Wire Fraud

What Is Wire Fraud?

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. It is often associated with scam emails that encourage people to make fraudulent bank (wire) transfers. While this is a common variety of wire fraud, the term can also refer to fraud by any other electronic means, from phone calls to SMS messages and beyond.

In legal terms, the US Government’s Section 1343 “Elements of Wire Fraud” states that prosecuting somebody for wire fraud requires the authorities to:

1. Show that the bad actor made use of a “scheme to defraud by means of false pretenses”.
2. Demonstrate the “defendant’s knowing and willful participation in scheme with intent to defraud”.
3. Demonstrate the “use of interstate wire communications in furtherance of scheme”.

While other countries’ definitions of and terminology for online and phone fraud vary greatly, the US uses the umbrella term of wire fraud, which is all-encompassing – as the nature of the online world (and global telephony) inherently crosses borders and state lines.

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. 

What Does Wire Fraud Include? 

Wire fraud includes every kind of fraud that’s carried out using telecommunications and electronic systems. As such, it includes many varieties of online cybercrime.

Examples include:

• email scams encouraging people to hand over money or make bank transfers
• social engineering attacks conducted online or on the phone
• scam telephone calls
• fake websites and eshops
• catfishing via dating sites and social media
• social media scams
• instant messaging scams (such as those conducted via WhatsApp or Messenger)
• certain types of Ponzi schemes
• bank or credit card fraud when it’s conducted online or via the phone
• insurance fraud when the application is submitted online

As you can see, there’s considerable overlap between different types of wire fraud. And they can also combine. Some scams, for example, can begin with a telephone call or instant message, and then lead people to a fraudulent website. 

How Serious Is Wire Fraud?

Wire fraud is a serious offense, with suitably serious penalties. The term is only officially used in the USA, but exact laws vary from state to state. 

It’s worth noting that due to the international nature of telecommunications systems, criminals committing wire fraud may be liable for prosecution in multiple countries – where the applicable legislation might have a different name, yet it corresponds to similar offenses.  

Similarly, wire fraud investigations often cross borders, with different nations joining forces to combat the crime. For example, in 2019, 218 people were arrested across eight countries in a coordinated campaign to break up a business email compromise (BEC) scheme. That particular variation of wire fraud targeted people able to make wire transfers on behalf of businesses.  

Penalties for wire fraud offenses vary dependent on the locale and the severity of the offense(s). Taking the UK as an example, average sentences for serious financial fraud are between four and seven years.

Is Wire Fraud a Felony?

Wire fraud across state lines is a felony in the USA. Penalties can include fines of up to $250,000 for individuals and $500,000 for companies, per count. Convicted wire fraud criminals can also be imprisoned for up to 20 years. 

There are also penalties of up to 30 years in prison and $1,000,000 if the scheme is related to a major disaster (per presidential declaration) or a financial institution.

Who Investigates Wire Fraud?

In the USA, the Federal Government investigates wire fraud if it crosses state lines. Investigations can involve multiple agencies – such as the FBI, the Department of Justice and the IRS. 

Large-scale international wire fraud often involves a joint effort from law enforcement agencies in multiple countries. 

Plenty of other parties are often involved in the details of wire fraud investigations. These can include local police departments and tax departments, who may sometimes be the first to become aware of a particular scam due to a complaint from an individual.  

Individual companies can also play a part in investigating wire fraud if their business or customer base becomes a target. 

How Long Does a Wire Fraud Investigation Take?

Wire fraud investigations vary considerably in complexity. Unraveling international criminal networks can take years. In cases of more run-of-the-mill low-level fraud, investigations can complete in much less time. 

According to reports, the average bank fraud investigation takes “up to” 45 days, per Chargeback Gurus.

3 Examples of Wire Fraud

Because wire fraud is such as broad term, there are virtually endless examples of how it can work. Today, we’ll look at just three of them: the Nigerian prince scam, CEO fraud, and gift card scams.

1: The “Nigerian Prince” Scam (and Many Variations)

Almost everybody with an email account has seen a variation of the “Nigerian Prince” scam. 

Prevalent since the 1990s, the scam works as follows: 

1. A person receives an unsolicited email purporting to be from someone (sometimes an insanely wealthy prince) who urgently needs to move a huge sum of money out of their country. 
2. The recipient is promised a considerable share of the money in return for assistance moving it. 
3. Usually, there’s the “need” for the victim to hand over bank details, or to transfer a small sum of money for “admin fees” or other expenses. 
4. Once the victim is hooked in, there are usually multiple attempts to extract more money. 

While this scam is obvious to seasoned internet users, it continues to this day. Far from being a small-scale operation, it’s often linked to organized crime. For example, in 2015, a South Korean victim and his daughter were kidnapped after flying to Africa to collect their promised payout. 

Many variations of this form of wire fraud emerge over time. Often, they’re linked to world events, such as wars in Syria and Ukraine. 

2: CEO Fraud

Also known as the CEO email scam, CEO fraud is a variety of wire fraud that’s already cost businesses over $26 billion. Incidents of this scam can grow by over 100% year on year.

It is relatively easy to execute and makes a victim of company employees – usually in the finance department. They receive an “urgent” email (or other communications) that appears to be from the CEO or another senior member of staff, ordering them to urgently pay an invoice. 

Like many such scams, it’s one where the scammers may try to double dip if they’re successful once. 

3: The Gift Card Scam

In 2021, around 40,000 people fell victim to gift card scams in the US alone. Part of the reason is that gift cards are much more difficult to track down, monitor and block than credit and debit cards.

There are many different types of gift card scam. A very simple version makes use of social media or email to target individuals: 

1. A person receives a message appearing to be from a friend or family member, saying they’re having problems buying gift cards for a relative’s birthday. 
2. The victim is convinced to buy the cards on their behalf, to help them out.
3. They are then asked to hand over the activation codes.
4. The scammer can then use the gift card credit.

Other gift card scams target companies rather than individuals. These can include people buying gift cards using stolen credit card details. 

Some criminals target the gift card infrastructure at a lower level, attempting to brute force thousands of redemption codes or to hack systems to generate new codes.

The anonymity of gift cards – rarely linked to any particular individual – and the ease with which their number can be acquired makes such scams particularly attractive to criminals who wish to evade detection.

How to Prevent Wire Fraud at Your Company

With so many varieties of wire fraud, companies must take a multi-faceted approach to reduce their risk of falling victim to scams. 

Cyber-awareness training is an important component. Scams like CEO fraud can often be avoided if employees are trained to exercise extreme caution around the actions they take based on email instructions. 

Similarly, exposure to example scam emails and websites can train employees how to recognize and question anything that could be an attempt at fraud.

On a technical level, prevention is usually better than cure. Fraud prevention systems can stop many wire fraud attempts before they do any financial damage.

Technologies used to pinpoint suspicious users include the following:

• Device fingerprinting can detect the use of VPNs and proxies, which could signify that a customer isn’t who (or where) they claim to be. These solutions can also detect connections between multiple accounts if – for example – a cybercriminal is placing multiple orders from one place, using different information.
  
• Data enrichment tools allow businesses to perform automated due diligence on customers based on simple data points such as an email address or telephone number. Businesses can further investigate red flags such as throwaway email accounts, complete lack of online presence, and phone numbers linked to virtual services.
  
• Velocity checks will consider data points gathered within the dimension of time. In simpler words, it will look at which customers have logged in from the same device within a certain amount of time, based on their device hash and other factors, or when a user has taken a suspicious number of actions within a certain time frame, compared to their usual patterns.

In many cases, good fraud prevention systems and techniques will stop the scammers in their tracks. Failing that, they can provide companies with evidence that can assist in disputing chargebacks or in further investigations. 

How to Prevent Wire Fraud as an Individual 

Avoiding wire fraud as an individual largely comes down to developing a refined sense of awareness of scams, fraud and cybercrime.  

A healthy dose of caution and skepticism serves individuals well whenever they receive an unsolicited email or phone call. Often, the signs are obvious to the trained eye: emails coming from strange-looking addresses, phone calls from organizations the victim doesn’t usually deal with, and suspicious login pages. 

However, cybercriminals constantly refine their methods, often coming up with scams designed to convince even the most web-savvy individuals. 

Along with awareness and caution, individuals should also religiously follow the basics of cybersecurity: up-to-date and properly configured security software, extra care on unsecured wireless networks, and frequently changed, complex passwords.