Wire Fraud: What It Is and How to Stop It

  • By Steven
  • Published: Mar 27, 2024
  • Last Updated: Apr 19, 2024

In 2023, based on wire fraud statistics nearly a quarter of consumers received suspicious communications, which may have occurred over text, email, phone, or social media. Of those who interacted with the sender, one in twenty consumers fell victim to wire fraud, which begins over electronic channels. That same year, consumers lost a reported $10 billion to fraudulent activities, a significant portion of which began as wire fraud.

Wire Fraud

Understanding, planning, and preventing the opportunities for wire fraud is essential for life in the digital world. At any time, a consumer could fall victim to wire fraud or the schemes of malicious actors—and unless someone else steps in to raise a red flag, victims may have their accounts wiped out before recognizing what happened (if they ever learn the truth at all).

Criminals can trick even the most cautious individuals into complying with fraudsters; consequently, those who understand the threats they face, plan for the possibility of running into a threat actor, and act to prevent the success of a scheme are well underway to protect themselves, businesses, and communities from fraudsters.

What Is Wire Fraud?

As the name implies, wire fraud happens over “wires” or electronic modes of communication. More specifically, wire fraud happens over electronic means and necessarily includes financial fraud. These phishing attacks are defined via the Internet, email, social media, text, calls, fax, or any other electronic communication; the method that a criminal uses to communicate with their potential victim is what differentiates wire fraud from other types of criminal activities.

For example, suppose a criminal messaged a potential victim on social media and successfully lured them into obtaining gift cards. Because the criminal used an electronic message to contact the victim, this scheme would be wire fraud—regardless of whether they ask for gift cards, preloaded credit cards, or some other money-deriving option like cryptocurrency. Consequently, wire fraud is a hard-hitting option for criminals; when the scheme succeeds, it can devastate victims.

Types of Wire Fraud

As mentioned above, crimes categorized as “wire fraud” fall into broad classifications of criminality. The type of wire fraud a crime falls into may be determined using specific elements of the scenario, from communication methods to targeted returns (i.e., stealing lottery money versus committing tax evasion); moreover, the impacts of these schemes may help to dictate the ultimate punishments that a criminal receives—be it months or decades of imprisonment. These schemes differ, but once individuals learn to recognize the signs of potential wire fraud, they can better avoid these and other scams.

  • Telemarketing Fraud: these crimes target isolated elders within our society, often manipulating them with promises and emotionally charged scenarios that encourage the victims to send money, gift cards, assets, or account information.
  • Phishing Attacks and False Pretenses: these crimes can target anyone, but they most often begin with spear phishing, where a criminal observes one or a few people; from there, they can craft stories that manipulate their target into desirable actions.
  • Employment-Related Identity Theft: These criminal activities often focus on the targeted selection of employees as potential identity theft victims, often exploiting information stored in corporate databases, so individuals must exercise discretion when providing personal information to breach-prone organizations.
  • Work-from-home Scams: these crimes target those looking for remote employment opportunities. They can involve promises of high salaries, secure employment, and enticing benefits. Subsequently, individuals must verify these opportunities before sending contact information to potential scammers.
  •  Malware and Ransomware: these crimes are included in much of the criminal activity online—it can spread from an attachment to a network and beyond; further, with 7 to 25% of passwords matching multiple company accounts, individuals and organizations have significant parts to play in preventing the spread of malware.

How Wire Fraud is Committed

In nearly all wire fraud cases, the scheme begins with a criminal contacting their potential victim. Most often, criminals do research before sending a communication to their target, putting them in a position of power over their target. After making contact, the criminal will encourage or convince the victim to send them something of value, be it money, assets, or personal information (i.e., passwords, usernames, name of financial lender, business accounts, etc.). No matter what the victim sends, the fraudster will profit from it; therefore, not responding to these criminals is vital.

Even after knowing the common denominators of wire fraud schemes, it can still be challenging to determine if the person you’re talking to is a criminal in disguise; “old friends” may unexpectedly ask for cash; an “HR representative” may request a code or password for some administrator reason; or a “potential employer” could request financial account digits or Social Security Number for Theft. There are many ways a stranger could wriggle their way into someone’s life—that’s why recognizing the red flags of wire fraud is essential to life in a modern society.

Recognizing the Red Flags of Wire Fraud

Wire fraud is successful when a perpetrator manipulates a victim into doing a desired action; consequently, if victims recognize and respond to these potential threats, they can mitigate much of the danger they might otherwise face. Typical indicators of wire fraud include communications from strangers; however, in a cyber-centered world, blocking people is not always an option (i.e., when contact data is used for dating or to locate potential employment opportunities). These are our favorite tips for staying vigilant online and recognizing wire fraud.

Flags of Wire Fraud

  • Confirm the recipient’s identity before sending anything of value. Many fraudulent schemes can end before they start, especially if individuals take the time to confirm who they are speaking to first. Verify the contact details online before calling—and never call strangers back directly; only use the company line.
  • Do not reply to emails with verifying information. Refrain from confirming information even if the message is from an employee’s email account. HR and personal accounts are not safe from hacking and impersonation attempts; call the other party directly to confirm or resolve their requests or questions.
  • Use caution if the other person uses urgency or “free” services in their message. Some criminals create fictional narratives to push their potential victim into compliance—they are usually successful when the victim does not have time to think critically about the situation. By that same token, some scammers may offer “free” services to clients in exchange for “first refusal rights,” which encourages victims to call them back after an “emergency” like computer issues. These are not free services but rather “repair” schemes with delayed victimization.

The Role of Technology in Wire Fraud

Technology advancements are a double-edged sword. On the one hand, they offer us more efficiency than any previous generation. A modern person can earn hundreds of dollars of profit on any given day using available AI and technology. However, technology also allows malicious actors to enter our lives.

The status of necessity society has placed on technology hinders our ability to remove ourselves from it. Consequently, the role of technology in wire fraud is a perpetuating cycle. Technology is the source and method of these fraudulent activities, but the public can’t just stop using tech in their daily lives. The only reasonable response is to learn about these threats and use caution in all interactions.

Legal Framework and Regulations

In the US judicial system, wire fraud falls under Section 1343 within the Criminal Resource Manual; the elements of wire fraud, as viewed by our courts, have specific requirements influenced by the mail fraud statute. Mail fraud is the template for wire fraud, the only difference being the communication method. Eight Supreme Court judgments fill out the requirements for criminal activity to be considered wire fraud, most condensable into a few identifying statements.

  • Wire fraud includes an attempt or scheme to defraud a victim of property, money, resources, or under other pretenses.
  • Wire fraud includes facilitating the scheme using interstate electronic communications such as email, calling, texting, or other electronic methods.

Additionally, if found guilty of these crimes, the wire fraud penalty in federal courts has a maximum sentence of 20 years and various options for fines. Individuals may pay a quarter of a million dollars for their crimes, while organizations may need to pay up to half a million. Further, if found guilty of wire fraud within a local court, these crimes may have many nuances, including increased prison time, higher restitution fines, and decades more imprisonment.

Consumer Rights and Protections

The Federal Bureau of Investigation, the US Secret Service, the US Department of Homeland Security, and the Federal Trade Commission investigate wire fraud claims. Consequently, authorities seriously enforce a consumer’s rights concerning wire fraud. These rights are similar to those granted by mail and correspondence privacy but apply to electronics instead of physical paper.

  • Consumers have a right not to be misled under pretenses or defrauded.
  • Consumers have a right not to have their property or money taken due to defrauding activity.
  • Consumers can report defrauding activity to the federal or local government.

How to Prevent Wire Fraud

As outlined above, technology is a double-edged sword. The public cannot stop using it, so we must take preventative steps to make it safer. Moreover, protecting oneself and those around them through cybersecurity procedures helps prevent individuals and institutions from becoming victimized by wire fraud (and other online dangers). Preventing wire fraud starts with the individual, but organizations are also key players in defending their consumers.

Individuals Can Prevent Wire Fraud Through Action and Accountability

Everyone’s done it—used the same password for multiple accounts, not signed out of a shared computer, or responded to the stranger who messaged at two in the morning—but just because we’ve all done it doesn’t make passwords safe. The actions that an individual takes are directly related to the success of fraudulent activities; if they take the extra time to check who they are speaking with, make a new password, or immediately delete suspicious communications, they significantly limit their chances of falling victim to fraudsters and other online threats.

Institutions Can Prevent Wire Fraud Through Policy and Training

Organizations also have a vital part to play in the overall safety of online users (and their direct consumers). Implementing company-wide cybersecurity policies is a significant factor in responding to online threats; subsequently, those without preventative policies must act to create continuity and incident response plans before they are necessary. Good cybersecurity policy will mold to an organization’s needs, but most include:

  • Strict adherence to multi-factor authentications at all levels
  • Complex solid passwords with a six-month cycle lifespan
  • Adjustable encryption algorithms for all pieces of data, even within storage
  • Many data gateways which require various permissions to access
  • Standardized procedures for alerting upper management to potential risks

Steps to Take if You Are a Victim

If you suspect you’ve fallen victim to wire fraud, act immediately to bring the criminals to justice. In the short term, notify upper management of impacted organizations (assuming you work for the defrauded company) or begin notifying the federal agencies in charge of investigating fraud; this can include the FBI, the Secret Service, the Department of Homeland Security, the Federal Trade Commission, or the IRS (particularly for tax evasion).

After submitting an incident report to one of the agencies above, potential victims can begin responding to the threat in their personal lives. Long-term recovery options include updating or changing contact information and altering passwords for personal accounts. Potential victims might hire monitoring professionals to locate and prevent personal data from appearing on the dark web; they might consider phone-based identifying methods, from one-time tokens to face or biometric IDs; they might freeze their credit and sign up for suspicious activity alerts. There are numerous paths they can take - all of them help mitigate potential damages while restricting the movement of cybercriminals.

Understanding, recognizing, and preventing wire fraud is vital for life in today’s digital world. Criminals are constantly working to trick victims into giving up information and financial details. Threat actors may achieve their goals by manipulating people’s emotions, impersonating authority figures, or through extortionist plots; moreover, their schemes can start in-person, online, or via any other mainstream communication channel—from text messages to physical mailing fliers. Awareness of these threats allows everyone to implement preventative measures before schemes can succeed and mitigate the consequences if they do.

Check out our landing pages for data solutions and recovery options following a cybercriminal’s entrance into your life, or read through our articles to find more about the fraud, scams, schemes, and threats we all face daily on the Internet. 

 

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