Businesses Beware: How Scammers May Target Your Wire Transfer

Before parting with company funds, make sure you are sending them to the right
place.

Typically, a business wire transfer is straightforward. For example, your company
owes $100,000 to a supplier for goods purchased. The time comes for you to pay the
funds to the supplier, and as in past instances, you have the supplier’s bank
information – routing and account numbers – in hand. Then, just before the wire
transfer is to proceed, you get an email from someone supposedly in the suppl ier’s
accounts receivable department stating that the wire transfer instructions have
changed and requesting, for some bogus but credible reason, that you send the
funds to a different bank account. The fraudster has spoken!

Based on your history with the supplier, you comply and initiate the wire transfer.
Days or weeks later, you get a request from the actual supplier as to when the
$100,000 payment will be sent. Confused, you reply that the wire transfer was sent
some time ago. A subsequent investigation will discover that both parties have fallen
victim to an all too prevalent scam nowadays, a business email compromise or “BEC”
scam. By then, the $100,000 is gone from your account and the bank may be unable
to reverse the wire transfer.

BEC scams can severely damage your company and are occurring at an alarming
rate. In 2018, the FBI’s Internet Crime Complaint Center received over 20,000
complaints of BEC scams and other email account compromise scams, with adjusted
losses of more than $1.2 billion, according to the FBI’s 2018 Internet Crime Report
(source: https://pdf.ic3.gov/2018_IC3Report.pdf).

While there is minimal case law to date addressing BEC scams, at least one federal
court, in Bile v. RREMC, LLC, 2016 WL 4487864 (E.D. Va., Aug. 24, 2016), held that
the party who failed to exercise ordinary care and could have prevented the loss
during the transaction should bear the losses from the scam. The facts of each
situation differ, of course, and require careful evaluation but sellers want to be paid
and buyers don’t want to pay twice for the same goods or services, because the first
payment went to a smart, polished fraudster’s bank account.

Thankfully, there are ways to help prevent your company from falling victim to BEC scams. A
comprehensive company plan to protect against BEC scams may include, among other things:
 Having appropriate technology and security practices in place to avoid email accounts f rom
being compromised and used as a vehicle to conduct a BEC scam.
 Having a written company policy – both internally and in business agreements – that require
any change in payment instructions, including wire transfer instructions, be confirmed both
in an email and also a second way, such as verbally on the phone.
 Having a company cyber insurance policy to cover the losses from a BEC scam.
Please contact the author Pedram A. Tabibi at ptabibi@meltzerlippe.com or any of our other Meltzer
Lippe Social Media, Software and Privacy attorneys to see what steps you can take to reduce the risk of
your company having to pay the price – possibly twice – for a BEC scam.

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