Wire Fraud is a $30 to $50 Billion Annual Fraud Problem

There isn’t a day that goes by that I don’t hear about wire fraud.  Wire Fraud is the latest fraud trend that is impacting banks from across the world.    But not only is it impacting banks, but small businesses and consumers as well.  Wire Fraud is an epidemic that is reaching historic levels here in the US and across the world.

In fact, I was even a victim of an $8,000 fraudulent wire transfer attempt just 18 months ago for our business.   Someone managed to takeover an email account and sent fraudulent request to our bank to wire funds to India.

There are No Industry Statistics or Reports on Wire Fraud

The most troubling aspect of Wire Fraud is that only the FBI seems to have any statistics about it.  There are no industry estimates or central reporting agencies that can actually quantify the problem.

I spent a good few months researching the problem of wire fraud and trying to size the losses. There was absolutely zero hard and fast numbers out there so I wanted to try to size the losses through research.

Impersonate the CEO to Run the Scam

The FBI has reported that Small Business wire fraud has cost US companies approximately $3 Billion.  That is an increase of over 1000% in the last 12 months and it is only growing.  You can read a report on it here – FBI and Wire Fraudsters.

The scam is remarkably simple and that is why it is growing so quickly.  There are 4 basic steps:

  1. Phishing Phase – Cyber hackers (in Ukraine or Russia typically) will blast phishing emails to small companies.  When opened those bogus emails infect the computer with malware which is used to gain access to the network
  2. Account Takeover Phase – The Cyber hackers than gain access to the CEO or CFO’s email and scan for prior wire request and then mimic those same emails to request fraudulent wire transfers to companies in the UK and often Hong Kong.
  3. Money Muling – Money Mules in those countries than receive the money into their accounts and siphon it back to the criminal organizations.

Wire Fraud Losses is now the #1 Fraud Category For Executives

FBI-Fraud-LossBut the FBI Estimate is Far to Low

The FBI is always at the forefront of notifying US consumers and companies about fraud risk.  I applaud them.  They were the only government agency that took a stand on mortgage fraud back in 2004 and I have a lot of respect for them for that.

90% of Wire Fraud (or more) is prevented with No Loss (The Swift Example)

But the FBI estimates are just the tip of the iceberg for wire fraud.  Consider the Swift Hacking Incident in Bangladesh.   You can read about it here – Swift Hackers.

In the attack the bank was successful in stopping 90% of the fraud attempts but they still lost $81 million.  That means that there was close to $1 Billion in attempted fraud in just one instance.

Some banks are reporting fraud prevention rates on wire transfer fraud of over 95%


Business Scams are Only Part of the Wire Fraud Problem

The Business Scam while perhaps the most important component of wire fraud is only part of the problem.   Consumers and even businesses are victims of fraudulent wire transfer in many other ways.

Romance Schemes – Where men and women are conned to send money overseas to con-artist who are promising to visit them or even marry them.

Account Takeover Schemes – Where consumers identities are stolen and fraudster take over their banking accounts and wire funds out rapidly.

IRS Fraud Schemes – Where victims are told they will be arrested for non-payment of federal income tax.  This one happened to me.  You can listen to the whole conversation here – IRS Scam.

Online Banking Chat Scheme – Fraudsters gain access to victims online banking credentials and then sets up live chat with customer service at bank to drain the bank account while the customer sleeps.

Many Businesses and Consumers Will Not Report Wire Fraud

Because so much of wire fraud is social engineering schemes consumers and businesses often feel conned or embarrassed that they were victimized.  Because of this, they will often not report it.

My estimate is that most wire fraud (where there is a loss) actually goes unreported because the consumers are embarrassed or the business does not want to look like they have been conned.

Many consumers and businesses will not report wire fraud because they feel that they are to blame for being victimized.

The Average Wire Fraud is Over $65,000 per Instance but $1 Million Dollar Attempts Are Not Extraordinary

I was shocked to learn that the average Wire Fraud is $65,000 per instance.  When you compare this to credit card fraud which is $700, or debit card fraud which is $400 or even check fraud which is less than $1000 you begin to see what the problem is.

It’s worse when you consider that $1,000,000 attempts are quite common on commercial accounts.  Banks and businesses cannot afford a wire fraud.  It can ruin a business overnight.

95% detection rates are simply not good enough for Wire Fraud Detection.  Systems, processes and technologies need to be nearly infallible to keep these banks, businesses and consumers from feeling devastating impacts.

Wire Fraud is a $30 to $50 Billion Dollar Fraud Problem

After interviewing many banking executives in the industry, several thing were evident in terms of sizing wire fraud losses and many were in agreement of the following.

  • The FBI estimates are just the tip of the iceberg.
  • 90% or more of the wire fraud losses today are prevented
  • Billions more in unreported wire fraud are not even being recognized today.


Wire Fraud is Approaching Fraud Levels of Credit and Debit Cards

It is difficult to say but by my estimation, I believe that the levels of Wire Fraud are approaching levels that the banks have experienced with credit and debit cards for years.

Compounding the issue is the global move to Faster Payments which is driving speed to processing.  As we saw in the UK, Canada and other regions that moved to faster payments, they experienced dramatic increases in their online banking, ach and wire fraud.

Thank you for reading

Thanks for reading the blog. I am not sure if you agree with my assessment.  If you are researching wire fraud losses (like I did for months), I am sure you are having problems finding good solid numbers.

These are my estimates and they are based on research and interviews with banking executives and industry experts.  If you have any feedback, let me know!

1 comments On Wire Fraud is a $30 to $50 Billion Annual Fraud Problem

  • disqus_9OsAy1MxXa

    i am working on a fraud case right now.. what is the best course of action?

    police report filed, both banks aware…now what?

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