Are you at risk for wire transfer fraud? SAO’s new resource details best practices for protecting public money

This article was originally published in August 2022. The links in the original article have been updated for your convenience.

We’ve recently updated our Best Practices for Wire Transfers resource, and the newest version is packed with practical steps you can take to strengthen your protections against modern fraud.

Here’s what’s new this year:

• Stronger controls and refreshed guidance to help you stay ahead of today’s wire‑transfer fraud risks
• Clear first steps to follow if you ever need to quickly report a wire‑transfer loss to your bank and the FBI — improving your chances of freezing or recovering funds.
• New recommendations on bank‑account protections, including setting up alerts so your team gets notified the moment a wire is started, approved or completed.
• Guidance on segregating duties so no single person can create or change wire templates without someone else reviewing
• Updated verification processes that remind staff not to rely on familiar voices or video images, since new technology makes it easier for bad actors to impersonate people.
• Expanded monitoring tips so you can quickly confirm that high‑dollar wires reached the right beneficiary, adding another safeguard against misdirected funds or fraud.
• Appendix A now includes a detailed list of policy topics to consider
• Appendix B offers a larger list of common red flags to watch for in wire‑transfer activity

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Wire transfers move money from one bank account to another. They are a fast way to send money and, if a fraudster intervenes, a fast way to lose it. Wire transfer fraud has dramatically increased in recent years, and more local governments are becoming victims of these scams.

How does wire transfer fraud happen? Typically, a bad actor poses as someone legitimate—like your chief executive or another entity you transact with—in order to get employees to send wire transfers to them. They often convey urgency so your staff will act quickly without talking to others who might interfere with the scheme. The fraudster counts on your employees trusting email and following the directions of superiors, without asking questions or verifying the information.

Bad actors send fake emails that look like the real thing, and may even covertly send emails from the legitimate person's email account. They will provide false contact information either before or at the same time they send the wiring instructions. They may try to intervene right before you send a large payment like a wire to purchase property. If the scam is successful, the fraudster quickly moves the funds to another account to prevent authorities from recovering the money.

Your employees can also perpetrate wire transfer fraud, especially if they have too much control over the wire transfer process, your bank account and the general ledger.

Fraudsters are constantly evolving their schemes, which is why you need to ensure your government has strong internal controls in place to prevent them. To help you, SAO has developed a new resource: Best Practices for Sending Wire Transfers. This resource has:

• Tips to help you develop and maintain detailed policies for your wire transfer process
• Key areas to address in your wire transfer employee fraud training so your staff become “responsibly suspicious” and learn how to spot red flags
• Recommendations about how to segregate duties to reduce your fraud risk—an important practice for preventing and detecting wire transfer fraud
• Advice to help you establish a verification process to confirm the authenticity of the initial request and accuracy of the wiring instructions

We'll talk more about fraud schemes and cybersecurity threats at the upcoming conference for the Washington Finance Officers Association (WFOA) in September. Don't miss our “Fighting Fraud Friday” and “Financial Responsibilities in Cybersecurity” sessions on the final day of the conference.

How to reach us for more assistance

Remember, SAO can help. If you have technical questions, submit them using our HelpDesk in the client portal.

We also have financial management specialists at SAO's Center for Government Innovation available to talk with you about best practices, resources, or internal controls. For assistance, reach out to us at Center@sao.wa.gov.