Bank Wire Fraud: How To Identify & Prevent Money Transfer Scams

When we think of online banking, at the centre of many services, features, or offers is—money transfer. Better yet, an instant wire transfer at the touch of our fingertip.

However, an RBI study revealed that payment fraud has risen by 70.64% in the October ‘23 -March ‘24 period.  That is why it’s essential to stay vigilant, as these transactions can sometimes be targeted by scams.

While online bank transfers are getting safer over time, one must stay vigilant because of such frauds. In this article on bank wire fraud, we shall cover not only what the red flags of bank wire transfers are, but also understand how to verify, avoid, and report them.

What is money transfer fraud?

As the term suggests, money transfer fraud involves the unauthorised transfer of funds from your bank account to a scammer's bank account. It is also known as wire fraud or bank transfer fraud.

In this common banking scam, a person or organisation can impersonate legitimate organisations, creating fake emergencies or manipulating their victims into making the transfers.

How does bank transfer fraud work?

There are many forms of bank transfer fraud, such as:

1. Initiating Contact: The scammer first contacts their target through email, SMS, or social media. Sometimes, the scammer may even call them directly. They pretend to be either their bank official or a government or law enforcement officer.
2. Creating a Sense of Urgency: Once the scammer establishes trust, they create a sense of urgency or panic by claiming that there is an issue with the target’s account. It may be framed as a time-sensitive banking issue or even a serious legal problem.
3. Requesting a Wire Transfer: To "solve" this fake burning problem or claim a bogus prize, the scammer requests an immediate wire transfer. To keep the target engaged, they may provide a fraudulent wire transfer credential or manipulate you to use their specific money transfer service.
4. Completing the Fraudulent Transfer: Under pressure or confusion, the victim initiates the wire transfer to the scammer's account. Once the transfer is complete, recovering the funds can be challenging.

Types of money transfer fraud: The red flags

While one must always be vigilant of such contacts, it helps to be in the know of common red flags that indicate a potential wire transfer scam:

1. Phishing: Scammers send fake emails or texts pretending to be legitimate institutions, attempting to steal personal information like passwords or bank details. 
2. BEC (Business Email Compromise): Fraudsters hack into company emails and use them to trick employees into making fraudulent payments or disclosing sensitive information.
3. Romance scams: Scammers build fake online relationships, gaining trust and affection, and then manipulate victims into sending money or sharing personal information.
4. Lottery/Inheritance scams: Scammers falsely claim you’ve won a lottery or inherited money, requesting fees or personal information before releasing the supposed funds.
5. Tech support scams: Fraudsters pretend to be tech support, claiming your computer has issues, and demand payment or access to your personal data to "fix" the problem.

How to avoid wire fraud?

In general, most bank customers remain skeptical of unsolicited offers promising quick money or prize winnings. However, when scammers claim there’s a problem with your existing funds or a technical/legal issue, even regular customers can be deceived. So, try to stay calm in case of such contact and do not act with urgency.

In general, banking experts suggest the following to reduce your risk of falling victim to bank wire fraud:

1. Never Share Personal Information: Information related to your bank account details, login credentials, Aadhar number, etc., is sensitive. So, never disclose this data to anyone.
2. Verify Contact: After the first contact, take your time and verify the legitimacy of the person, organisation, or number. For this, you can look up their website, call them, or even visit their office.
3. Use Secure Communication: If you must resolve an issue with your bank account, pause that channel of communication and instead contact your bank directly through verified phone numbers, by logging into your online bank portal or by visiting the bank branch.

In addition to this, make a habit of regularly checking your bank account statement. Report any suspicious activity to your bank immediately.

What steps should you take if you experience bank wire fraud?

Once you initiate a wire transfer, it's usually irreversible. However, if you suspect a fraudulent transfer before the funds are sent, you can contact your bank immediately. If you discover you've been a victim of bank wire fraud, take these immediate steps:

1. Contact Your Bank: Report the fraudulent activity to your bank immediately. The sooner you report it, the higher the chance of recovering your funds.
2. File a Report: Register a complaint on NCRP or call 1930 to document the scam. This can be helpful for your investigation into the scammers.
3. Seek Legal Advice: Depending on the severity of the fraud, you may need to consult with a legal professional to understand your options for fund recovery.

Also read: Guide On Safe Banking To Help You Secure Finances

Conclusion

Remember, a legitimate bank official may contact you regarding issues with your bank account but will never request sensitive information or bank transfers via unsolicited calls or emails. So, to identify a real threat from a bank wire fraud, vigilance is your strongest defense.

If in doubt, always verify through trusted contact methods. Stay alert to protect your financial security. And, if you are ready to apply for an account with a secure bank, explore the Zero Balance Digital Savings Account by Kotak 811.

FAQs

1. Is it safe to receive a wire transfer from a stranger?

No, receiving wire transfers can be risky if you don’t know the sender. Verify the source before accepting funds.

2. I wired money to a scammer. Can I get it back?

Recovering money sent to a bank wire scammer is challenging. Contact your bank and the authorities immediately to report the fraud.

3. Is wire transfer safe for a seller?

Wire transfers are safe for sellers when proper precautions are taken. To minimise risks, ensure the buyer is verified, wait for the full amount to be cleared before shipping any goods and be cautious of any unexpected or suspicious payment requests. Always use secure, trusted platforms for transactions.

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This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.