What is wire transfer fraud and how to avoid it

What is wire transfer fraud?

Wire transfer fraud is a form of financial scam that sees victims tricked into sending money to an account controlled by cybercriminals. Scammers use several techniques to deceive their victims, including impersonation and cyberattacks. Once funds have been transferred, they are quickly moved and laundered, making recovery almost impossible.

These scams are popular because they generate huge profits for criminals. Impersonation is particularly effective, with $2.95 billion lost to scammers through wire transfer scams in 2024. Pretending to be a trusted company executive or known supplier, criminals will use emails, phone calls, and other methods to request money and generate urgency, encouraging victims to act quickly and to ignore their own misgivings.

Bank transfer scams are distressing for victims and hugely costly for businesses. Financial losses are compounded by damage to a company’s reputation, which can have a long-term impact on earning potential and customer loyalty.

[H3] Common types of wire transfer scams

Wire transfer scams take many forms, with new techniques emerging all the time. Here are some scams that you should be on the lookout for:

• Business email compromise (BEC): Victims are targeted with an email that appears to originate from a trusted business contact. The recipient is tricked into sending money or sensitive information to fraudulent accounts.
• Phishing: Similar to BEC, phishing uses a range of channels, like emails, SMS texts, or other messages, to convince recipients to divulge information like passwords or bank details.
• Vendor payment fraud: Vendor payment fraud occurs when a fraudster manipulates or creates false payment information, like fake invoices or altered account details, to trick a company into making unauthorized payments for goods or services that are not delivered or do not exist.
• AI deepfakes: AI deepfakes allow criminals to create convincing voice or video calls, pretending to be a known and trusted contact, like a senior manager. Using these digitally created avatars, scammers will try to convince their victims to disclose sensitive information or to perform a fake transfer.
• Account takeovers: Account takeover fraud occurs when criminals successfully compromise a victim’s bank account, often using credentials obtained through phishing. Once inside an account, scammers can perform bank transfers directly.

How to identify bank transfer fraud?

As you can see, bank transfer fraud comes in a variety of forms; there are “safe account” scams where victims are told their money is at risk and must be urgently transferred, romance scams that exploit emotional bonds to request large wire transfers, or business email compromise schemes where payment instructions are subtly altered to divert funds.

The hallmark of these scams is the sense of urgency they generate. Victims will be told they must act immediately to prevent personal loss. Sometimes, particularly with BEC attacks, scammers will demand secrecy, making it harder for the victim to protect itself.

Early detection of attempted wire transfer fraud is crucial to minimizing or preventing loss and damage to corporate reputation.

Real-world examples of bank transfer scams

Wire fraud is big business. Former Jacksonville Jaguars financial manager Amit Patel embezzled $22 million from his employer by making hundreds of fraudulent purchases and wire transfers. Patel was able to exploit the company’s virtual credit card (VCC) program for personal gain.

The ecommerce industry is not immune to wire fraud scams either. Valiant Consultants, operating under several brand names, successfully scammed millions of customers. Victims were promised passive incomes of up to “$100K per month” if they used Valiant to set up and manage online stores. Victims wired tens of thousands of dollars for “setup fees”, but the returns never materialized.

What are the warning signs of wire transfer fraud?

There are several indicators of a potential wire transfer fraud attempt:

• Urgent or unusual payment requests: Targets will be instructed to act quickly or risk massive losses. Scammers hope that by invoking urgency, they can make victims less likely to hesitate.
• Personal gain in return for secrecy: Sometimes scammers will promise a large financial return if the victim complies with the wire transfer request.
• Changes to vendor banking details: Vendors making contact to say their bank account details are changing is a red flag that a bank transfer fraud is underway. If changes are being made within the accounts system, it may be that the system itself has been compromised directly.
• Unusual timing or location: Requests originating from different territories may signal something is wrong, particularly if the purported originator has no presence in those locations.
• Unfamiliar or inconsistent email addresses: Any corporate request originating from a @gmail.com or @outlook.com address is unlikely to be legitimate. Nor is a request sent from a domain other than the claimed sender's domain.

How to prevent wire transfer fraud?

Funds transfer scams are becoming more sophisticated, requiring multiple layers of security to defend against them effectively. Here’s what your strategy must address:

Identity verification during onboarding

Given that the entire premise of wire fraud is convincing victims to direct payments to an illegitimate destination, confirming customer and/or vendor legitimacy is vital. Identity verification during onboarding protects businesses at the start of any commercial relationship and at every touchpoint thereafter.

User authentication at point of purchase

Ensuring a user is authorized to make a transaction is critical to narrowing the window for potential fraud. Measures like multi-user authentication, biometric verification, or facial recognition provide a fast and relatively seamless way to confirm every payment.

Monitor transaction and activity

Regular and irregular transactions follow patterns, although they may be challenging to detect. AI and advanced payment platform technologies can analyze transactions and detect anomalies in real time, providing an important opportunity to reject fraudulent bank transfer requests.

These checks are crucial to reducing risk, and your choice of payment service provider plays an important role in strengthening your defenses. Your ideal payment partner will perform basic checks, such as Address Verification Service (AVS) or Card Validation Digits (CVD), for every incoming transaction.

Protecting your business from wire transfer fraud

Preventing wire transfer fraud requires awareness of threats, prevention of attacks, and rapid response to limit the impact of successful attacks. Paysafe can help your business develop and implement customized risk rules that strengthen your processes. We also provide secure payment processing solutions designed to detect and block wire transfer fraud attempts.

Contact our team to learn more.

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