Dave Coughlin Partner View Bio

Wire Fraud

Wire fraud and cybersecurity have been hot topics all year. Take a look at this information about wire fraud from out partner Maritime Program Group on things you should look out for.

According to recently published information, the use of wire transfers has nearly doubled in the last 20 years to 130 million transfers per year totaling more than a whopping 600 Trillion dollars. Do you think that there would be incentive to try to grab some of that cash by the “bad actors” among us? You bet there is. Read on.

Back on April 7th, one of our insured’s completed a sales transaction for a used boat. They had brokered the boat for their customer who lived in the UK. The vessel sold for about $475,000.00 less commission and expenses for a net to the seller of $440,000.00. Our insured completed the sales transaction with the buyer (a US citizen) and held the net sales proceeds in their bank account for distribution to the seller once the funds cleared. The insured contacted the seller requesting wire transfer instructions via email as that was the way that they had been communicating throughout the entire transaction.

The seller emailed the wire transfer instructions including the Routing Number, Swift Codes and all bank information. That email was received by our insured with the normal thread information, subject line, email return address but… it was not from the seller. The email had been “hijacked” midflight, as it were, between the UK and the US. The routing numbers, account information and bank details had been altered.

Our unsuspecting insured wired the funds – all $440K of it – as instructed. A few days later the seller called our insured inquiring where the proceeds of the sale were. Our insured told him they had wired the money. Very long story short (boiling down a half a year’s international investigation into a couple of lines) the money had been diverted into another bank account which was held by a Nigerian based group. The money was gone, the account closed and the hunt was on.

Unfortunately, there was no coverage for this loss under the policy in force. Our insured was out the $440K, the seller was out the $440K, the Nigerian cartel was $440K richer and the FBI and INTERPOL were faced with tracking down the funds under nearly impossible circumstances. Case particulars pending.

Controls which are designed to prevent fraud within financial institutions are often defeated. It, therefore, falls on us to take control. There are online, mobile, call center and even bank employee points of compromise with malware, email compromise, Phishing and other methods of fraud being used to intercept the wire transfer. So… what can you do to prevent just such an occurrence from happening to you or one of your clients? The following steps should be taken in all cases when wiring funds:

Verification Is Key To Stopping Wire Fraud

  • Accept wire transfer instructions only expected in the normal course of business. Unusual requests, those that would not be in the normal course of business, should be questioned and brought to the attention of a supervisor or manager. If in doubt… STOP.
  • Obtain wire instructions in writing, preferably on letterhead (not the body of an email) of the person giving the wire instructions. Fax transmissions are less likely to be targeted.
  • Ask for a signature and compare same to any known samples (if any).
  • Once received, call the person to whom the money is to be wired on the phone and confirm that the instructions (every detail of it) are correct. Call the number you have on record already and not necessarily the number on the email or fax/letterhead.
  • If possible, verify the identity of the person over the phone using some recently known random transaction information (last bill amount, most recent transaction, etc.)
  • Contact your financial institution and verify the wiring instructions and details for your bank as well as the receiving bank are correct.
  • If you are to be the recipient of a wire transfer, then verify that your instructions have been received and every detail is correct.

    • On a side note: Afraid of online banking? Have your doubts? I just got off the line with a friend who works in the private asset world of a very large bank. She reminded me of a very good point about checking accounts and paper checks. Do you still write checks? Well, they have your name, address, telephone number AND YOUR BANK ACCOUNT AND ROUTING NUMBER on them. A quick look at your Facebook account, Twitter, or Instagram accounts, the bad guys will have your “dog’s name, mother-in-laws birthday, your birthday, and just about anything else you use for your personal ID information. Think about that… scary stuff!

    Don’t risk your personal reputation or business by being careless in handling wire transfers or ACH transfers. Hopefully, this will never happen to you but chances are that this growing trend in cybercrime will affect someone you know. Let’s all keep a good lookout from the bridge and tend the watch duty faithfully.

    This information was brought to you by our partners at Maritime Program Group. To talk about making sure you have the proper coverage, contact our personal insurance team.

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