Many people in professional settings regularly utilize wire transfers in transactions with their clients and are likely aware of some of the more well-known wire transfer scams. Unfortunately, many individuals, especially senior citizens are being targeted with wire transfer scams and falling prey to these attacks, often losing a significant amount of their personal savings.
Wire transfer scams continue to be prevalent with victims ranging from companies to senior citizens. You receive an e-mail confirming the purchase of a computer accessory. It says if this was not your purchase, call a 1-800 number. You call telling them that you did not make the purchase. The person says that you have been subject to a scam and that he is from a reputable computer company. He says that he will help “clean up your computer” and will pay you $500 for your time.
Obviously, you are very concerned and welcome the help to stop the scam. The person tells you he is wiring the $500 to your account and that your computer has been cleaned. He calls and tells you a mistake was made and an additional $10,000 was wired along with the $500 – which he evidences by emailing you a copy of your bank records showing the $10,500 deposited into your account.
You wire the $10,000 back to the person to a foreign bank. You were concerned but did not want to take money that is not yours. The wire goes through and you check your bank account and find that the $10,500 was never deposited but your account reflects the wire to the foreign bank. You are out $10,500…
Unfortunately, this is not a story but is a scam that fraudsters have been successfully executing.
There are several lessons for consumers:
- You should never wire money to someone you do not know.
- Never accept a mystery “clean up” of a virus or a potential scam.
- Fraudsters PRETEND to be from an organization you know.
- Fraudsters say there’s a PROBLEM or a PRIZE.
- Fraudsters PRESSURE you to act immediately.
- Fraudsters want you to act before you have time to think. If you’re on the phone, they might tell you not to hang up so you can’t check out their story.
- Fraudsters tell you to PAY in a specific way.
Financial Institutions are subject to a wide range of federal laws and regulations designed to protect consumers. The primary regulator for ensuring the bank’s compliance with federal consumer laws is the Consumer Financial Protection Bureau (CFPB). Section 1073 of the Dodd-Frank Act created a new section 919 of the Electronic Funds Transfer (EFTA) requiring remittance transfer providers to provide disclosures to senders of remittance transfers, pursuant to rules prescribed by the Bureau. https://www.federalregister.gov/d/2020-10278/p-46
One of the key requirements under the Remittance Rule is the ability of a sender of a wire transfer to cancel a remittance transfer within 30 minutes of initiating the wire. Federal Register: Rules Concerning Prepaid Accounts Under the Electronic Fund Transfer Act (Regulation E) and the Truth in Lending Act (Regulation Z).
The Bank Secrecy Act (BSA)
The Bank Secrecy Act (BSA) was enacted by Congress in 1970 to fight money laundering and other financial crimes. 12 USC 1829b, 12 USC 1951–1959, and 31 USC 5311, et seq. The BSA requires many financial institutions to create “paper trails” by keeping records and filing reports on certain transactions. The BSA’s reporting and recordkeeping provisions apply to banks, savings and loans, and credit unions as well as other financial institutions.
There are other requirements including, but not limited to:
- Establishment and maintenance of a BSA compliance program, see CFR 208.63, 12 CFR 211.5(m) and 12 CFR 211.24(j) (Federal Reserve); 12 CFR 326.8 (FDIC); 12 CFR 748.2 (NCUA); 12 CFR 21.21(OCC).
- Establishment of red flag monitoring such as:
- Customers Who Provide Insufficient or Suspicious Information
- Efforts to Avoid Reporting or Recordkeeping Requirement
- Funds Transfers
- Automated Clearing House Transactions
- Activity Inconsistent with the Customer’s Business
- Reporting of large currency transactions
If the bank effectively implements its BSA compliance program, the bank may stop the fraudster from completing its illegal activity. If the bank raised one of the red flags to you before the money was wired, it could have saved you the $10,500.
In the event, you or some you know is subjected to fraud and the bank failed to follow its program, there may be the basis for recovering the stolen funds. Also, the federal banking agencies can bring civil money penalty actions for violations of both the BSA and Dodd-Frank. 2 USC 1829b, 12 USC 1951–1959, and 31 USC 5311, et seq. and https://www.federalregister.gov/select-citation/2013/05/07/12-CFR-1075.