Set the Ground Rules for Wire Transfers

Refuse to become the next victim—demand a phone call.

Scammers are inserting themselves into transactions with a level of unprecedented sophistication. These scammers can duplicate email addresses, steal letterhead, and follow a transaction to learn intimate details.

There is one way to prevent this fraud. A telephone call must be placed before funds are wired. The only common denominator present in every wire fraud transaction is that the issuing party did not place a telephone call to verify wire fund instructions.

If your clients send or receive wire transfers, you should set the ground rules for the transaction and demand a telephone call before a wire transfer is issued. Start this discussion early and educate everyone involved in the transaction.

Many lawyers are now attaching warnings like this on every email or correspondence:

Wire fund transfer fraud is now an epidemic. Please do not send wire transfer funds based upon receipt of an email without telephoning my office. We will be waiting for your call.

As the transaction nears its end, lawyers will issue a reminder like this one:

Immediately before wiring any funds involved in this transaction, please telephone my office for final approval and instructions. Please do not issue any wire fund transfers without the final telephone call. Please also assume that any email advising of a new telephone number or with new or different wire instructions is fraudulent. Please call our office at the number now known to you if you receive such an email. The email may seem legitimate and may recite details of the transaction; assume it is fraudulent.

Scammers obtain financial information about a transaction, spoof the seller’s lawyer’s email account, and then instruct the buyer to wire funds to the scammer’s chosen bank account. The buyer’s attorney will often fail to telephone before issuing the wire fraud transfer, the funds are wired to the scammer, and the funds are lost. Telephoning before sending a wire fund transfer is the best risk management measure that lawyers can take to prevent this fraud.

If an attorney has notice that a scammer has infiltrated a transaction, he or she should advise all other parties to the transaction. The first attorney may catch the scam; the second may not. Scammers will try to fool other parties to the same transaction, hoping to find the one party who will transfer the funds.

For example, in Bile v. RREMC, LLC, 2016, U.S.Dist. LEXIS 113874 (E.D. Va. 2016), an attorney represented a plaintiff in an employment discrimination suit. The case settled, and the plaintiff’s attorney asked her client for payment instructions. When the plaintiff’s attorney received the email, the email address looked suspicious.

When the plaintiff’s attorney called her client, the client advised her that he had not sent the email, and provided the correct wire instructions, which she then provided to defense counsel. She did not, however, advise defense counsel of the original email hack.

Hours later, a second email from the same scammer came into the defendant’s office with countermanded wire instructions. The defense counsel wired the funds without a confirming telephone call, and the funds were lost. Suit resulted with the court finding that the plaintiff’s attorney should have known that her email was compromised and advised defense counsel.

Summary

Be suspicious of all emails that contain wire transfer instructions. Always call the telephone number on file to confirm that the instructions are legitimate, and advise all parties to the transaction to do the same.

What to Do if You Are the Victim of a Fraudulent Scheme

IMMEDIATELY report to the bank and to law enforcement. Time is of the essence in any recovery action. In certain circumstances, the Financial Fraud Kill Chain (FFKC) may be utilized to recover large international wire transfers. To utilize this procedure, the details must be reported to the FBI.

Do not wait until it’s determined that the funds have gone overseas. Work with the bank to report the fraud as soon as it is discovered.

The transaction must meet the following criteria for FFKC action:

  • The wire transfer is $50,000 or more
  • The wire transfer is international
  • A SWIFT recall notice has been initiated
  • The wire transfer has occurred within the last 72 hours

This article was written in conjunction with Swiss Re and is not to be taken as legal advice.

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