Wire transfer scams are on the rise and are the third most common type of payment fraud in the US.
Wire transfer scams are straightforward to set up and therefore dangerous. One, because every organization nowadays uses wire transfers. Two, because once the money is sent, it’s virtually impossible to get it back.
The ease and immediacy of wire transfer scams in business make them very appealing to fraudsters. No one is safe against them: in the B2B world, scammers target small businesses and large corporations alike.
Now is the time to think about how to protect your company against financial fraud attempts. Read on to find out:
- What exactly are wire transfer scams?
- How can you protect your organization against wire transfer fraud?
- What are some wire transfer scam best practices to protect yourself?
Do you want to learn more about all the types of payment fraud and how to prevent them from happening? Check out our most recent report about fraud in the US.
Wire Transfer Scams: How to Recognize and Avoid Them
What is a wire transfer scam?
A wire transfer scam is a request for direct bank account payment through malicious means. Wire transfer scams in business have one goal: have the organization transfer money to a third party’s account under false pretenses.
As such, wire transfer scams are a type of third party fraud.
It often comes through as an email from someone impersonating someone else (spoofing), asking for a bank transfer. In some cases, a wire transfer scam happens through a phone call. This is technically called vishing.
In December 2022, a small business owner in Houston answered the phone to who he thought was a representative of his bank’s fraud division warning him about a fraudulent transaction.
The caller knew some of his personal information like his bank account number. He asked him a few more questions, before the alert was raised on a suspicious outgoing $42.000 wire transfer.
Little did he know that the first caller was actually a fraudster and that answering their security questions completed the breach. The scammers made more transfers to different bank accounts nationwide without leaving a trace.
That’s textbook false bank advisor fraud. This mistake cost his business nearly $200.000.
How do wire transfer scams work?
Scammers always come up with new and innovative theft tactics. But essentially, wire transfer scams work because hackers pretend to be someone they’re not.
In well-known internet scams, they impersonate a Nigerian prince, or someone from a lottery organization offering too-good-to-be-true handouts.
In the example above, however, the fraudster pretends to be a bank representative — which is both more credible and dangerous.
It’s very common for corporations to receive emails asking for a bank transfer from someone impersonating a supplier real or bogus (vendor fraud), or even a high-level company executive. In the latter, the hacker spoofs the fraud victim by impersonating someone like the CEO (which is called CEO fraud).
Identity theft is a commonly used tactic in wire transfer scams.
It’s often done by sending phishing emails, where the recipient is “hooked” under false pretenses and led to reveal sensitive information (like their social security number, credit card numbers, or any financial information).
Scammers send an email directly asking for a wire transfer or phishing for some sensitive information that’ll allow them successful hacking into the recipient’s bank account.
Once the funds are transferred to their accounts, they vanish. It’s very hard to get the funds back, especially as it can take a while before anyone realizes what really happened. In the case of direct debit, it’s almost impossible to do as payments are instantaneous
What’s worse, any recourse towards your bank is likely to fall through. The Electronic Fund Transfer Act (EFTA) from 1978 only protects certain unauthorized charges, like when someone physically steals a debit card to make purchases.
Wire transfer fraud isn’t covered because it is considered an authorized payment, as the fraud victim usually willingly revealed their account information.
What are the warning signs of a wire transfer scam?
Fortunately, there are some warning signs that can alert you to a wire transfer scam attempt. Here are a few:
- Someone initiates contact with you asking for money. Most fraudsters will impersonate someone reaching out to you out of the blue.
- There is a sense of urgency. The sender asks you for an “urgent” bank transfer or puts pressure on you. That’s especially the case with CEO fraud.
- It involves revealing financial or sensitive information. Most professionals will never reveal – let alone ask – for such data over the phone or email. According to the Texas Attorney General’s Office, asking for a confirmation or security number is a sure sign you’re being scammed.
- There are typos. Misspelling in the body or in the sender’s email address should send your alarm off, as it is a sign of spoofing.
- It feels off. Sometimes, you can’t pinpoint a single element, but the general vibe of the request feels weird to you. In this case, it’s better to double-check through another means.
Wire Transfer Scam: what prevention techniques to use?
Best practices against wire transfer scams.
When it comes to financial fraud, it’s better to be safe than sorry. Make sure you actually have a strategy to prevent wire transfer scams as well as contingency plans in case it does happen. Being proactive is really key here.
Fraud protection processes against wire transfer scams:
Setting up internal control processes to follow is the surest way to secure your company from the inside out.
Which processes you set up depends on what your company does and how it’s set up, but one easy thing you can do is to set up a double approval process for payments. Following the “4 eyes principle” decreases your risk of falling for a scam.
Having two different employees (or one employee, one manager) check every bank transfer is a good way to reduce the risks of wire transfer scams. You can decide to apply it to all transfers, or only those above a set amount.
You can also set up reinforced measures when you add a new third party to your list of suppliers, or if there is a change in their financial information.
Trustpair does automatic and systematic checks of the combination of the name and account number of your third parties with international databases. That ensures you are sending the money to the right bank account (and not someone pretending to be them).
Once you’ve decided on the measures to roll out, ensure you communicate them properly and regularly to all your employees.
Become a cyber-aware company.
Ultimately, the best measures will be useless if your staff doesn’t adhere to them. This is why it’s essential to make sure your employees know and follow your processes, but also understand the danger of wire transfer scams (and other scams).
Training and sensitization should therefore be a constant in your company, with regular sessions organized. Wire transfer scam education is one of the most important steps you can undertake to protect yourself.
Being cyber-aware must be part of your company culture. For that, you can share wire transfer fraud trends and industry insights within your security and financial team, but also throughout your organization. Some companies have a Slack channel dedicated to that, as it’s good information and keeps the matter top of mind for everyone.
Use an anti-fraud solution like Trustpair.
Protecting yourself from wire transfer scams doesn’t have to take all your time. In fact, it needs to be efficient in order to be sustainable. Manually checking for fraud isn’t scalable, especially if you’re a large corporation that has thousands of payments going through in different countries. Finance digitalization is the best option to increase performance.
The good news is, fraud protection software like Trustpair helps you set up automatic security processes across your payment chain to really reduce (or even eradicate) the risk of fraud.
We do that by natively integrating with your software like SAP or Oracle to give you a completely secure payment chain. Your security approach must be global and include your suppliers and software, too.
When using Trustpair, every payment goes through a systematic match, where we check your third party’s financial information against databases internationally, ensuring they are correct. In the end, it means you’re always paying the person or supplier you actually want to pay & not a fraudster
With Trustpair, fraud and wire transfer scam attempts are quickly detected and brought to your attention. You still need to check those and decide how to proceed, but the bulk of the detection is made for you, saving time, resources, and money. Book a demo call to see how to be 100% secure against wire transfer scams.
Key Takeaways:
- Wire transfer scams happen when money is sent to a third party’s bank account under false pretenses. In the B2B world, scammers will impersonate suppliers or even a CEO.
- Hackers will either ask for a direct money transfer, or for sensitive information to be communicated to them (like a security code), which allows them complete access to your company’s accounts.
- Wire transfer scams are easy to set up and immediate. It’s very hard for companies and individuals alike to get their funds back once they’ve been sent.
- Some warning signs of wire transfer scams include: asking for sensitive information, typos or misspellings, and labeling a transaction as « urgent ».
- To protect your company against the risk of wire transfer fraud, you must be proactive in your approach. You can set up internal processes like double approval processes or double-checking the bank account you’re sending the funds to.
- You can become a cyber-aware company by organizing regular security training and raising wire transfer scam awareness.
- An anti-fraud solution like Trustpair does automatic financial checks to ensure you send the money to the right bank account. Our AI also raises the alert in case of suspected fraud, allowing you to block suspicious transactions.
