Wire Fraud: How to Spot and Prevent Schemes Targeting Small Businesses

Introduction

Wire fraud may sound like a fictional plotline from a Hollywood blockbuster, but the reality is far more terrifying. If you’ve ever received an email from a Nigerian prince or been approached by someone claiming to represent a government official, you may have been a target of a wire fraud scheme. In this article, we’ll delve into the world of wire fraud, explore the elements of wire fraud, provide examples of common schemes, and offer best practices to help prevent your small business from falling victim to wire fraud.

The Elements of Wire Fraud

According to Cornell Law School, five elements must be present for a crime to meet the definition of wire fraud. The accused must have engaged in a scheme to commit fraud, which involved a lie or omission, resulting in the loss of money, property, or services. Additionally, the accused must have used or intended to use wire communications, such as radio, television, or wire, to commit fraud, and the accused must have used interstate wire communications to commit fraud.

Examples of Wire Fraud

What does wire fraud look like in the real world? Here are three common examples.

Internet Scams: You may have heard of the infamous “Nigerian prince” scam, in which someone claiming to be a government official or member of a royal family emails you, asking for help transferring millions of dollars out of Nigeria and into your bank account. The Better Business Bureau warns that scammers may ask for your banking account number and social security number, among other personal information.

Social Security Scams: The Social Security Administration warns of phone scams in which the caller claims to be from the SSA, calling to alert you that your Social Security number has been suspended on suspicion of illegal activity, and then threatens you with arrest or other legal action or promises benefits in exchange for information.

Phishing: Scammers send fraudulent emails asking for sensitive information, such as passwords and account numbers. Common scams include posing as an ecommerce site, claiming that you have been a victim of identity theft and that you need to confirm your personal details.

Wire Fraud Penalties

Wire fraud is a federal crime that carries serious consequences. If found guilty, individuals can face up to 20 years imprisonment and fines of up to $250,000, while organizations can face fines of up to $500,000. In special circumstances like targeting financial institutions, punishments can go as high as 30 years in prison and a $1 million fine. It’s important to note that someone doesn’t have to follow through with wire fraud to be convicted; as long as there is sufficient evidence to prove intent, they can be found guilty.

Conclusion

Wire fraud is a serious threat to small businesses, but with the right knowledge and precautions, you can protect yourself from falling victim to these schemes. Stay alert, keep your personal information secure, and report any suspicious activity to the appropriate authorities. By taking these steps, you can help safeguard your business and prevent wire fraud from becoming a part of your reality.

The Difference between Wire Fraud and Mail Fraud

Wire fraud and mail fraud are both serious crimes, but there are some key differences between them. While both types of fraud involve the use of deceptive practices to steal money or property, wire fraud is a digital crime committed through email or phone, while mail fraud involves the use of the USPS or a private carrier. It’s important to understand these differences and take steps to protect yourself from both types of fraud.

Preventing Wire Transfer Fraud

Wire transfer fraud is a growing concern for small businesses, as scammers increasingly target employees with sophisticated phishing and social engineering attacks. To prevent wire transfer fraud from impacting your business, it’s important to follow these best practices:

Hold Regular Trainings

One of the best ways to prevent wire transfer fraud is to educate your employees on how to recognize and avoid scams. Regular trainings can help employees stay up-to-date on the latest tactics used by scammers and help them identify and report any suspicious activity.

Verify Wire Transfers through a Two-Step Verification Process

To prevent unauthorized wire transfers, always verify them through a two-step verification process. This means never wiring money over the phone to someone who could be posing as a vendor. According to the Federal Trade Commission, “Not only will you not have the same protections you would paying with a credit card, but it’s illegal for a telemarketer to ask you to pay with a wire transfer.”

Avoid Using Public Domain Email Accounts for Business

Scammers often target public domain email accounts, such as Gmail or Yahoo, because they are easy to create and difficult to trace. To protect your business’s sensitive information, it’s important to use a secure, company-provided email account.

Use Encrypted Email to Protect Sensitive Information

Encryption can help protect sensitive information from prying eyes. By using encrypted email, you can ensure that your messages are only readable by authorized recipients and reduce the risk of wire transfer fraud.