Wire fraud is a type of financial crime that involves tricking an institution into transferring money or giving access to funds. It can involve making false statements, hiding information from another party, or impersonating someone else to gain access to resources.
Commonly referred to as “wire” fraud due to the common way these schemes are executed using money transfer services like Western Union and MoneyGram.
A wire transfer is simply a transfer of money from one individual or entity to another through the use of any intermediary financial services such as a bank, credit union, or payment processor.
While these intermediaries provide necessary monitoring and anti-fraud measures, they also present opportunities for malicious actors intent on defrauding others for their personal monetary gain.
Vast sums of money are lost to wire fraud every year, affecting both businesses and individuals. It’s near impossible to produce a total global figure due to differences in how the statistics are reported. However, cybercrime (of which wire fraud is an integral part) is certainly a growing problem, anticipated to cost $10.5 trillion per year by 2025.
The following are just some of the examples of wire fraud.
- Bogus emails that request payment for goods that never existed.
- “Investment” emails promising high returns but which are in fact a scam designed to fleece the recipient.
- Email phishing scams designed to steal passwords, account logins, credit card details and other information – to enable identity theft and other types of fraud.
- Email hoaxes designed to scare recipients into making a rash response, such as clicking a link that installs malware on their computer.
- Phone calls that are designed to scare recipients into parting with money or personal information.
- Fake websites designed to trick people into parting with money or personal information.
Wire fraud is taken extremely seriously by the authorities and Internet fraudsters are often prosecuted to the full extent of the law. There are many cases of people who attempted to scam others online ending up in prison for very long periods of time.
For example, in 2008, a Romanian man named Anurag Hora was sentenced to 25 years in prison for his part in a $50 million internet fraud scheme, and in 2014, South African bad actor Thamsanqa Samuels was sentenced to 15 years behind bars for fraud.
Typically, the longer the scam lasts and the more people it involves, the more serious it is considered to be. Some types of wire fraud are considered particularly serious, such as hacking and identity theft, and those who are found guilty are often imprisoned for several years.
Wire fraud is a felony, according to the U.S. Department of Justice. Wire fraud charges are often leveled against suspects as misdemeanors, with a maximum sentence of one year in jail per offense.
Felonies are reserved for very serious offenses, such as terrorism, murder, and drug trafficking. Wire fraud convictions are usually recorded as “felony convictions,” but this refers to the severity of the crime committed, not the actual legal classification of the conviction.
It is possible for the authorities to press felony charges for certain types of wire fraud. However, this is uncommon, and those charged with felony wire fraud are often sentenced to less than a year in prison.
The authorities responsible for investigating wire fraud are different in every country. In the U.S., the FBI, the Department of Justice, the Secret Service, the Postal Inspection Service, and other law enforcement agencies investigate cybercrime, including wire fraud.
The FBI investigates all types of wire fraud and often works with other law enforcement agencies, including the Department of Justice, Postal Inspection Service, the Department of Homeland Security, and the Securities and Exchange Commission.
In the U.K., the National Cyber Crime Unit (NCCU) of the National Crime Agency investigates various types of cybercrime, including online and phone fraud, as well as cyber-espionage.
The length of a wire fraud investigation varies greatly, but often takes many months, and even years – it’s not uncommon for a fraud investigation to last two years or longer.
A major factor affecting the length of an investigation is the amount of evidence required to bring charges against a suspect(s) – if authorities only have a small amount of evidence, the case may be dropped.
Other factors that can affect the length of an investigation include whether or not the investigation is being prioritized, the amount of resources available to the investigation (such as staff to analyze data and trace call/email logs), and whether or not the authorities have a suspect(s) in mind.
The better prepared authorities are for an investigation, the more likely they are to successfully bring charges. This means that the length of the investigation can often be reduced by sending authorities the correct data and evidence whenever possible.
The “Nigerian Prince” scam is one of the most common varieties of wire fraud and has been around since the 1990s, although it has evolved and diversified since then.
It’s also known as the “419 scam” after the section of the Nigerian criminal code that used to be applied to it. The scam starts with an email that claims to be from a member of a royal family in Nigeria (or another country such as Cameroon, Ghana, or the Ivory Coast).
It claims that the recipient has been “selected” to receive a large sum of money in return for a small “favor” such as depositing money into an account and wiring the rest to the scammers. Of course, the scammers don’t actually have the money they promise to send, and the recipient ends up losing money when they try to follow the instructions.
The “Nigerian prince” scam is one of the oldest and most well-known types of wire fraud, but there are many other types of wire fraud as well.
The gift card scam is a type of wire fraud that has become increasingly common over the last few years.
Scammers send emails to small businesses and tell them that they are being awarded a gift card from a major retailer. The email appears to come from a legitimate corporation, such as Amazon or Walmart, and the scammers claim that the gift card is for advertising services.
Once the scammers receive the gift card information, they sell the gift card for a fraction of its value. The scammer then sends the business an email saying that the gift card didn’t arrive. The business then researches the issue and finds a number of articles online saying that gift cards to small businesses have been discontinued by the major retailers.
The business then sends an email to the major retailer asking why their gift card was rejected and finds that a scammer sent them the same “advertisement”.
In reality, gift card scams are simply a new variation of wire fraud that is particularly difficult to trace.
The CEO email scam is a classic example of wire fraud. It’s a scam that has been around since the early 2000s, and in many ways remains a tried-and-tested method, used to scam money all over the world.
The scam involves a fraudster emailing a company’s CEO or other high-level employee, posing as a supplier, such as a shipping company. The scammer will make up a story, claiming that they need to transfer money to the company, but don’t have a bank account.
The scammer then asks the employee to accept the money and transfer it on their behalf. In reality, the employee is being scammed and the money doesn’t exist.
The CEO email scam is a common type of wire fraud because it’s easy for scammers to create fake emails and company logos, and it doesn’t require them to contact the company directly.
Prevention is always better than cure. It’s easier (and cheaper!) to stop fraudulent activity at the source than to figure out what happened after the fact. In the world of wire fraud, you can take a number of steps to protect your company and customers from falling victim.
Start by educating your employees with an internal fraud awareness program. Your employees are the first line of defense against fraud – the more they know, the better equipped they’ll be to spot and prevent it.
A key part of this is to train your employees in how to recognize the different types of wire fraud. A mix of human and algorithmic detection are used by advanced fraud prevention systems (AFPs). AI-based systems (such as Spotrisk) are particularly useful for detecting social media fraud, which is not well-covered by traditional fraud detection methods.
Yes, it most definitely is. A lot of these threats won’t go away with time – in fact, some of them will only become more sophisticated.
Stepping back and taking a look at the bigger picture, there are three major reasons behind the increasing threat level of wire fraud:
- Growing cyber criminal sophistication. The bad actors will continue to grow in their ability to infiltrate computers and networks, produce malware, and steal data.
- Increasingly volatile global political environment. This is a broad statement, but it’s worth noting that the most serious attacks historically have often happened during times of political upheaval, such as the attacks on the World Trade Center on 9/11.
- Growing dependence on a digital economy. As people, businesses, and countries become more and more reliant on a digital communication infrastructure, the potential for disruption and abuse grows significantly.
The rise of the internet and the increased use of electronic communication, including social media and chat apps, has led to an explosion of cybercrime. Bad actors have been quick to take advantage of the new technologies, often targeting vulnerable people, including adolescents, the elderly, and financially insecure people.
Wire fraud is a term that encompasses all types of fraud that make use of telecommunications, including fraud conducted online, on the phone, social media, fax and so on. A key part of combating wire fraud is to train your employees in how to recognize the different types of wire fraud and to implement an internal fraud awareness program.
It’s also important to note that the FBI has its own internal systems, like a CTN that are often understaffed and struggling to deal with the sheer volume of investigations. The best way to combat wire fraud is to stay informed and educate yourself and your employees on how to recognize the different types of wire fraud.
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