Understanding Wire Fraud: A Guide for Businesses

Imagine this: You’re the financial manager for a construction company. One day, you receive an urgent email from your long-time lumber supplier requesting payment for a large shipment needed for an important project. The email mentions their bank account details have changed and they provide you with the new wiring instructions.

It's important that you keep the project on schedule. Do you quickly submit the payment?

Pause! This could easily be a wire fraud scheme known as Vendor Spoofing.

This email request contains two elements of many wire fraud schemes: Urgency and Last-Minute Changes. It’s important to take a closer look to verify the request or your payment could be sent right to scammers.

Defining Wire Fraud

Wire fraud is a serious crime that occurs over wire communications, this includes phone, text, email, and internet communication. These scams are aimed at accessing sensitive data and/or stealing funds under false pretenses. Wire fraud schemes can take many forms and are known to target businesses of all sizes. It’s important to be able to recognize the signs and protect your organization.

Common Methods Scammers Use to Facilitate Wire Frauds

Phishing: Phishing scams involve criminals sending fraudulent emails that appear legitimate to trick recipients into providing sensitive information, such as passwords or payment details.

Spoofing: Spoofing involves scammers impersonating a trusted source and is often used in conjunction with phishing attacks. Spoofing tricks victims into believing they are communicating with a legitimate entity. One way they do this is by making slight variations to email addresses that may be overlooked, bill@sample.com vs billl@sample.com.

Business Email Compromise (BEC): BEC schemes involve fraudsters gaining access to a company’s actual email accounts. Once inside the system, they use legitimate email addresses to request funds or changes in account details, making it difficult for victims to detect the fraud.

This is not an exhaustive list of the types of wire fraud you may encounter. However, there are a couple tell-tale signs you’re dealing with a scammer.

• Last-Minute Changes: Be cautious of sudden changes in account details. Always verify changes through a trusted channel.
• Unusual Urgency: Scammers often create a sense of urgency to cloud judgment. Always question the need for rushed actions.

Proactive Measures

Wire fraud is a significant threat, but there are steps you can take to safeguard your business:

• Call-Back Verification: Always verify payment instructions through a phone call to a known number, especially for significant transactions or new payment instructions.
• Dual Control and Segregation of Duties: Ensure multiple employees are involved in processing and verifying transactions.
• Avoid Emailing Financial Information: Never email sensitive financial information.
• Be Cautious with Attachments: Be wary of opening email attachments or downloading files, even from trusted sources, as they may contain malware.
• Provide Education and Training: Train your employees to recognize phishing attempts, spoofing and other fraud tactics.

Now that you know a little bit more about wire fraud schemes, here's another situation to consider:

You’re on the planning team for your company’s shareholder meeting. You’ve overseen the handling of vendor payments. You receive an urgent email from the CEO explaining that the event center did not receive the deposit. If they do not get it by tomorrow, the company will have to forfeit the space. The CEO would take care of it but since she is traveling, she’d like you to handle it immediately.

This is one of the most significant events of the year, and you don’t want to let the CEO down. What do you do?

A. You check and the email came from the CEO’s official email address. You have enough proof to send the wire transfer to the event center.

B. You check and the email came from the CEO’s official email address. However, you decide it’s best to give her assistant a call to see if he is aware of the issue.

C. You ignore the request because the event center has already sent you confirmation of the deposit.

If you picked B, you made the right call! When you called the CEO’s assistant, he informed you that she was not traveling and transferred you to speak with her. Thanks to you, she discovered that her email had been compromised! By calling to confirm, you saved the company from losses and kickstarted recovery efforts.

What to Do if You Are a Victim

If you fall victim to wire fraud, take the following steps as soon as possible:

• Contact Your Bank: Immediately inform your bank about the fraud and request to stop any transfer of money if possible.
• Report to Authorities: File a complaint with the FBI’s Internet Crime Complaint Center (IC3) at IC3.gov and contact local law enforcement.
• Keep Records: Maintain all communication records with the scammers, including emails, text messages, and phone calls, to aid in the investigation.

Wire fraud is an ever-evolving threat, but by staying informed and implementing robust security measures, you can protect your business from falling victim. Always verify transactions through trusted channels and remain vigilant for red flags that indicate fraudulent activity.