Wire fraud might sound like something out of a Jason Bourne movie, but if you’ve ever received an email from a Nigerian prince, you’ve been a target of a wire fraud scheme.
Wire fraud is a federal crime that occurs when electronic communication, such as email or text messaging, is used to further a criminal act.
But what does that really mean? Here’s what to look out for and best practices you can implement to help prevent your small business from becoming a victim of wire fraud.
Elements of wire fraud
According to Cornell Law School, five elements must be present to meet the definition of wire fraud.
- The accused must have been engaged in a scheme to commit fraud
- The scheme must have involved a lie or omission
- The scheme resulted or would have resulted in the loss of money, property or services
- The accused used or intended to use wire communications (for example, radio, television, wire) to commit fraud
- The accused 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: Have you heard of the old “Nigerian prince” scams? They are alive and well in email inboxes across the country. In this scheme, according to the Better Business Bureau, someone claiming to be a government official or member of a royal family emails asking for help transferring millions of dollars out of Nigeria and into the email recipient’s bank accountant. It’s always “urgent and private,” and the recipient will of course be compensated for their help. “Those willing to assist are asked to provide their banking account number (for ‘safekeeping’ the funds) and Social Security number, birth date, or other personal information.” The BBB warns that variations of this scheme are also popping up, such as emails soliciting donations or claiming that you are the beneficiary of a will.
- Social Security scams: The Social Security Administration (SSA) 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: Email phishing refers to scammers sending fraudulent emails asking for sensitive information, such as passwords and account numbers. While there are many types of phishing attacks, common scams include posing as an ecommerce site asking you to provide your login information, or 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 and, as such, can come with serious consequences. Committing wire fraud against most people and entities, like small businesses, carries a sentence of not more than 20 years imprisonment and fines of up to $250,000 for individuals and $500,000 for organizations.
However, for special circumstances like a state of emergency or targeting financial institutions, punishments can go as high as 30 years in prison and a $1 million fine.
It’s also important to know that someone doesn’t have to follow through with wire fraud to be convicted, as long as there is sufficient evidence to prove intent.
What is the difference between wire fraud and mail fraud?
Wire fraud might use deceptive practices similar to mail fraud, but the difference between the two is that mail fraud would require the perpetrator to use the USPS or a private carrier, while wire fraud is committed digitally, for instance, by email or phone.
How to prevent wire transfer fraud
Wire transfer fraud can be a concern for small businesses whose employees are also at risk of falling for scams. Follow these best practices on how to prevent wire transfer fraud from impacting your business.
- Hold regular trainings to teach employees to look for scams and protect your business’s data.
- Always verify wire transfers through a two-step verification process. This means never wiring money over the phone to, for example, 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.”
- Do not use public domain email accounts for business.
- Use encrypted email to protect sensitive information that scammers might try to access.
Nationwide is providing this information as part of its Business Solutions Center website content and e-newsletter. The information included on this e-newsletter and the Business Solutions Center website is designed for informational purposes only. It is not legal, tax, financial, or any other sort of advice; nor is it a substitute for such advice. The information may not apply to your specific situation. We have tried to make sure the information is accurate, but it could be outdated or even inaccurate, in parts. It is the reader's responsibility to comply with any applicable local, state, or federal regulations, and to make their own decisions about how to operate their business. Nationwide Mutual Insurance Company, its affiliates, and their employees make no warranties about the information, no guarantee of results, and assume no liability in connection with the information provided.