Is it even safe to transfer funds online or electronically? In the old days, if you wanted to give somebody money you have to hand them cash, or wrote them a check. 

What about all of the new ways to pay money on PayPal, Zelle, and Transfer Wise, are these safe? You can even do a wire transfer at your bank, but it’s a little bit different. You have to understand the differences between an online transfer versus using some other function. 

The basic thing to understand is once you do a transfer, that’s not your money anymore. There are no takebacks on a wire transfer. Even if there’s an error, the wrong name, or the wrong account number, it’s not your money anymore. 

What we recommend doing if you’re transferring any significant amount of money, is to do a test transfer first. If you’re sending money for the closing of an escrow account on a sale or if you’re sending a large amount for a purchase send a small number of dollars, $2 something small that you can throw away. Then, verify that the person that you are trying to get it to actually receives that. 

The reason why is because if for some reason you have the wrong information, accidentally or on purpose, that’s a small transfer. It won’t get to where you’re sending it if you send it to the wrong escrow company, the wrong attorney, or the wrong car dealership. If you say Hey did you get that $2 I sent? And they tell you no, well, now you know that it went to the wrong place. Send a test amount. 

Verify they have it and get it in writing that they’ve received it. Make sure it’s coming from the actual company you’re trying to send it to. A lot of these scammers and cyber hackers take the identity of your recipient by having an email that looks like theirs. And unfortunately, that doesn’t keep the bank from processing it. Banks make process wire and other transfers even if there’s evidence that the transaction is initiated by a fraudster. This is because the banks have been protected. 

In the case of Lucky Star Enterprises III v Wells Fargo Bank, The company sent money to a contractor through Wells Fargo and it went to a scammer. They sued Wells Fargo for saying Look, you shouldn’t have let this go through, it was obviously a different person. They sent $125,000 to this scammer’s account. The employee of Lucky Star followed the email instructions they received and they sent it unbeknownst to the employee, the Wells Fargo account did not actually belong to the contractor. Even though the account number was similar, the name belonged to fraudsters. They learned afterward, that the contractor account was actually controlled by fraudsters who found out about the fact that they were doing this remodel. And Wells Fargo even flagged it as fraudulent. But the fraudsters moved the money over money overseas and they lost it. What happened when the court ruled against this business in the favor of the bank? Even though the name was different. The bank relies on the number as the identification of the beneficiary, so even though the name on the account wasn’t the same as what it was sent to basically the people that sent the money lost their money. Banks are entitled to ignore conflicting names on wire transfers based on the account number. So if they see two different names, they could still put the money through when you lose your funds. So if you sent a test message, I mean a test transfer to the recipient and ask them Hey did you get that $2 and they say no well now you’re not going to send the $125,000 and lose out all your money.

How often does this happen? Well, According to this article, Zelle, which is an app used by banks to transfer money, it’s an extremely common scam. More ubiquitous than people think. According to law enforcement, the scammers are out in full force taking advantage of corks and digital banking, and mobile apps that make it easy for them to get your money. The Zelle thing is huge and crooks are using it to their advantage. Nearly 18 million people have been hit by widespread fraud on money transfer apps, according to the early warning service by the government. 

Zelle’s biggest draw is the immediacy of transfers and it also makes scams more effective. It’s a favorite of fraudsters. We’re not picking on Zelle, any other money transfer is at risk of the same thing. So be aware that it could be any of these platforms not just Zelle. And like the other article said it’s tough to get money back when scammed. You’re not really going to be able to do a chargeback like on a credit card because it’s considered a money transfer, you’re pretty much out of luck. You can try suing them but you’re not kind of know who to sue. What kind of scams are these? It could be anything it could be somebody selling puppies online, PlayStations, expensive sneakers, fake apartment rentals. 

Any time that you’re sending money online, it could be a fraud. So if you’re going to send money, again, do a test transfer and get identification of who’s receiving it so you know who it is you’re doing business with. Make sure the platform itself is legit. You know there are some money transfer platforms people haven’t heard of that aren’t even legitimate. Obviously, Zelle and PayPal and some of the other ones we’ve seen over the years are legitimate money transfers. Venmo comes to mind as another one. But they’re all brand new so when you see a new company pop up you don’t know if it’s legitimate or they’re just taking your money. So you want to do some research on those as well. 

We get probably 40 or 50 inquiries a day from people who have lost money on scams that are trying to get their money back on our investigations side. Unfortunately, a lot of times that money is gone for good. You could do an investigation if it’s a high dollar amount and sometimes you can locate the people and their assets to get a return on that money. But it’s important to make sure that you don’t lose it in the first place and those are some ways to try to prevent it. Test the pathway by using a small amount of money. Verify that the actual person or company that you’re dealing with received it and then do your full transfer using the exact same information. Don’t re-type it, just send it to the same one that’s already in your account because you know they received it. Especially if you have written documentation that they received your first transfer.

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