What to Expect When You’re Not Expecting (Wire Fraud) – PART 1

Particularly during the pandemic, there has been an ever-increasing number of incidents of wire fraud. According to the FBI’s Internet Crime Report, there were $6.9 billion in victim losses in 2021 due to wire fraud. There were 2,300 average complaints received daily with an average of 552,000 complaints annually over the last five years. Unfortunately, in a post-pandemic era where even more transactions are now done virtually rather than in-person and where use of wire transactions is a customary and ordinary course of dealing and practice, the numbers are sure to continue to rise.

Take for example, my clients’ recent experience. Reed and Debbie (names have been changed) were building a home in Arizona and their contractor asked for them to wire money for the next phase of the construction project. That same day the contractor provided the information for the amount that was due, my clients received another e-mail from the contractor stating that the general contractor was undergoing an audit and so as not to disturb the work being done by the auditors, he was providing different wire instructions. This e-mail originated from the general contractor’s e-mail account. Unfortunately for my clients, the general contractor’s e-mail had been hacked, and the hackers had been monitoring the general contractor’s e-mail, probably for months, waiting for the opportunity to intercept and redirect the almost $150,000 that my client was wiring from their retirement account. Equally unfortunate is that the financial institution which had certain protocols in place to prevent fraudulent wire transfers failed to follow their own protocols and executed the transaction without verifying the new and different wire routing number instructions. After initiating the wire, my clients received a confirmation email from the contractor’s email acknowledging receipt of the funds. It was not until the next day when the contractor’s assistant called inquiring why the wire was not sent that my clients discovered they had been defrauded. By the time they realized what had happened, the funds had already been removed from the bank account and the crooks were off to the races. Unfortunately, my clients were left scrambling, not knowing the steps they should take and like so many others, becoming the innocent victims of a truly insidious scheme and endangering their retirement.

If you or someone you know becomes the victim of wire fraud, the first 24 hours after the event become extremely important to your success or failure to recover the stolen funds. First, understand time is not your friend. The ability to recover funds stolen by wire fraud decreases nearly exponentially as more time elapses between the time of your discovery of the event and your actions. So following the principles outlined below will afford you the best opportunity to get back what belongs to you.

Understand that because of the sheer volume of complaints received regarding wire fraud and the work involved with recovery, there is systemic inertia that must be overcome. It will be hard to persuade some needed parties to take immediate action. So don’t just be a squeaky wheel, be an air raid siren and follow the steps outlined below.

Step 1: Contact your financial institution that executed the wire and have a “fraud alert” sent to the bank that received your wire. Call the bank immediately and notify them of the fraudulent wire, including all information available concerning the wire. Demand that they immediately contact the fraud department of the receiving financial institution and place a “fraud freeze” on the account so that your funds cannot be further transferred; and demand that your financial institution confirms whether your funds are still in the recipient’s account at the other bank. If not, insist that your bank immediately identify where the funds were subsequently transferred and your bank immediately notify any banks that received your funds to place a “fraud freeze” on those accounts.

Step 2: File a complaint with IC3. The FBI has an Internet Crime Complaint Center, referred to as IC3. Go to https://www.ic3.gov/complaint/default.aspx/ to file a complaint, providing the information requested. Once your complaint is submitted, it will generate an IC3 Complaint Number, which you should retain to give to the FBI Field Office.

Step 3: Contact your local FBI Field Office and provide the IC3 Complaint Number. You can find your local field office here: https://www.fbi.gov/contact-us/field-offices. Call the field office and ask for the special agent that processes financial or cybercrimes. You will give the special agent your IC3 Complaint Number and explain the facts leading up to the wire fraud, sharing any other critical information.

Step 4: Call the bank(s) that received your funds. Call the bank that initially received your funds and ask to speak to the fraud prevention department. Provide all information and background regarding the wire fraud so that the bank can accurately identify the transfer and account. Ask for a “fraud freeze” to be placed on the funds so that no further transfer of the funds can be made. Confirm that the “fraud freeze” has been placed and for how long the bank will keep the “fraud freeze” in place (this varies by financial institution). Ask if any funds have been transferred or withdrawn from the bank account that received your funds since your funds were wired. If they have been withdrawn, ask for the names and locations of the bank(s) that received your funds and request that the bank sends a message to the receiving banks requesting a “fraud freeze” on those accounts as well. Take careful notes of the number you called, with whom you spoke, and when and all the information they provided. Make sure to get a direct callback number and the email address (if available) of that representative for future correspondence. If more than one bank received your funds, repeat this same step for all banks.

Step 5: Contact local authorities and file a police report. Ask for the detective or police officer responsible for wire fraud. Provide all the information you have gathered to the local law enforcement official, including all contact information. Save the police report (sometimes called an incident report) number.

Step 6: Call legal counsel who handles cybersecurity issues and insurance carrier (if applicable). Depending on the circumstances, legal counsel may need to take immediate civil action to protect your interests, including the possible filing of a temporary restraining order (TRO). Attorneys who practice in this area also often have established relationships with the local FBI field office and local law enforcement that can help facilitate your incident receiving higher priority. If you are a business or (less likely) an individual who carries errors and omissions, professional liability or any form of cybersecurity or cyber loss coverage, contact your insurance agent and place your insurer on notice of the incident, including the IC3 and police report numbers.

Following these steps will give you the best possible opportunity to recover your lost money before it disappears forever. In the next article, look for more insight into what to expect after the initial steps above are followed.