Easy step to help prevent wire fraud

Written by Elyce Schweitzer on August 21, 2018. Posted in Education

Matching the payee name on wire transfer with name on payee’s destination bank account can help prevent wire fraud

Wire fraud is a HUGE problem that only keeps getting bigger and bigger.

In fact, U.S. Representative Randy Hultgren (R-III) wrote a letter to Fed Chairman Jerome Powell on June 29th urging the Fed to be more proactive in regard to wire fraud and real estate transactions.

The letter referenced the United Kingdom’s system of matching payees’ names as a possible solution to the problem of wire fraud. However, we don’t have to wait until a federal law is passed that orders banks to match the payee name on the wire transfer payment to name on the payee’s destination bank account (“Beneficiary Bank”).

As title and escrow agents, we can be proactive and in partnership with the banks with which we do business.

So what can we do right now?

We can know what our Bank Agreement says with our escrow account bank (the “Receiving Bank”).

Does the Bank Agreement say that the Receiving Bank will check the payee’s name with the name on the destination account when a wire fund transfer is initiated?

Or, does it say that the Receiving Bank need only rely upon the account number it was provided in the wiring instructions order?

The answers to these questions might lead to an opportunity to have a discussion with your partnering Receiving Bank.

We can send the wire instructions on the payment order, with explicit directions that acceptance be restricted to match the designated payee’s name on the Beneficiary Bank account. If it doesn’t match, then do not send the funds.

Lastly, if something does go wrong despite our best efforts and precautions, then notify both the Beneficiary Bank and the Receiving Bank as soon as possible.

Typically, banks require notification of an unauthorized transfer or error within a defined time period such as, for example, 30 or 60 days.

Aside from any contractual or legal requirement for early notification, the sooner the problem is communicated, the greater the odds of the bank being able to halt or pull back the wire funds transfer. For a great explanation of how a wire fund transfer works behind the scenes, view “Funds Transfer Law and Unauthorized Payment Liability.”

Tags: cybersecurity, escrow security, fraud, title insurance, wire fraud