Ways to Help Protect Your Business from Wire Fraud

You might have heard of individuals losing money to acts of wire fraud. But did you know that it's also a popular way for scammers to steal money from businesses? That's why it's important to learn about business wire fraud and ways to help prevent it.

Here are some quick tips that can help you prevent wire fraud at your business.

 

What Is Wire Fraud?

Wire fraud occurs when a scammer uses phone, text or internet technology to steal money from a business. Notably, wire transfers are immediate, and criminals will often transfer the money out of the account within the same day, as wires are considered verified funds and are immediately available for withdrawal. In other words, once money is sent via a wire transfer, it can't be recovered if that transfer turns out to be fraud.

There are two common ways that scammers commit wire fraud on businesses:

• First, scammers might use methods such as social engineering, phishing, and business email compromise. In each of these techniques, the scammer harvests credentials through email, phone call or text message, which can result in an account takeover and the ability to commit wire fraud on a company.
• Second, wire fraud can happen when criminals trick businesses into sending a wire transfer to them under false pretenses, such as sending a fake invoice with updated account information that's supposedly from a known vendor. Once a wire transfer has been initiated, it cannot be cancelled.

Wire Fraud Causes More Than Financial Loss

Besides having a financial impact on a business, wire fraud can be damaging to a company's reputation. News of wire fraud can lead to clients losing trust in the company, potentially driving a decrease in further business.

A significant loss may cause clients to assume that a company lacks a robust cybersecurity program or is unable to secure sensitive information.

The financial and reputational risks caused by wire fraud mean that companies should take every step reasonably possible to help prevent it.

 

How to Help Protect Against Wire Fraud

Business leaders should practice the following tips to mitigate their fraud risk and help shield their businesses against wire fraud:

Have a Clear Process

Develop a clear process and method of procedures to verify and document decision-making before initiating any wire transfers. For example, the process should require employees to verbally verify that the request is coming from an authorized and authenticated source by calling the client or vendor using a known phone number any time there is a change in information or they are processing a new request.

Verify a Person's Identity

Verify the authenticity of any person making a wire transfer request. Criminals often pose as legitimate vendors to mask their identity. Some scenarios include simply attaching an invoice for a payment, but some involve elaborate stories, such as a big, confidential project that requires funding via wire transfer and demands your secrecy.

Always verify the source of the request by calling from the information you have on file. If you suspect fraud, do not reply to the sender's initial point of communication as this may be compromised or hacked. Instead, consider reaching out via a phone number that you know to be correct and trustworthy.

Use Dual Control

Implement dual control measures for wire transfers. Having dual control for payments means that one user will act as the maker to initiate a wire payment and a different user will act as the approver of that action for the payment to be released.

Having this measure in place can reduce opportunities for fraud, increase accountability and provide an extra layer of protection from fraud.

 

Embrace Cybersecurity Useful Practices

Always follow cybersecurity useful practices. While preventing fraud is never guaranteed, taking the right steps to prevent it can greatly reduce the likelihood of your business losing money to wire fraud.

For example, one of the most important cybersecurity tools for protecting businesses is the use of long and complex passwords. They should be 16 characters or longer with special characters, and users should never use the same password for multiple logins.

Additionally, use security measures such as firewalls, and make sure that software is updated regularly.

Monitor Your Accounts

Regularly monitor and analyze your financial accounts and transactions for unusual activity. Use reconciliation tools to ensure accuracy and to uncover any discrepancies and prevent fraud.

Educate Your Team

Teach every person in your company about fraud tactics and how they can avoid them. Fraudsters regularly change tactics, so it's important to stay up to date about the latest schemes and always be on the lookout for wire fraud red flags.

Don't Rush Wire Transfers

While wire transfers are meant to be speedy, be certain to slow down and use due diligence before initiating one. Rather than acting hurriedly, take time to call the requester by phone and check to make sure the request is legitimate before initiating the wire transfer.

Question any wire transfer request that is out of the norm or has last minute changes without legitimate explanation and verbal verification. If a sender requests an urgent or immediate wire transfer, that is a red flag and could be a sign of a fraudulent request.

 

Do Banks Protect Against Wire Fraud?

Your bank may offer additional controls that can help you protect your business from wire fraud, such as setting daily payment limits. By setting predefined payment thresholds of the amount of money that can be transferred in a single transaction or over a specified period, you can help limit losses in the event of fraudulent activity or user error.

In addition, your bank may offer wire templates for recurring wires to ensure consistency, minimize the risk of entering incorrect account information and make it more challenging for fraudsters to manipulate or exploit the transaction process. If a “supposed" representative of a payee contacts you to update payment information for a wire template, verbally verify with the company with contact information known to you.

If you suspect that fraud has occurred on your account, contact your bank's fraud team and reach out to the FBI Internet Crime Complaint Center (IC3) immediately to report the incident. City National clients can dial (800) 557-4262 to contact the bank's fraud team.