The Evolution of Wire Transfer Fraud

As the internet became global in the 1990s, a cyber scam popularly known as the “Nigerian Prince Scam” or “419 Scam” emerged. The scam was intended to harvest the personal information of victims and, in many cases, directly steal their money.

Victims received emails from a supposedly exiled royal, government official, or executive whose fortune was held hostage by war. They claimed they needed to wire transfer funds to an overseas account for safekeeping. They asked for a small advance payment before the transfer, promising millions in exchange for the “good deed.”

As odd and ineffective as it sounds today, hundreds of people fell for this. Now, this scam has re-emerged and become much more technologically advanced.

After the pandemic, the rapid shift of businesses and financial activities to the digital space led to a sharp increase in cyber fraud—especially wire transfer fraud. According to the Federal Trade Commission, roughly $314 million was lost to fraudulent wire transfers in 2020 alone, and that number is rising.

Fraudsters target everyone, from commercial businesses making large transactions to vulnerable senior citizens. While the elderly are often targeted, many highly capable professionals get snagged, too. This article will help you understand how wire transfer fraud happens and what you can do if you become a victim.

What is Wire Transfer Fraud?

Wire transfer fraud is essentially psychological manipulation. Scammers convince a victim to wire funds to the scammer’s bank account instead of the rightful party’s. However, fraud can also occur if a scammer gains remote access to a victim’s computer to wire out funds without consent.

Often, scammers pose as a trusted source: an employer, a business partner, or a family member. They use emotional manipulation, claiming an emergency to build urgency. Sensing this urgency, victims send money in a hurry, not realizing the questionable nature of the request until the money is gone.

The Real Estate Email Hack

Insurance policies often use the term “social engineering” for this type of fraud. It happens without the victim having a clue. For example, imagine you are excited to seal the deal on your new home. A hacker gains wrongful access to the email address of your real estate agent or escrow officer.

The hacker monitors your conversation, waiting for the right moment. Then, they slide in with their own email address. This address often has a minor difference—like a single letter changed—making it indistinguishable from the original.

The hacker duplicates the writing style, signatures, and logos to look authentic. At the perfect time, they send you wire transfer instructions with details for an account they control. Because it looks real, you send the large sum believing it’s your agent.

Website Mimicking

Another frequent method is website mimicking. A consumer visits a site designed to look exactly like a legitimate one, such as a fake Amazon, Facebook, or bank login page. Hackers have successfully copied the sites of Chase, Bank of America, Coinbase, and many others.

Once on the fake site, the hacker may trick the individual into clicking a link that grants remote access to their computer. Alternatively, they trick the consumer into logging in, capturing their credentials. Once the hacker has what they need, they wire money out to a different bank account belonging to them.

How to Prevent Getting Scammed

There are ways to prevent losses. Here are general tasks you can do to protect yourself:

  • Verify the Sender’s Email: Hackers can identically spoof an address. Check every single letter of the email address sending wire instructions to ensure it is legitimate.
  • Verify Phone Numbers: If you receive a call claiming to be from a bank or government organization, never send money immediately. Hang up, look up the official office number, and call them back to confirm the employee’s details.
  • Cross-Check Before Sending: If you receive wire instructions via email, always cross-check them by calling the person directly.
  • Confirm in Person: If possible, avoid online confirmations for large transactions. If you have local contact with the receiver, verify the details face-to-face.
  • Notify Parties of Suspicion: Upon receiving any suspicious emails or calls, notify all parties involved in the transaction immediately.
  • Look for Red Flags: Watch for misspellings, poor grammar, and emails sent outside normal business hours.
  • Verify Immediately: Confirm that the wire transfer was completed and received by the correct party immediately after sending.
  • Review URLs: Be careful of websites. Review the web address closely to ensure you are on the legitimate site.
  • Don’t Click Suspicious Links: Never click links in emails or websites that you do not completely trust.

FDIC Prevention Tips

Wire fraud often stems from identity theft. You can avoid it by following these tips offered by The Federal Deposit Insurance Corporation (FDIC):

  • Avoid sharing personal information via phone or email with people you don’t know personally.
  • Always confirm the identity of anyone contacting you online for personal info. verify their claims with the organization they say they represent.
  • Avoid opening emails from suspicious addresses or those with typographical errors in the company name.
  • Never share confidential info online, such as your Social Security number, financial account numbers, or driver’s license number.
  • Carefully dispose of bills, receipts, credit card offers, and account statements.
  • Use strong passwords that are not easy to guess. Avoid using security questions with easily available information (like your mother’s maiden name).
  • Review account statements meticulously to catch unauthorized transactions early.
  • Instantly report any missing account documentation, as identity thieves often divert mail to their own addresses.
  • Do not leave mail in your mailbox; secure it against theft.
  • Review your credit history regularly.
  • Keep security programs updated on your computer.
  • Always perform financial transactions on a secured, personal network. Avoid using public WiFi to access bank accounts.

Who is Usually Liable?

In most cases, banks will blame the consumer for the fraudulent wire transfer, even if the consumer had nothing to do with it. They may claim the consumer shared login information or point to an obscure clause buried deep in their terms and conditions.

However, what banks do not want you to know is that they might be liable for unauthorized transfers. Wire transfers between banks and commercial entities are governed by Article 4A of the Uniform Commercial Code (UCC).

If the wire transfer was not authorized by you, and was not initiated by someone acting as your agent, the bank may be liable. The UCC is designed to ensure banks have rigid security procedures in place. If they fail to follow these agreed-upon procedures, the consumer is often not liable for the loss.

What to Do If You Are a Victim

Step 1: Call the Bank Immediately
Inform them that you did not authorize the transfer. There is a small chance they may be able to reverse it. Get the information on where the money was sent, call that receiving institution immediately, and tell them the funds are the result of fraud. Ask them to put a ‘fraud freeze’ on the account.

Step 2: File an FBI Complaint
File a complaint with the FBI’s Internet Crime Complaint Center (IC3), which can be found here.

Step 3: Send a Formal Letter
If the bank claims your money is gone, immediately write them a letter stating that you are not liable because you did not authorize the transfer. Include your IC3 complaint to support your claim. Give as much detail as possible to prove the transfer was unauthorized and send this letter via certified mail.

Wire transfer fraud is a frightening and victimizing trauma. Dealing with banks can feel like hitting one dead end after another, as they often refuse to acknowledge disputes and blame you for the loss.

However, with the help of an attorney, you can navigate the process without confusion and have the best shot at recovery. Los Angeles Legal Solutions uses the law as a sword, going on the offense for our clients to help them get their money back. Book a FREE consultation with an experienced attorney here.