What Is Wire Fraud? Top Tips for Safe Wire Transfers

Dem10/getty images

Wire fraud may sound like something only millionaires have to be on the alert for, but the truth is, it’s a lot more common than that. It might help to understand the definition of wire fraud first: It’s a form of fraud that happens over the internet or via a phone call, email, text or even a direct message on social media. These types of fraud can be bank scams, cash app scams, online scams, Venmo scams and digital wallet scams. And, they are quite common.

According to the Federal Trade Commission, fraud in 2021 increased more than 70% over 2020 and accounted for $5.8 billion in losses. Many of these cases involved wire fraud, such as online shopping scams, which made up around $392 million in consumer losses.

Avoiding wire fraud isn’t hard if you know what to watch out for. These tips will keep scam artists out of your wallet.

What is wire fraud?

Wire fraud by definition is any attempt to defraud someone out of money using some form of telecommunication (by wire). Basically, anything that isn’t an in-person transaction or a transaction by mail likely falls into the wire fraud category. This can include transactions through:

• Phone calls
• Social media
• Instant messages (like Facebook Messenger or Whatsapp)
• SMS
• Text messages
• Faxes

Wire fraud is against the law, and committing wire fraud is a punishable crime.

Types of wire fraud

Since there are so many ways to commit wire fraud, not surprisingly, there are many ways scammers target potential victims. Here are some of the more common types of wire fraud.

1. Advance-fee scams

You’ve probably heard of the infamous Nigerian Prince Scam, where you receive an email from a “Nigerian prince” who needs your help to transfer money, and in exchange, promises to pay you thousands in return. This is a classic example of an advance-fee fraud or upfront-fee fraud, any type of scam where you, the target, are promised something for a fee.

Some other advance-fee scams include:

• You’re asked to perform a transaction for someone who lives in a country in conflict, like Ukraine or Nigeria.
• You’re offered a special deal, but to get it you need to pay a fee.
• The scammer promises to pay off your debts for a fee.

How to avoid it:

• Don’t send your bank account information or online bank login to strangers.
• Don’t respond to emails from strangers without doing research on them.
• If the email is purportedly from a business, Google it, then contact it directly to verify if the email is real.

2. Phishing scams

Phishing is any scam where thieves try to trick you into divulging personal information, such as your bank account number or social security number, online over email; smishing is the same thing but over text message. In a common example of phishing, you might receive an email from someone pretending to be an IRS agent saying that you need to make a payment ASAP or you will wind up in major legal trouble. Then, if you fall for it, the fake IRS agent/scammer uses your payment information to steal your money. In another version, they might pretend to be your bank or other financial institution and request your login and password to confirm your identity. Again, if you give it to them, they’ll use the info to drain your account.

How to avoid it:

• Don’t send personal information such as your checking account number or social security number through emails or text messages. No legit business will ask you for information this way.
• Rather than respond to the email or text, contact the company or agency directly.
• Never give anyone your passwords. Businesses will never ask you for your password unless you’re signing into your account.

3. Business email compromise fraud

Corporations typically use wire transfers to move large amounts of money, so unsuspecting employees are often targeted by scammers through a business email compromise.

In this type of fraud, scammers gain access to executive email accounts through phishing attacks or spoofing. “Then, they’ll email employees requesting that they make wire transfers to an account that’s secretly under the scammer’s control,” explains Dan Barta, principal enterprise fraud and financial crimes consultant at SAS, a global analytics company. “When the transaction is complete, the fraudster quickly transfers the funds to yet another account to avoid detection.”

How to avoid it:

• Use two-factor authentication to protect your accounts.
• Make sure any email correspondence is really from within your company. Telltale signs that it isn’t legit are misspellings and any deviations from the standard company email format.
• Don’t download email attachments from people you don’t know. They could contain malware, aka malicious software, that steals your personal information.

4. Romance scams

This scam is when someone online starts a romantic relationship with you with the sole focus of scamming your money. It might take the form of love bombing, where a new romantic interest showers you with attention in order to gain your trust, or catfishing, where the scammer pretends to be someone completely different.

Romance scams are one of the most common wire fraud types. An Atlas VPN analysis found that romance scam victims lost more than $343 million during the first three quarters of 2021.

How to avoid it:

alengo/getty images

• If a love interest you’ve never met in person asks you for money, don’t give it to them.
• The scam artist will usually manipulate a lonely person’s emotions to get what they want. Don’t get drawn in by sad stories; these thieves can come up with very elaborate and detailed tales.
• Never give your personal information, like your social security number or banking information, to people online.

5. Family member scams

Family member wiring scams are typically targeted at seniors and are a form of elder financial abuse. In this scam, fraudsters collect information about one of the senior’s loved ones from social media to craft a scam. “They use this information to gain the senior’s confidence and get them to send gift cards or money,” explains Patrick Simasko, elder law attorney and financial advisor at Simasko Law in Mount Clemens, Michigan. “One of the biggest scams out there is when a scammer calls a senior pretending to be their grandchild with a sob story of having been arrested,” he says. They ask the senior for bail money, and some do transfer money thinking they’re helping their grandchild get out of jail.

Another scam done through social media is when a scammer acts as a military member and asks a senior for money to get home to visit family, according to Simasko. This is a scam typically done during the winter holiday season.

How to avoid it:

• Hang up and call your family member at their last known phone number to verify if they really did call.
• If the call was supposedly from jail, call the police department to confirm your loved one was arrested.
• Call family members or friends of the person to confirm their situation.

6. Real estate scams

Real estate and rental fraud occur when someone loses money to a scam through a real estate, rental or timeshare transaction. It targets people who are buying or renting a new home, as commonly seen in Airbnb scams.

In this scam, the fraudster will impersonate a lender, real estate agent or other authority and insist you wire their payment to a new account. Of course, this new account will send the money straight to the thief.

How to avoid it:

• Always communicate with your mortgage company and real estate agents through phone numbers and email addresses they have previously used.
• If someone asks you to pay through a new account, call your contacts directly to confirm if the new request is legit.
• Don’t share banking information through emails or text messages.

7. Computer control scams

There have been a number of scams involving people claiming to be from a tech business like Geek Squad or Norton. These scam artists ask to access their targets’ computers remotely to fix a problem with its software.

If you let them, they get into your banking accounts, where they can do lots of damage and steal your funds, says Mary Dishong-VanEtten, vice president and corporate security officer at Tompkins Mahopac Bank in Pennsylvania.

How to avoid it:

• Never allow anyone to access your computer unless you can confirm they are with a trusted company. Next up, learn more about Geek Sqaud scams and how to avoid falling prey to frauds online.

8. Shopping scams

Shopping scams involve websites or social media stores that look like they are from legitimate companies. Ads for these scam stores often pop up on social media, using images from reputable stores to draw people in, and they may feature photos of actual brand-name products at wildly discounted prices. But once you buy said product, you never receive it, or if you do, it may be just a photo of the product or a knockoff version. Often, these online storefronts will disappear after a short time, making it impossible to track down the scammer.

How to avoid it:

• If the prices are too good to be true, they probably are. This is a red flag that someone is attempting to scam you.
• Avoid sellers that want you to pay with a money order, pre-loaded money card or wire transfer.
• Verify that the company’s address and customer service contact information are active before making your purchase.
• Check that the site is secure. Secure sites will have a padlock icon before the website address or the web address will include “https.”

What should you do if you fall for a wire fraud scam?

• Contact your bank immediately. The bank sending the wire transfer may be able to recover your money from the receiving bank if the funds haven’t been forwarded out of the fraudster’s account, says Barta.
• Submit a fraud report with the FBI’s Internet Crime Complaint Center for investigation.
• Contact your local police. The scam artist may be targeting others in your area, and the information could help with their arrest.

Get Reader’s Digest’s Read Up newsletter for more tech, cleaning, travel, humor and fun facts all week long.

Sources:

• U.S. Federal Trade Commission: “New Data Shows FTC Received 2.8 Million Fraud Reports from Consumers in 2021”
• Dan Barta, principal enterprise fraud and financial crimes consultant at analytics company SAS
• Patrick Simasko, elder law attorney and financial advisor at Simasko Law in Mount Clemens, Michigan
• Atlas VPN.com: “Romance scams cost Americans almost $350 million in 2021”
• Mary Dishong-VanEtten, vice president and corporate security officer at Tompkins Mahopac Bank

Westend61/Getty Images

What Is Cryptocurrency?

Andriy Onufriyenko/Getty Images

What Is Bitcoin, and How Does It Work?

HT Ganzo/Getty Images

What You Need to Know About Web3