Wire Fraud: A Cautionary Tale for Clients

Ashley Klemann, CFP® • Jan 1, 2024 • SAFETY

We’ve all heard of wire fraud and have likely seen many cautionary tales on the news, thinking that we would never be the victim of such a crime ourselves. Many of us may even have undergone several hours of training at work on how to avoid falling prey to such schemes. Despite the warnings, wire fraud is becoming more common today. This was precisely the situation a client found themselves in when, despite their precautions, they fell victim to a fraudster and wired money to someone impersonating their contractor.

As it turns out, this bad actor had corrupted their contractor’s computer and sent several emails to clients who had outstanding invoices with a fake invoice that included fraudulent wire instructions. Not only did the email come from the contractor’s email address, but attached to the invoice were the receipts documenting the materials and their costs that were used in the client’s project. In addition, copied on the email were several of what appeared to be other employees of the contractor’s firm; the only difference being a letter or two in the email addresses.

After verifying the email came from the contractor and reviewing the attached invoice and supporting materials, the client completed the $39,000 requested wire. Unfortunately, this wire was made to the fraudster’s account rather than the contractor’s. The client later found out that they were not the only victim of this false wire. After speaking with the contractor, the clients learned several other clients of the contractors were also targeted and fell victim to this scheme. The contractor explained that the fraudster had set up rules in the contractor’s Outlook inbox whereby any correspondence about the fraudulent wire was automatically moved to a folder other than the inbox so that the contractor would not be made aware. As it turns out, they even had someone manning a phone whose number was listed on the invoice in case a client called to verify the legitimacy of the wire.

Unfortunately, a fraudulent wire can prove very difficult to recover. It will likely involve the police and possibly an attorney and still may yield no recovery of the lost funds. So, what can be done to prevent falling victim to wire fraud in the future? Like the clients in this example, the security of your devices and accounts may be intact and have additional measures like two-factor authentication implemented, but that doesn’t mean those you are interacting with have done the same. A good first step is to call the person requesting the wire with a number you have reached them at before that is independent of the number included with the request for the wire. Additionally, be sure to verbally confirm the wire details and do not rely on the accuracy of email alone.

Additionally, review your homeowner’s insurance coverage. Many insurance carriers now offer a cyber liability coverage endorsement that can provide coverage for fraudulent wires. As the clients in this example discovered, they had this coverage on their policy. Unfortunately, it only provided coverage up to $200. When reviewing your policy for this coverage, be sure to ask your insurance agent about this endorsement and make sure that you understand what level of coverage it provides.

At Heritage Wealth Architects, we also follow strict procedures during any money movement, including wire requests. Before we initiate any funds transfer on your behalf, we make it a point to confirm the transaction with you. A member of the HWA team will call you directly, seeking your verbal confirmation for the requested transaction, ensuring that you are the one that requested the money movement. We greatly appreciate your time in these procedures to safeguard your finances.

As wire fraud becomes more common and fraudsters get more sophisticated, it’s important to stay vigilant. Make sure you review your account and device security settings. Enable secondary security measures like two-factor authentication when available and be sure to verbally verify wire instructions with someone you know and trust. Additionally, talk to your insurance agent about adding cyber liability coverage to your homeowner’s policy. Implementing these precautions will help keep your money safer from bad actors.

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