Understanding Wire Fraud and How to Prevent It

Wire fraud is on the rise. According to the FTC Consumer Sentinel Network, the first two quarters of 2024 have seen 18,791 reports of wire transfer fraud with a total of $148.9 million lost to these schemes.

What is Wire Fraud?

Wire fraud involves the use of electronic communications ― either verbal or written ― to deceive someone into sending funds via a wire transfer. It often occurs through phishing emails, fraudulent wire instructions, or social engineering tactics. At Coldstream, we are committed to protecting our clients from wire fraud and other scams. Please see our previous article on cybersecurity to learn how we protect your data and what you can do to help protect your assets.

How Wire Fraud Occurs

1. Phishing and Spoofing: Malicious actors often impersonate trusted individuals, such as coworkers, friends, or family members, to send fraudulent wire instructions. These emails or messages can be highly convincing, leading the recipient to believe they are legitimate.
2. Business Email Compromise (BEC): In BEC campaigns, a malicious group gains access to a company’s email systems and monitors communications, sometimes for months, usually through one or two employees. They wait for an opportune moment ― such as during a real estate transaction, large investment or business purchase ― to pose as the party verifying the transaction and send fraudulent wire instructions that would redirect funds.
3. Social Engineering: Scammers and hackers may gather information about you or your financial relationships from social media, public records, or even through direct interaction. They can use this knowledge to craft convincing scenarios that lead you to unwittingly authorize a fraudulent wire transfer.

Real-Life Example of Wire Fraud

• High-Profile Case: In 2024, a Hong Kong finance professional paid out $25 million to a crime group, after a Zoom call with scammers who used deepfake technology to pose as their Chief Financial Officer and other coworkers. Deepfake technology allows an individual to create a realistic visual overlay of another person in real time using artificial intelligence and data, such as online images and videos, gathered about their target.
• Coldstream Case: We recently worked with a client who sent a request via email that we withdraw a significant amount from their account. The email had come to multiple team members and to the client’s personal banker. We reached out directly to the client to confirm the transaction, both per our regular policy and practices but also because this was not in line with recent discussions we’d had with the client. Once we learned that the client’s email had been compromised, we immediately took steps to work with the client’s custodian to restrict the accounts we manage. We also coached the client on next steps, such as changing passwords, executing a credit freeze, and other protective actions.

Protecting Yourself Against Wire Fraud

Given the sophisticated nature of wire fraud schemes, it’s necessary to take proactive steps to safeguard your assets. Here are some practices to help keep your funds safe:

1.Verify Wire Instructions Through Multiple Channels:

• • Phone Verification: Always confirm wire transfer instructions with your financial advisor or the relevant party through a known phone number, not one provided in an email.
  • In-Person Verification: If possible, verify wire instructions in person or through a secure video call.

2. Monitor Financial Transactions:

1. • Review Accounts: Check your account information and make sure you are reviewing correspondence, account statements, confirmations, and alerts.
   • Regular Audits: Conduct regular audits of financial transactions to spot any unusual activity. Immediate investigation of any anomalies can potentially prevent or recoup significant losses.
   • Real-Time Alerts: Set up real-time alerts for wire transfers, allowing you to quickly detect and respond to unauthorized transactions.
   • Report: Report any unauthorized account activity or errors immediately to your Coldstream team.

3. Foreign Wires:

• • Verification: Treat any foreign wires with extreme caution; always verify the end destination with multiple trusted sources before wiring funds. Always verify the legitimacy of any company or individual you are sending a wire to.
  • Take your time: Don’t lose an opportunity for doing due diligence on a transaction. Take your time and ask yourself, “does everything here seem right?” Even a single pause can mean the difference between losing money and saving yourself from a potential scam.

How Coldstream Protects its Clients Against Wire Fraud

Our client service teams employ the tactics mentioned above to protect our clients against wire fraud. In addition, we conduct multi-person verification of wires, verification of document signatures, and verbal verification of all wire details with the client and receiving party. We also implement several data security protections which you can find here.

Conclusion

As with many aspects of cybersecurity and financial awareness, it is important to remain vigilant when it comes to wire transfers and large dollar transactions, especially those that come across as “a once-in-a-lifetime opportunity” or “urgent.” You can find more information on scams and wire fraud at the below resources. If you have any questions, please reach out to your wealth management team.

• FinCen | Analysis of Business Email Compromise
• Federal Trade Commission | What to Know Before You Wire Money
• Washington State Office of the Attorney General | Wire Transfer Scams
• fidelity.com | Configure Account Alerts
• schwab.com | Configure Account Alerts