The Golden Rule that Halts Money Wiring Scams

Money wiring scams cost victims millions every year, yet one simple step will avoid most of them: Internet Scambusters #414

Despite all the publicity and additional security measures, money wiring scams rob victims of tens of millions, maybe even hundreds of millions, every year.

But their success hinges on one simple feature: the willingness of those victims to send cash, untraceable, to someone they don’t know.

In this week’s issue, we explain how the scam works and what the money transfer companies themselves say about the crime.

The Golden Rule that Halts Money Wiring Scams

Money wiring — the business of transferring cash electronically — is a huge global operation involving the movement of as much as half a trillion dollars ($500 billion) every year.

A large chunk of that is the legitimate remittance of money by migrants to family in their home country, and another portion involves transfers between people and organizations that know each other, like family, friends and businesses.

But, sadly, money wiring scams, in which people get fooled into sending their money to someone they don’t know, represent a sizeable and growing amount of that total.

No one knows how much for sure, but in a famous instance last year, the Federal Trade Commission (FTC) charged one cash wiring company with helping scammers who tricked people into handing over more than $84 million during a four-year period.

The specific allegation, which resulted in the company agreeing to pay $18 million compensation for victims, was that the firm knew crooks used its system for fraud, but did next to nothing about it.

And that $84 million represents just the amount the FTC claimed the company knew about from customer complaints. Presumably, there’s a whole lot more that never came to light.

New security measures have been put in place by some companies and, in other cases, employees or agents have intervened when they suspect a person who is trying to wire a large lump sum or repeated payments to the same person is being scammed.

But the bottom line is that they accept no responsibility if you get conned, provided there’s no evidence they knew about it.

Meanwhile, money wire scams continue apace. Yet one simple measure — one Golden Rule — would avoid most of these con tricks.

Let’s be clear, first, what we are talking about here.

Typically, money wiring involves the following:

  • Person A enters the office of a money transfer company or its agent (oftentimes a counter in a grocery store), provides some form of identity (e.g. a driver’s license), and completes a form identifying Person B as the recipient of a sum of money.
  • Person A pays the money, plus a fee for the transfer service, and the company/agent issues a receipt.
  • Alternatively, the above two activities can be carried out online, if Person A opens an account with the money transfer company.
  • Person B enters any of the transfer company’s offices worldwide, produces identity, and perhaps details of the receipt or an agreed password, and collects the cash.

You don’t have to be an A-student to spot the potential for a scam. If a crook uses phony identity and knows the other required information, he/she walks off with your money, which is now totally untraceable.

This is exactly what happens in a huge range of scams — mainly those involving:

  • Payment for non-existent online purchases.
  • Distress scams where the victim sends money wrongly believing it to be for a relative or friend in trouble.
  • Upfront payments for everything from fees for bogus lottery winnings and inheritances to property rentals.
  • Nigerian scams where victims receive a phony check with a request to wire part of the sum to another party (the scammer).

You can read all about these particular scams in earlier Scambusters issues.

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The point is that, in all these cases, the scammers tell their victims to wire the money and then to provide them with the relevant receipt or security information so they can collect.

Once you pay, your money transfers instantly. It’s gone. The recipient is untraceable and you’ll never get your money back.

The remarkable thing is that even the big money wiring companies themselves tell their customers not to do this — never to send money to people they don’t know.

That’s the Golden Rule. Follow that and you’re almost certain not to be caught out by a wire money scam.

Or, if the requester claims to be someone the target does know (as in the distress-type or grandparent scam), you should take all possible steps to confirm their identity.

The two biggest names in the money wiring business are Western Union and MoneyGram and each publishes security guidance, though not always easy to find, on their websites.

Western Union actually tells customers not to use its service for online auction purchases, and it urges buyers to be particularly suspicious when a seller offers no alternative method of payment.

The company stresses, too, that it doesn’t offer any kind of purchase protection or escrow services — a claim often used by scammers to make their story seem more convincing.

On its website, MoneyGram points out that items sold at too-good-to-be-true prices are scams, that lottery organizers never ask winners to pay fees upfront and that if you’re unable to verify whether a distress call is really from a family or friend, don’t wire money.

The FTC reinforces this advice with a video message in which David Vladeck, Director of its Bureau of Consumer Protection declares: “Money transfers are a useful way to get money to people you know, that you’ve had dealings with in the past, quickly and efficiently.

“What we’re worried about is sending money to people you don’t know or people you haven’t had any dealings with in the past. That’s a red flag that oftentimes is not a false alarm.”

And be sure to read their FTC consumer alert, Money Transfers Can Be Risky Business.

If anyone ever asks you to wire money, here are the key points to remember:

  • If you don’t know them, don’t wire. Period.
  • If you think you do know them or know on whose behalf they’re calling, check their story thoroughly.
  • If you get a check, with a request to wire back part of the payment, don’t bank it. Report it to the police and the FTC.
  • Know that you alone are responsible for verifying the authenticity of the person with whom you’re dealing, not the wiring company.
  • Understand that if you’re scammed, it’s highly unlikely you’ll ever get your money back.

Relevant contact numbers if you do suspect a money wiring fraud:

* FTC — 1-877-FTC-HELP * Western Union — 1-800-448-1492 * MoneyGram — 1-800-MONEYGRAM

So, now you know for sure what to do. If anyone you don’t know asks you to use money wiring to get cash to them, just don’t!