Scott Anchin: How to Prevent Wire Fraud

With electronic payments increasingly the norm, wire fraud is becoming more common and varied in format. Wire fraud generally involves the use of electronic communication to defraud another person by phone, fax, telegram or, most commonly now, the internet.

Notable scams to watch out for include romance scams on dating apps and social media; advance-fee scam emails promising rewards for financial help; phishing emails claiming account information has been compromised, with a link to input credentials; and hiring scams, where prospective “employers” request personal information like birth dates and Social Security numbers, or a “processing fee.” 

Community banks must remain vigilant, as prosecutors or regulators may act against financial institutions that fail to recognize or prevent cases of wire fraud.

Banks can launch awareness campaigns to educate customers on avoiding scams. Encourage them to:

• Use strong passwords and multifactor authentication.

• Double check the identity of anyone requesting funds. For example, call a family member directly if “they” ask for financial help via social media before responding.

• If the request is for an “urgent” transfer of funds, that is a red flag. Don’t rush to pay it.

• Don’t click on links. If you receive an email that appears to be from your bank, check the email address or go (separately) to the bank’s website to verify the request.

• Watch for hiring scams offering unrealistically high salaries and complicated onboarding processes that involve requests for money.

Banks can also work internally to protect customers from wire fraud by doing the following:

• Have a clear plan for responding to suspected fraud, from freezing transactions to notifying law enforcement.

• Train bank employees to spot red flags, like urgent requests for money and changes in vendor payment information. 

• Use multifactor authentication for access to financial systems.

• Create clear wire transfer protocols within the bank.

• When a wire transfer is requested, especially a new one, use multiple verification steps like multifactor authentication, callbacks or confirmation pop-ups.

• Monitor real-time transactions using advanced algorithms and AI to flag suspicious patterns. 

• Look for (and flag) unusually large amounts being transferred or consider setting limits for wire amounts.

• Look for transfers to countries at risk for financial fraud and money laundering (refer to the Financial Action Task Force’s black and gray lists).

• Require two individuals to verify high-value transfers.

• Place holds on unusual transfers, allowing time for potential fraud to be caught.

• Conduct regular internal audits to make sure the whole team is in compliance.

Wire fraud is just one of many fraud and scam typologies. Community banks should integrate wire fraud education and internal controls into a comprehensive enterprise strategy. Proactive measures and ongoing vigilance can turn fraud prevention into a competitive advantage that builds lasting customer trust.