Wire fraud is a serious and growing concern for businesses of all sizes. It happens when a scammer uses a phone, text, email, or online platform to steal money from a company.
Understanding wire fraud — and educating your employees on the risks — can protect your organization from potential financial and reputation damage.
What is wire fraud?
Wire fraud refers to any fraudulent or deceitful scheme using telecommunications or information technology to obtain money, property, or sensitive information.
The elements of wire fraud are similar to those of mail fraud but require the use of electronic communication or interstate wire communications.
Types of wire fraud
Scammers use several different tactics to commit wire fraud schemes. Here are a few common scams.
Business email compromise
Business email compromise (BEC) involves scammers gaining access to a business email account and sending emails that appear to be legitimate. For example, an employee might receive an email that appears to come from the CEO asking the employee to initiate a wire transfer to the scammer's bank account. Because these transfers are immediate, it's often impossible to recover the funds once the transfer is complete.
Phishing attacks
Phishing attacks involve fraudulent emails that appear to come from a reputable source, tricking recipients into providing sensitive information such as login credentials or bank details. Perpetrators use the information they gather to commit identity theft and clean out the victim's financial accounts.
Advance-fee scams
This type of fraudulent scheme often involves emails with a compelling story. It's also known as a "Nigerian Prince scam" because it might include a wealthy prince or government official trying to transfer millions of dollars out of a foreign country. The scammer promises you a piece of the action in exchange for using your bank account numbers to initiate the transaction or cover legal fees. Of course, once you pay the fee, you'll never hear from them again.
Ransomware attacks
In a ransomware attack, scammers trick employees into clicking a link or downloading an attachment that encrypts files on the victim's computer or network. The hacker then demands a ransom to unlock the files.
Telemarketing fraud
Telemarketing fraud involves fraud over the phone. You might receive a call from a telemarketer selling a product or service. They collect payment over the phone, but you never receive the goods or services promised.
These are just a handful of ways you and your employees might fall victim to wire fraud, and new schemes pop up daily.
How wire fraud affects businesses
Wire fraud can have a devastating impact on your business, leading to:
- Financial losses. Businesses suffer direct monetary losses from fraudulent transactions and pay legal fees to resolve the issue. Even if your insurance coverage pays for the loss, you may have to pay a deductible and face increased insurance premiums when your policy comes up for renewal.
- Reputational damage. Loss of trust from customers, partners, and investors can cause long-term damage to the business's reputation.
- Increased regulatory scrutiny. Businesses are responsible for safeguarding their customer's sensitive personal and financial information. If customer data is part of the fraud scheme, you may have to pay penalties and face other legal consequences.
How to prevent wire fraud
Fortunately, there are several steps you can take to protect your business from wire fraud.
Employee training
Your employees are the first line of defense in protecting your business from fraud. Hold regular training sessions to educate employees about the latest fraud tactics and prevention techniques.
Teach them how to identify BEX and phishing scams and verify the identity of anyone who requests a wire transfer.
Consider conducting regular phishing simulations to test and improve employees' responses. Anyone who clicks on a suspicious link or sends confidential information over email needs additional training.
Implement wire transfer verification procedures
Implement a multi-factor authentication system for wire transfers. For example, if an executive requests a transfer via email, they must also provide a password or PIN, confirm the request via phone call, or get a second authorization from another executive.
Segregation of duties
Separate responsibilities for initiating, approving, and executing financial transactions. This prevents one person from single-handedly committing wire fraud.
Vendor verification
Require accounts payable employees to verify the identity and legitimacy of vendors before adding them as payees or changing their payment information.
Knowing your vendors also helps employees identify unusual requests, such as large or urgent wire transfers or instructions to transfer money to a different bank account.
Technology solutions
Implement advanced email filtering technology to detect and block phishing attempts and use multi-factor authentication (MFA) to add an extra layer of security to sensitive accounts.
Ensure you regularly update your operating systems and applications to patch vulnerabilities exploited by scammers.
Review your insurance coverage
Ask your insurance agent if you have cyber insurance to cover potential losses from Automated Clearing House (ACH) or wire fraud. Your cyber insurance carrier may recommend or require additional steps to protect your business.
What to do if you're a victim of wire fraud
If you do fall victim to a wire fraud scheme, take immediate action to minimize the damage.
- Notify your bank or financial institution immediately. If you act fast enough, they may be able to reverse the fraudulent transaction or trace the funds.
- Work with your IT department to secure your systems. Change passwords and review your security measures to prevent further breaches.
- Report the event to the local authorities and the Federal Bureau of Investigation (FBI) Internet Crime Complaint Center (IC3). Your insurance company may require a police report when you file a claim.
- If the wire fraud involved customer, vendor, or employee information, you may be legally required to notify impacted parties. Your legal counsel can assist with this process.
Get better control of your payment approval processes with BILL payment approvals
Preventing wire fraud requires awareness, education, and the latest security measures. Implementing an accounts payable management solution like BILL payment can improve control over your accounts payable processes and increase fraud protection.
With BILL's customized approval workflows, transaction limits, merchant controls, and multi-layered security technology, you can rest easy knowing your transactions are thoroughly vetted, reducing the risk of unauthorized payments and fraudulent activities.
Take the first step towards securing your business against wire fraud. Start a risk-free trial of BILL today and experience the peace of mind that comes with better management of your business finances.
