Limiting Wire Transfer Fraud

Fraud in its many forms is a huge contributor to loss in banks each year. As a bank operator, it’s your duty to protect and inform your clients against wire fraud. It’s impossible to stop every scam wire transfer from being authorized. However, with the right controls in place, you can significantly reduce red flags and suspicious activity within your financial institution: here’s how.

Create written policies.

Starting with written policies is the first step in mitigating wire fraud. All banks need to create guidelines for sending and accepting wire transfers, including how they will be posted and processed, and specify the employee’s responsibility in handling these transactions.

Segregate duties.

Separation of duties is the best way to implement a checks and balances process in your bank. At the very least, the person who is responsible for sending wire transfers should be separate from the person responsible for authorizing the transfer.

Set wire transfer limits.

Use any and all system limitations to help improve controls and consider limiting who can initiate and approve wire transfers. Review the wire transfer setup to ensure all of the proper system limitations have been implemented. Also review all of the users to determine that their approval limits are appropriate and the users have a logical need for their capabilities, recommends CLA Connect.

Create a transfer agreement.

Customers who regularly send and receive wire transfers should be required to sign a wire transfer agreement. Be sure to include the methods that you will honor wire requests, as well. For example, some customers submit online requests, some call in, some send emails or even faxes. Your bank isn’t required to approve all methods of wire transfer requests, so specify which ones they can use in your transfer agreement.

Require two-party authentication.

If there is a suspicious wire transfer request, it’s best to call both parties and verify the amount and the intended recipient. Follow standard written protocol to protect both parties in the transfer.

Recognize suspicious behavior.

Coach individuals responsible for accepting and verifying wire transfer requests to be skeptical. Encourage them to question when something seems out of the ordinary. Employees should learn to trust their instincts and recognize a potentially bad situation.


The purpose of audits is to pinpoint external and internal red flags. Hire a third-party auditor to review the processes that are in place and highlight any areas of concern. If there is an issue detected, they can discover where it came from and how it was processed. This might be an upfront cost for your bank, but identifying suspicious activity internally and externally will save you money in the long run.

About Financial Guaranty Insurance Brokers

Since 1983, Financial Guaranty Insurance Brokers has distinguished itself as a provider of Professional Liability, Cyber Liability, and Crime insurance products for entities of all types. To receive timely, personalized service from a knowledgeable and experienced staff, call us today at (626) 793-3330 to speak with one of our professionals.