Welcome to our first article in a new series keeping you and your loved ones safe from scams. We’ll freely admit this is not the normal Nerdbot content. It’s a subject we care about immensely and have some experience with thanks to having worked in banking and finance. We’ve seen people lose money due to scams; friends, family, and strangers alike. As new technology becomes available for banking, AI, and money management, scammers will also use these advancements for their own gain. Meanwhile, the average person doesn’t understand how banking works and isn’t aware of the ways scammers try to manipulate people. Today we’re going to talk about the dangers of wire transfer scams and the risks associated with them.
Wire Transfer vs. Payment
Something many people don’t realize is that a money transfer and a payment are two very different things. When you pay for something with a debit card, you are largely protected by Regulation E. It’s something the federal government has in place to protect the consumer. If you go to purchase something using electronic means, there’s coverage, but a purchase is not the same as a transfer. A purchase is a business transaction with a merchant. They are providing a good or service in exchange for a direct payment. A transfer can be used to pay someone, but it’s not necessarily a business transaction.
That last part is the one that’s problematic when it comes to scams and your protections. Let’s say you intend to purchase a car from someone and they want you to wire transfer them the money. You could potentially do that, but your protection is not the same as with a debit card. What if you did the purchase using your card but didn’t get the product? You could attempt a billing dispute through your bank. There’s no guarantee you can get the money back. But there is a system in place there to challenge a merchant who doesn’t deliver the goods.
Transfers Are Like Giving Someone Cash
When it comes to a wire transfer, you run the same risk as giving someone cash before getting the product. For example, let’s say you were going to pay someone $5,000 in cash for a used car. What’s to stop them from taking the money and not giving you the vehicle? They could run off with the money, and your bank wouldn’t be able to help you. Your option would be to legally pursue that person for theft.
That’s ultimately the same course of action if you wired or transferred someone the money. The bank can’t know for sure why you gave them the money. It wasn’t a purchase that was run through merchant services and VISA, Mastercard, etc. How’s the bank to know whether you didn’t get what you paid for or you did? Maybe now you’re trying to claim you didn’t, so you can get the money and the product.
This is the reason why money transfer systems like Zelle straight up warn you in their disclosures. You shouldn’t use this service with strangers. You should only be sending money to people you know and trust. They’re serious about that because attempting to recall those funds is not easy. Ultimately, it comes down to whether or not the recipient agrees to give the money back. They may very well not, leaving you in an extremely difficult position. Even Wells Fargo’s official website states when it comes to wires, “Sending money this way is like sending cash in that, once sent, the wire transfer typically cannot be reversed. Wired funds are considered the property of the recipient—even if sent as part of a scam—and may be final.”
The Dangers of Zelle
Naturally, scammers know this. When they’re outside of the United States, they can’t use a service like Zelle that is only available domestically. Instead, they coordinate with “money mules.” They receive money for them, often believing it’s part of a legitimate job they’ve been hired for. Then they will send the money internationally to the person running the scam outside the US. And when a scammer is in the United States and running a Zelle scam, what if they withdraw the money? How are you going to get it back if the account is empty? Oftentimes, these scammers take the money and get it out of their account quickly. The bank may not have a chance to recall the funds. When that happens, your bank is not going to insure you against the scam.
These are all reasons why you should be extremely careful about who you transfer money to. The protections that most banks have in place for fraud are not relevant for the type of fraud you might be thinking of. It’s one thing if someone hacks into your online banking. Sending money without your knowledge or consent- that’s something your bank can protect you against. But if you willingly give your money or information to someone, that’s where a lot of protections fall apart. Is there a danger in using your debit card to buy something off a website you’ve never used before? Yes. But there are federal regulations in place that give you some layer of protection there. There’s also information that can be traced by your debit card company. It can reveal info about the processing of that transaction.
What to Know and Do
So what do you do if you need to wire transfer or Zelle money to someone? Well, for starters, you need to treat the transaction carefully. Look at it from the perspective of knowing that once this money is sent, it’s not coming back. If something goes wrong, you’re on your own. Are you still willing to do the transfer knowing that? And how confident are you that the person you’re sending to is trustworthy? If this is someone you’ve never met and only encountered online, what proof do you have of who they are? How reliable are they? Please keep in mind too that scammers can use tools to impersonate others online or potentially over the phone. So, even if it is someone you know requesting money, verify it’s actually them in a way that’s more personal.
Also, and this is really important too, if something seems too good to be true, it probably is. It’s an old adage but one that holds true. That deal you run across for a product that seems amazing or has an incredibly low price point? That’s a sign of a scam. That’s not a universal truth, but it’s a good rule to live by. You can’t even put trust in pictures or videos these days. AI is being used to create lifelike presentations of items and people. You have to be wary. Always.
Knowledge is Power
Not everyone is out to scam you. There are enough crooks out and about that you have to keep your guard up, though. Understanding transfers and the protections and lack thereof around them is fundamental knowledge you should have. Hopefully, by better comprehending the risks, you’ll think twice before transferring funds for that pet someone’s promising to sell you online.
