WHAT IS WIRE FRAUD? Types, Examples and Penalties

What is a wire fraud

Wire fraud may sound like something out of a Jason Bourne movie, but if you’ve ever received an email from a Nigerian prince, you’ve been a victim of a wire fraud scheme.
But what exactly does that mean? Here are some red flags to look out for and best practices to put in place to keep your small business from becoming a victim of wire fraud. We’ll also look at some examples and penalties for commiting a wire fraud.

What Is Wire Fraud?

Wire fraud is the use of electronic communication across state lines, such as social media, phone, email, or even fax, with the intent to deceive and profit.
Wire fraud is a federal crime that can result in a maximum 20-year prison sentence as well as fines. “The penalties can be severe,” Eric Young, senior managing director at Guidepost Solutions, says. The penalties compound because each act of wire fraud — each individual email or phone call — is considered a separate act of wire fraud.

The statute of limitations for wire fraud is typically five years unless the wire fraud involved a financial institution, in which case prosecutors have ten years to bring legal action against the defendant. According to Young, cases involving financial institutions have a longer statute of limitations because these investigations frequently involve money laundering, terrorism, or other financial crimes and take longer to complete.

Furthermore, prosecutors may impose penalties on those financial institutions for failing to implement fraud-prevention measures such as know-your-customer (KYC) standards.

What Is a Wire Fraud Conspiracy?

Conspiracy to commit wire fraud occurs when two or more people join forces with the intent of using electronic communication for criminal purposes. To be convicted of wire fraud, an actual act of wire fraud does not have to be committed; all a prosecutor requires is the clear intent to commit fraud.

Types of Wire Fraud

Even when not part of larger operations, wire fraud attempts against individuals can be extremely damaging. According to a Ponemon 2021 study, large US businesses will lose a total of $15 million per year to phishing attacks in 2021. In 2021, 92,000 people over the age of 60 reported $1.7 billion in losses to the Internet Crime Complaint Center.
Here are some examples of common wire fraud scams to avoid:

#1. Advance-fee scams:

This is also known as Nigerian prince scams because so many of these scam emails mention Nigerian royalty, advance-fee scams typically take the form of an email with some fantastical story, such as a rich tycoon having their passport and phone stolen or a Nigerian prince attempting to flee the country.

The backstory is irrelevant. What matters is that they require your assistance and are willing to pay you for it, as long as you first wire them some money, an advance fee. It may be a steep fee, but the scammer ahem the wealthy businessman assures you that it is nothing in comparison to what they will pay you for assisting them.

#2. Phishing:

Instead of directly stealing money from you, phishing emails trick you into providing private information to these scammers. This could be in the form of an email informing you that your online bank account password has expired and provided a link to update it. They contain a link to a convincingly designed website that requests your username and old password. They now have everything they need to log into your bank.

There are numerous phishing scams that can become very sophisticated. It is best not to click on any links or download any software contained in these emails.

#3. Hiring scams:

These scams prey on job seekers. Scammers frequently contact their victims through hiring platforms such as LinkedIn, offering them high-paying positions. These scams may attempt to steal personal information such as applicants’ birthdays or social security numbers. Others, similar to advance-fee scams, ask applicants to send money for ambiguous processing fees.

Learning from these common scams, it is critical to avoid disclosing any private information, such as your Social Security number, credit card number, or birthday. Furthermore, if someone you know approaches you for information, double-check that the person you think you’re speaking with is actually on the other end of the line. This is especially important if you are asked to wire money, as it is extremely difficult to reverse those transactions once they have been completed.

Examples of Wire Fraud

What does wire fraud look like in practice? Here are three typical examples.

#1. Internet Scams:

Have you heard of the old “Nigerian prince” scams? They are still very much alive in email inboxes across the country. According to the Better Business Bureau, in this scheme, someone posing as a government official or a member of the royal family emails asking for assistance in transferring millions of dollars out of Nigeria and into the email recipient’s bank accountant. It’s always “urgent and private,” and the recipient will be compensated for their assistance. “Those willing to assist are asked to provide their banking account number (for safekeeping the funds) and Social Security number, birth date, or other personal information.”

The BBB warns that variations of this scheme, such as emails soliciting donations or claiming to be the beneficiary of a will, are also appearing.

#2. Social Security Scams:

The Social Security Administration (SSA) warns of phone scams in which a caller claims to be from the SSA and calls to inform you that your Social Security number has been suspended due to suspicion of illegal activity, then threatens you with arrest or other legal action or promises benefits in exchange for information.

#3. Email phishing:

Scammers send fraudulent emails requesting sensitive information such as passwords and account numbers. While there are many different types of phishing attacks, common scams include posing as an eCommerce site and requesting your login information, or claiming that you have been the victim of identity theft and must confirm your personal information.

What is the Difference Between Wire Fraud and Mail Fraud?

Wire fraud may employ deceptive practices similar to mail fraud, but the difference is that mail fraud requires the perpetrator to use the USPS or a private carrier, whereas wire fraud is committed digitally, for example, via email or phone.

How To Prevent Wire Transfer Fraud

Wire transfer fraud is a concern for small businesses, whose employees are also vulnerable to scams. Follow these best practices for preventing wire transfer fraud in your business.
Hold regular training sessions to teach employees how to spot scams and protect your company’s data.

Always use a two-step verification process when making wire transfers. This includes never wiring money over the phone to someone posing as a vendor, for example. According to the FTC, “not only will you not have the same protections as you would if you paid with a credit card, but it is illegal for a telemarketer to ask you to pay with a wire transfer.”
Use public domain email accounts for business purposes only.
Use encrypted email to protect sensitive information from being accessed by scammers.

If you have been charged with wire fraud, your attorney may choose to use a number of legal defenses in your case during the trial and/or appeals process. While the strategies used by your counsel will vary depending on the specific circumstances of your case, the following are some of the more common ones used to defend against wire fraud charges.

#1. Absence of Intent

It must be proven that you intended to commit fraud in order to be convicted of wire fraud. Intent can be difficult to prove because it is impossible to know what another person is thinking. You cannot be convicted if there is insufficient evidence to prove your intent.

#2. Factual Error

A wire fraud case is frequently founded on the transmission of false or misleading statements. You cannot, however, be convicted of knowingly and intentionally communicating false information in an attempt to defraud if you communicated false information that you believed to be true. For example, if you send an email to potential investors claiming that the weight loss pill you sell has a 90% success rate, which you believe to be true based on the information you’ve been given, but it turns out that the pill only has a 30% success rate, you weren’t communicating false information on purpose, but rather had incorrect facts.

#3. Puffery

“Puffery” refers to the use of exaggeration or opinionated statements by salespeople in order to close a sale. Statements such as “our weight loss pill are the best on the market!” are examples of puffery. “A salesperson who makes such a statement over the phone, email, television, or other forms of wire communication is unlikely to commit wire fraud because consumers will interpret the statement as opinionated puffery and are not relying on that information to make an informed purchase.”

Other Offenses Relating To Wire Fraud

#1. Mail Fraud

The wire fraud statute was enacted by Congress in 1952 to broaden mail fraud laws to cover forms of fraud committed through means other than mail. While wire fraud and mail fraud share many similarities, the main distinction is the use of wire vs. mail. A mail fraud conviction, like a wire fraud conviction, requires proof that the defendant participated in a scheme to commit fraud and did so on purpose.

Because communications in fraud schemes frequently take place via multiple channels such as phone, email, and mail, mail fraud is frequently charged alongside wire fraud in the same case.
Mail fraud and wire fraud are both federal offenses. Mail fraud is punishable by up to twenty (20) years in federal prison and/or a fine. If the fraud involves a presidentially declared disaster or emergency or a federal financial institution, the prison sentence can be increased to up to thirty (30) years.

#2. Securities Fraud

Securities fraud is a broad term that refers to a variety of fraudulent activities involving investment securities, such as the sale or purchase of securities. In certain circumstances, such as the use of wire communication in a scheme involving investment securities, this offense may be charged alongside wire fraud.
Because securities fraud is a federal and state offense, the penalties can be severe. For federal securities fraud, the penalties include fines of up to ten million (10,000,000) dollars and a prison sentence of up to five (5) years, with an increased prison sentence of up to twenty (20) years.

#3. Internet Fraud

Fraud committed via email or elsewhere on the internet is commonly referred to as “cybercrime,” and some common types of cybercrime include hacking and phishing in order to obtain computer data or financial information illegally. The use of email in a fraud scheme, such as work-at-home scams or other popular schemes, is frequently prosecuted as wire fraud. Cybercrime that is not prosecuted as wire fraud can be prosecuted under federal or state law.

#4. Attempt or Complicity in Wire Fraud

If you try wire fraud but fail, you may still be charged with “attempted wire fraud” or “conspiracy to commit wire fraud.” Despite the different designations, federal law does not distinguish between successful and unsuccessful attempts to commit fraud. The penalties for attempted wire fraud and conspiracy to commit wire fraud are the same as for successful one. The potential penalties (detailed below) include steep fines and up to twenty (20) years in federal prison.

Penalties for Wire Fraud

Wire fraud is a federal crime that can have serious consequences. Committing wire fraud against the majority of people and entities, such as small businesses, carries a maximum sentence of 20 years in prison and fines of up to $250,000 for individuals and $500,000 for organizations.
Special circumstances, such as a state of emergency or targeting financial institutions, can result in prison sentences of up to 30 years and a $1 million fine.
It’s also important to understand that someone doesn’t have to commit wire fraud in order to be convicted, as long as there’s enough evidence to prove intent.

References

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