Contrary to popular belief, wire transfer fraud doesn’t necessarily involve actual wire transfers. Such scams are based on various electronic communication forms, such as phone calls, emails, social media, and other messaging apps. They are used to defraud both standard internet users and businesses using fake websites, phishing emails, and other techniques that lure victims into sending fraudsters cash, gift cards, crypto, etc.
Some of the popular white-collar crimes, such as insurance fraud or Ponzi schemes, fall under the wire transfer fraud category when they are committed online or by phone. Wire transfer fraud poses a serious risk, leading to bad publicity and customer loss if not addressed. The worst part is that this type of fraud is hard to trace or reverse, making it a “perfect” crime for bad actors looking for quick money in their pockets.
So, what exactly is wire transfer fraud, how does it work, and what steps should you take to prevent it? Find the answers below.
What is Wire Transfer Fraud?
Wire transfer fraud is a type of payment fraud where the person is tricked into sending money to a fraudster’s bank account under false pretenses. It can be any scam that uses spoofing or identity theft, relying on electronic communication like phones or the internet to deceive people or companies into sending funds, such as standard online transfers, gift cards, prepaid credit cards, crypto, and any other valuable assets that the fraudster might want to steal for their personal benefit.
Some common examples include bad actors who scam by:
- Sending fake checks (for example, a cashier’s check), and asking to cash it and forward the money to them.
- Calling from the “IRS” or other official representatives and unexpectedly asking to wire funds (with consequences if you don’t comply).
- Asking to wire money overseas for some convincing reason, such as a grandchild on vacation or in the military.
Criminals who are skilled at wire transfer fraud impersonate figures like government officials, suppliers, and company executives, creating a convincing sense of urgency that pushes their victim to transfer the funds and finalize the “deal.” This helps fraudsters trick their victims without allowing them actually to think or assess the request on a deeper level.

Other illicit practices, for example, hacking into the person’s email and replicating documents that are later sent from the supposedly the same “real estate agent” to the victim, can be used to change the transfer destination to their fraudster’s account.
Criteria for Defining Wire Transfer Fraud
Cornell Law defines wire transfer fraud through a checklist of five key elements:
- The scheme involves a lie or omission.
- The person participates in a scheme to commit fraud.
- The person uses a form of communication (phone, email, social media app, etc.).
- The use of such communications advances the fraud scheme.
- The scheme results in financial losses (it can be money, assets, and so on).
How Does a Typical Wire Transfer Scam Work?
The most common scam linked to wire transfers is when the criminal uses their credentials to receive an electronic fund transfer between them and the victim’s bank account.
A typical wire transfer scam can be executed using several techniques, such as:
- Sending a phishing SMS demanding payment via wire transfers. In some cases, a scammer can infiltrate legitimate conversations and alter payment details.
- Joining an email exchange between attorneys, homebuyers, and other companies as a way to impersonate a company executive to request changes to a payment destination.
From the victim’s perspective, the transfer and the request seem authentic. In reality, the recipient’s account details are changed. So, the victim believes they’re making a valid payment when they’re actually wiring their money to the scammer.
Reasons Why Wire Transfer Fraud is Still a Threat
Most businesses today operate remotely, providing online payments or doing business through channels like phone calls and emails. This makes it particularly attractive for fraudsters, especially when the platform doesn’t request to verify their identity. Fraudsters can easily deceive people during transactions without face-to-face interactions or proper Know Your Customer (KYC) processes.
So, the main factors that make wire transfer fraud dangerous are that fraudsters can:
- Trick the person into sending money to their bank account instead of the true, intended recipient.
- Think of fake situations to convince someone that a payment is needed, providing fraudulent bank account details.
In both scenarios, the wire transfers can’t be reversed, which is why wire transfer fraud is so common. Previously, traditional wire transfers could take up to two business days, especially if it was an international transfer (due to additional steps like currency exchange). Now, with fintech providers and instant payment methods, people can credit their funds in seconds.

When the person realizes that they were scammed, the actor has already erased their tracks and left with the funds in their account. A notorious example of such fraud is when Xoom lost over $30 million in 2015. A financial executive was tricked into wiring the money, as they thought that this request came from their CEO.
Wire Transfer Scam Examples
There are different types of illicit practices linked to wire transfer scams. For instance:
1. Overpayment Scam
An overpayment scam involves a person pretending to be a new client. They often fake being interested in an item on an online marketplace. The main idea is to “accidentally” overpay and ask the person selling the item to return the difference via a wire transfer. Once the victim sends the money, the scammer cancels their initial payment, leaving the seller at a loss. Bad actors sometimes use stolen credit cards to reverse the payment. Sometimes, criminals claim that their overpayment was for “transport fees” that are going to another third party.
So, practically any business that sells goods or services online is at risk of having bad actors and overpayment scams on their platforms. Often, bad actors target victims regarding large purchases, hoping they’ll oversee warning signs while they score a bigger prize.
➡️ Tips that can help you avoid overpayment scams:
- Don’t rush into wiring money. Always take your time to inspect the buyer and their credentials.
- Look for warning signs. If there are misspellings or suspicious variations in details like their email address, it can be a sign of impersonation.
- Be cautious and trust your instincts. If the buyer is asking to wire more than the original price — it’s most likely a scam.
Related: Top 5 Marketplace Fraud Examples You Should Know
2. Tech Support Scam
A tech support scam involves a bad actor pretending to be a staff member of a well-known company, such as Google. They call, email, or text their victims, claiming that the device the person uses needs to be updated or fixed, and then they ask for a wire transfer for the services they provide. This type of scheme often only works on seniors or those who are less tech-savvy. Alternatively, more skilled fraudsters target businesses and hack their internal systems. They then ask for payment to unlock the files, also known as ransomware.
Fraudsters can also spoof the company’s emails, which typically belong to senior members, and send payment requests to accountants. Often, this works if the bad actors shut down the company’s internal system, claiming that the payment needs to be urgently made in order to fix all operations. With systems down, such a request seems less suspicious. Alternatively, they can trick company employees into installing malware, which then gives them access to sensitive information.
➡️ Tips that can help you stay away from tech support scams:
- Keep in mind that legitimate companies won’t contact you out of the blue. Especially through phone calls or unexpected emails.
- If your computer needs to be fixed, don’t trust phone calls from supposed tech specialists. Instead, contact the software company directly on your own.
- Ignore urgent warnings about security issues. Especially if it’s a suspicious pop-up or an urgent phone call. You can always double-check with your security specialist if it’s a work device or do a malware scan at home.
3. Real Estate Scam and Mortgage Fraud
A real estate scam involves a scammer faking wire transfer instructions and replacing them with different bank account details. This way, they can redirect the payments and replace the legitimate bank accounts, tricking victims into sending them money, for example, a down payment for a house. Luxury areas like Beverly Hills are often targeted.
Fraudsters pose as home buyers or lawyers, putting themselves into a comfortable position in terms of receiving wired funds. For example, a scammer can hack the victim’s emails and then impersonate their real estate agent or attorney. The email typically contains a large sum of money that the victim wires to the scammer instead of actually securing their dream home.

Alternatively, bad actors trick their victims into sending them their mortgage repayments. Another deceptive practice consists of trapping borrowers to take out unaffordable loans, often leading to financial hardships later in life. Vulnerable groups like seniors can fall victim to such refinancing scams, which actually offer unfavorable terms.
➡️ Tips that can help prevent real estate scams:
- Don’t respond to last-minute changes, such as urging a deposit that wasn’t issued according to plan.
- Discuss suspicious behavior with your family and friends, especially if you feel like you’re pressured to take out a loan.
- Never pay a fee before receiving a service. Instead, reach out to your certified housing counselor for assistance.
Related: What is Loan Fraud? Types and Prevention Tips
4. Fake Check Scam
A fake check scam involves a criminal asking the victim to wire them funds, in this case, to deposit a check. The logic behind this scam is that the scammer will ask you for more than you “owe” them, creating a convincing story that the money should be sent to them for a specific case. It can be a special prize payment, taxes for a service, payment for supplies for a job, etc.
For example, a scammer can pose as a personal assistant online. When the victim “applies” for a new job, the fake personal assistant says they’re hired. The person then receives a check with instructions on how to buy gift cards, asking later to send the PIN number to their new “boss.” Once the scammer gets the gift card PINs, they use them right away, leaving the victim without the money.
Related: How to Combat Document Forgery?
5. Rental Scam
A rental scam involves a person misrepresenting themselves and the property or lease. The goal is to collect the money and receive the wire for a fake or fraudulent offer. Scammers often create appealing rental offers online, putting out real-looking listings that are often too good to be true. They create fake websites to appear more genuine or post false listings on websites like Facebook’s marketplace. Sometimes, scammers “rent” a real property and use its photos when it’s already rented out. They ask for an upfront wire transfer, leaving the victims stranded.
Often, scammers target students in August or July when they are most in need of housing. They justify the need for a wire transfer by saying things like “there were past cancellations,” and the advance payment is just a “guarantee” for you to land the apartment.
➡️ Look out for these warning signs to avoid rental fraud:
- Avoid vague listings. It might be copied from a legitimate listing. It’s better to always see the property in person before agreeing to pay.
- Research the person. In other words, do your due diligence and meet the owner or the real estate agent in person. You can check property records or look for any adverse media online.
- Be cautious before agreeing to wire money in advance. If the person who’s renting the property claims to be out of town or if they provide a foreign account, that’s a sign of a scam. Always search the address online and check if the property’s address is legitimate.
Can a Wire Transfer Be Reversed?
In most cases, wire transfers can’t be reversed. So, when the victim is tricked, they might not receive their money back. That’s because the transfer appears to have been authorized from the victim’s account.
Most financial institutions don’t want to waste their sources on such matters and have their policy shaped strictly, only allowing reversals if:
- A duplicate transfer was sent.
- The recipient received more money than intended.
- The bank made an error with the recipient’s account number (in general, if the bank is at fault, they tend to assist their customer).
However, there are some exceptions. For example, a standard wire transfer can be reversed if the sending bank notifies the other (receiving) bank of the cancellation before the transfer is fully processed.
What are the Key Indicators of Wire Transfer Fraud for Businesses?
Businesses, especially regulated industries, such as banks, credit unions, loan service providers, fintech platforms, and other financial institutions that are at risk of being used for wire transfer fraud, need to implement proper anti-money laundering (AML) measures. This also includes fraud prevention procedures that help identify bad actors and spot fraud before it escalates further. For that, there are certain risks that businesses should look out for when conducting processes like transaction monitoring.
The main risk indicators that companies should track and be aware of include:
- Unverified beneficiary data. This includes wire transfers made to an account with incomplete recipient information (name or address, for example). This also includes inconsistent or unchecked and unverified beneficiary data. You should always determine if the beneficiary isn’t trying to stay anonymous and disguise their identity for fraudulent reasons.
- Unusual movement of funds. For example, the person proceeds with fast transfers, often using multiple accounts and wiring the money through multiple jurisdictions. This can be a scheme to launder cash.
- Suspicious transaction patterns. Often, this includes sudden large transfers or frequent small transactions to unfamiliar accounts that are atypical to the person. For example, structuring is a big issue in money laundering, where people use multiple transactions just below the reporting threshold to maintain anonymous and clean illicit funds.
Related: AML Red Flags — Complete Breakdown
Wire Transfer Fraud Prevention Measures
Tips and solutions to prevent scams and wire transfer fraud differ. We look into this below.
➡️ For Companies:
1. Staff Training
To prevent wire transfer fraud, businesses should conduct staff training that is vital for financial companies and their employees. This helps identify fraud and spot suspicious patterns, which should be escalated to the compliance team for further investigation.
Some red flags that staff members should know when it comes to wire fraud attempts include:
- Urgent requests, especially without any previous disclaimer.
- Poor spelling and grammar or unusual formatting of the messages.
- Requests for login credentials, bank account information, or other personal data.
- Suspicious messages from clients, managers, or company executives via email.
- Other red flags, such as unusual links, slightly altered email addresses, etc.
Related: AML Fraud —Types and Detection Measures
2. Customer Due Diligence (CDD)
Additionally, companies must stick to proper customer due diligence (CDD) measures. This means conducting KYC checks (and Know Your Business (KYB) verification for other companies to prevent third-party risks or partnering with a fraudulent entity in general) and identifying new customers during the account opening process. Afterwards, ongoing due diligence measures, such as transaction monitoring and reverification at high-risk cases, such as before a suspicious transfer attempt, are a must.
The five CDD steps involve:
- Identifying and confirming the client’s identity.
- Identifying beneficial owners when applicable.
- Understanding the nature and purpose of the business relationship.
- Knowing the source of funds involved.
- Keeping records of the personal information for reference.
3. Background Checks on Other Companies
CDD procedures act as a first line of defense against fraud by detecting criminals when they attempt unauthorized transactions or use forged documents, stolen identities, or other fraudulent methods. For corporate clients, background checks should be conducted. For example, before partnering with a new supplier, you should verify its beneficial ownership to ensure you’re not getting involved in a sanctioned entity or a business that’s used for money laundering. This also includes processes like verifying the company’s address. If it doesn’t match or you find a Google Maps picture that doesn’t align with the office photos on their website, it might be a sign of fraud.
Additionally, companies should maintain good cybersecurity hygiene. This includes reporting potential scams using a unified internal system, adding spam filters on all email accounts, or using strong passwords. To keep up-to-date information and know the latest fraud trends, businesses should assess their security protocols through regular audits.
Related: 6 Steps to Conduct a Know Your Business (KYB) Verification Check
➡️ For Users:
While there is no guarantee that you’re not going to fall for a scam in the future, you can always do your own research. This helps you stay informed regarding issues like wire transfer fraud. Unfortunately, scammers online have become more sophisticated over the years, as now we have AI and other automation tools that can also be used in fraud. So, it’s vital for internet users to stay ahead of evolving scamming techniques, such as phishing emails, and spot the impersonators before wiring them thousands of dollars.
The key factors that might indicate you’re being tricked into a wire transfer scam include situations like:
- Receiving checks in exchange for a return payment.
- Being asked for payment and then getting rejected to speak in person or over the phone.
- Being asked to wire the money immediately, without having the chance to think or consult someone.
- Being pushed to use instant payment apps, crypto, or gift cards for the transfer.
- Noticing that the address of the requester looks suspicious, as the name seems to be missing some elements.
- Being asked to wire the money to a shady jurisdiction or simply another country.
Final Thoughts
So, while you can’t take fraud out of the picture completely, you can learn how to manage risks appropriately. However, this requires a collective approach that both businesses and individuals need to take: implement basic security measures, such as monitoring for suspicious activity or double-checking the person before wiring them money.
At iDenfy, we offer a complete fraud prevention package for various industries, offering you AI-powered user verification, business verification, AML screening, risk assessment, and other RegTech solutions.
Let’s chat for more info.