What is Wire Fraud and How to Avoid It?
Scammers have continued to find wire fraud attractive and profitable, especially in the real estate and banking industries. According to the 2021 ALTA Wire Fraud Survey, one-third of all wire transfers in 2020 were potential targets of scammers. Many transactions are at risk of becoming regrettable mistakes.
While more and more people are adopting e-wallets and m-wallets post-COVID-19 pandemic, they face an increased risk of using them to fulfil the criminal wishes of wire transfer fraudsters. When this kind of scam happens, millions of euros can get into the wrong hands. Therefore, be very careful about clicking on a link in an email or the send button in your application.
Nevertheless, this kind of scam is still preventable. In this article, we will describe what wire fraud means and give you practical tips to avoid it.
Meaning of Wire Fraud
The use of chat rooms, emails, phone conversations, fax machines, or any other electronic communication tool in the intentional deception of a person or party is known as wire fraud. The aim of this kind of activity is usually to get money, assets, or other benefits from another person or party through an illegal online channel.
How Does a Wire Fraud Work?
In a wire transfer scam, the fraudster attempts to persuade a potential victim to send them their valuable property. Although the victim can send the rewards through different methods, the process of persuasion generally takes place using electronic communication systems, such as emails, social media chats, phone calls, and faxes.
Even after convincing someone to give up money or other possessions, the fraudster will more likely break his commitment after the property has been transferred. He will leave the victim to suffer and never try to make further contact. Hence, in many countries, governments impose hefty fines, jail terms or both for wire fraud.
Most Common Wire Fraud Methods
Wire fraud happens in different ways. However, the most common methods used by wire transfer scammers are telemarketing, phishing, catfishing, and the "419" fraud, or the so-called "Nigerian prince" email scam.
Telemarketing has been a popular method used by fraudsters for many decades. It happens when a victim is called, told a falsified account of events, and persuaded to send sensitive information or money to the caller. For example, telemarketing scammers typically convince their victims that they have won a lottery or online casino prizes. The aim is usually to get them excited and gullible so that they can provide whatever is required to claim their sudden "winnings."
Phishing is a typical kind of wire fraud committed online. It happens when an individual sends texts or emails impersonating a trustworthy company, such as a FinTech company, a neobank, or a traditional bank. Fraudsters use this method to collect their victims' financial and personal information to carry out their evil schemes, such as hacking into digital accounts.
When someone creates a false internet profile (usually with images and information of another attractive person or celebrity) simply to deceive individuals searching for love and collecting money from them, that person is said to be catfishing. Once a romantic relationship has been established, the fraudster may request that the victim transfer hundreds or thousands of euros as payment for assistance. Catfishing is a common practice on online dating sites and mobile dating applications. Beware!
The “419” email scam
The “419” fraud was named after Section 419 of the Nigerian Criminal Code, which says,
“Any person who by any false pretence, and with intent to defraud, obtains from any other person anything capable of being stolen, or induces any other person to deliver to any person anything capable of being stolen, is guilty of a felony, and is liable to imprisonment...”
The “419” scam is a wire fraud method that persuades a victim to make advance payments to a wolf in sheep’s clothing. This kind of crime is also known as the “Nigerian prince” scam. It was given this name following the story of a fraudster who sent emails to people, claiming to be a Nigerian prince in a pitiable but rescuable situation. Those who tried to help the “prince” were defrauded by him.
Today, this kind of fraudster could be anyone from any country, not necessarily a Nigerian. What you need to look out for is that the person will try to make you believe that they are royal or wealthy but have lost access to their wealth due to some unfortunate event. The criminal will promise to give you a share of their millions if you assist them with some money to help them recover their treasury or lost fortune.
Modern email systems from FinTech giants like Google (Gmail) and Microsoft (Outlook) use advanced tools to detect suspicious messages and deliver them to their users’ spam or junk folders. While many 419 emails go to such places, some fraudulent messages still get to users’ primary mail folders. Therefore, irrespective of the mailing service you use on your computer or smartphone, be on the lookout for 419 scam messages and do not reply to them.
Why Prevent Wire Fraud?
You should do all you can to prevent any kind of wire fraud because it can be very painful to lose your personal data and money to a criminal. When a fraudster has withdrawn the money you ignorantly sent, it is often impossible to get it back. You cannot hold your bank responsible for the loss because you made the wire transfer or disclosed your personal information to the criminals.
Everyone participating in any type of digital transaction—customers, teams, employees, and employers—must take precautions to prevent wire fraud since liability is uncertain. Any individual, freelancer, digital nomad, couple, small business, or large organisation that chooses not to use secure payment methods should be prepared to face many financial and social challenges.
How to Prevent Wire Fraud
It is easier and cheaper to prevent wire fraud than to recover any amount you may have lost to a fraudster. That is why experts always recommend you put more effort into stopping criminals from accessing your money. Below are various ways you can prevent wire fraud.
Limit information available to the public
Certain details about your business must be disclosed to the public in order to operate it. However, to secure some of the most delicate information about your company, personnel, and customers, you should take a few necessary steps. They include reviewing the information that is displayed on your social media profiles and websites to remove sensitive content, and regularly checking your privacy settings for the latest security measures you can implement.
Use strong spam filters
It will be far more difficult for thieves to obtain account information and ultimately commit wire fraud against someone in your company if they cannot get their emails in front of your staff. That is why the easiest way to protect employees from falling for phishing emails is to prevent them from being viewed. One of the best ways to accomplish this is with a powerful email filter. SpamBully and MimeCast are two examples of products that offer ways to filter and prevent phishing emails.
Test your employees with an arranged hacker
It is not always enough to use spam filters. Due to this, a lot of progressive organisations are employing outside firms to assess their staff members' vulnerabilities to phishing. They just make a phishing email, distribute it to your workers, and watch to see who falls for it and what credentials are provided. The victims receive the training they need to avoid repeating the same error in the future.
Additionally, you can run your own tests using software platforms. You may test out free solutions. Utilise Google's phishing test, which we seriously encourage. It offers a wide selection of emails that are designed to teach you and your staff how to distinguish between phishing and genuine emails.
Install real-time system monitoring
You can use a real-time security monitoring programme to keep the entire network of your organisation free from threats. Install software that comes with features such as malware protection, web-content filtering, and geolocation blocking. By doing so, you will ensure that abnormal behaviour or unusual patterns are identified, and proactive steps can be taken to prevent wire fraud.
Use strong passwords and two-factor authentication
A weak password can easily be cracked by a fraudster. Hence, you should always use a strong password to secure your emails, social media platforms, and digital payment accounts. When creating your password, do not use your name, date of birth, or any personal information that can be guessed easily. Try to include uppercase and lowercase letters, disordered numbers, and special characters in all your passwords. Also, do not use one password for every platform because all your accounts will be at risk if it gets exposed to criminals.
Another security measure to enable, if available, is two-factor or multi-factor authentication. In that way, all payments must go through a second or third verification stage of collecting extra pieces of information from the account holder before they can be processed. The additional detail for verification could be a code sent via SMS or a call to the phone number of the account owner. Thus, if your sensitive information gets into the hands of criminals, they will not be able to steal your money as long as you do not send them the verification information.
Verify Who You Are Transacting With
Wire fraud schemes are successful because they take advantage of established trust between unrelated parties. That confidence is almost never betrayed if identities are verified correctly. Therefore, inform your customers, referral partners, and staff about the importance of being watchful and vigilant.
Here are a few down-to-earth methods you may use for identity verification.
Always begin with information collection and sharing
The first step in doing business with any stranger should be information gathering. The parties involved should collect and exchange correct and verified details, such as their full names, email addresses, residential addresses, and personal telephone numbers. This activity should be very important to real estate agents, personal loan providers, corporate lenders, title companies, escrow service providers, and attorneys.
Define your standard wire transfer process
Consumers in general are ignorant of the complexities involved in sending money by wire transfer. Fraudsters take advantage of their ignorance since they are aware of this.
Therefore, to ensure consistency throughout an organisation, a well-defined, documented, and measurable method for accepting incoming wires and paying money by wire transfer during the payout process is necessary.
Educate your staff and customers on wire fraud
Inform your customers about the aspect of your wire transfer method that affects them directly. Also, educate your workers on how to identify fraud. Send them guidelines on how to accept incoming wires securely. Knowing the tricks fraudsters use helps people spot red flags early and reduces their vulnerability to fraud.
Authenticate identity and wiring details
You should have a tested method for authenticating wire details before completing a transaction. You can confirm your transfers over the phone, in person, or via software. The identification of the individual to whom the information belongs must also be confirmed. You want to be sure that you are dealing with someone you know to an extent that you can trust.
Tips to Prevent Email Wire Transfer Scams in Real Estate Business
Wire transfer fraud is one of the most popular cybercrimes involving real estate. These online crooks frequently access unsecured email accounts, especially those of prospective homeowners, to gather details about future real estate closings. They send misleading wire transfer instructions to homebuyers through email while posing as authorised officials of real estate companies or financial institutions.
How can you prevent wire transfer scams through emails while doing real-estate transactions with others? Here are some tips to follow:
- The wiring instructions should be defined from the beginning, and the signatures, phone numbers, email addresses, and other necessary confidential details of both parties should be shared and verified early.
- Advise your customers to reject any changes to wiring instructions that did not come from your official email.
- Do not respond to strange emails.
- Use professional email services that can filter suspicious emails and provide advanced security, even if you may have to pay for them.
- Change your passwords regularly to keep your accounts secure.
If you think that you have fallen victim to wire transfer fraud, you may be able to recover your money by doing any of the following:
- Quickly call your bank and ask for a reversal of your SWIFT or SEPA payment to the fraudster.
- Change your password if you still have access to your account.
- File a complaint with the Internet Crime Complaint Centre (IC3) of the Federal Bureau of Investigation (FBI), especially if you are in the United States.
- File a police report and contact other relevant local authorities.
The most frequent target of wire fraud is the real estate business. Transactions in this sector involve large amounts of money, which is why fraudsters are attracted to it.
You may be able to recover money from a wire fraud if detected early enough, especially if the money has not been withdrawn. You can call your bank or file a report with the police and the payment may be reversed to your account.
A wire fraud investigation can take about 45 days, depending on the extent of the complexity of the transaction.
In the case of wire fraud, all participants in the transaction are held responsible. They include the victim (payer), the hacker (payee), and the banks or financial institutions of the payer and the payee.
Basically, a fake wire transfer request will contain unverified information. It often comes to you unexpectedly.
The fundamental signs of a fake wire transfer are as follows:
- It is a sudden and unexpected request to wire money to an account.
- The sender attached a fake cheque or money order, asking you to cash the money and send it to them.
- The sender claims that you have won a lottery or prize in a competition you know nothing about.
- The fraudster is asking you to send a confirmation code so that you can withdraw the wired money.
- The message contains grammatical errors or technical mistakes that show that the sender is not well-educated in the profession they claim to belong to.
- The cybercriminal is claiming to be a member of a royal family or an aristocrat in need of help to regain their wealthy status.
- The fraudster appears as a charitable organisation asking for financial support to fund a project that you cannot verify from reliable sources online and offline.
Fraud, teller errors, malware attacks, and other risks can be linked to wire transfer payments. Typically, once money is sent by wire transfer, it is almost impossible to get it back, except in some cases when the fraud was detected early. Therefore, it is important to verify the payment details before completing a wire transfer.
Yes, it is possible. Without one-on-one identity confirmation, an attacker may deceive one of the parties to a transaction into transferring money to their bank account rather than that of the intended recipient.
Yes, in some situations. Banks are required to reimburse you if you report a fraudulent transaction on time. Hence, the longer you wait to tell them about it, the less likely it is that they can help you.
Scammers can get your money by sending you fake messages and phishing emails or texts asking you to provide sensitive information that they can use to access your account.
Aside from phishing emails, other methods fraudsters use to get money from their victims include telemarketing, catfishing, 419 scams, fake online quizzes, and fake job advertisements.
Two-factor authentication (2FA) and multi-factor authentication (MFA) are high-security measures that can be enabled on a user account to prevent authorised access. They ensure that the user proves that he has the right to the account by asking him to provide information known to only him (knowledge), a password or some other code delivered to only him (possession), or/and a unique character such as his fingerprint (inherent).
In 2FA, only two of the above factors are used to verify the identity of the person trying to access the account to complete a transaction online, while in MFA, two or all three factors can be used for verification.
Social engineering is the practice of taking advantage of vulnerabilities in people to obtain access to private information and security systems. To access a target's account, social engineering uses manipulation of people rather than hacking.
Wire Fraud is Preventable!
Although wire fraud is dangerous, it is still preventable if you know what to do. In this article, we have shown you several things you can do to ensure that, as a business owner, your company and customers are protected against fraudsters, and as an individual, your wire transactions are legitimate and scam-free. Make good use of all of this information today!