KYC AML Guide: the Clock shows the average reeding time of the blog13 min Read


KYC AML Guide: the Clock shows the average reeding time of the blogAugust 11, 2023

Unveiling the Tactics: Exploring Wire Fraud and Money Laundering

In the digital age, financial crime is on the rise, with fraud and money laundering being two prominent threats. Wire and title fraud risk set a new high in the first quarter of 2023, with 51.6% of transactions containing at least one risk issue. In this blog post, we will delve into the complexities of wire fraud and money laundering.

M Abd'al Bari

Research Associate | Fintech and KYC

Suppose you are an art enthusiast who comes across an online art auction featuring a stunning masterpiece by a well-known artist. You decide to bid in the auction. You carefully read the auction instructions, register as a bidder, and place your bid with zeal. Finally, the auction ends, and to your delight, you receive an email informing you that you were the winning bidder. Your veins are racing with adrenaline, and you can’t wait to claim your prize. The email instructs you to wire the payment to the auction house’s designated account. You proceed with the wire transfer without hesitation, however, you are unaware that you have been the victim of a devious form of wire fraud.

In the digital age, financial crime is on the rise, with fraud and money laundering being two prominent threats. Wire and title fraud risk set a new high in the first quarter of 2023, with 51.6% of transactions containing at least one risk issue. In this blog post, we will delve into the complexities of wire fraud and money laundering.

What is Wire Fraud and Money Laundering?

The term “wire fraud” refers to the intentional use of electronic communication, such as social media, phone, email, or fax, to deceive others and make ill-gotten gains. Typically, this involves interstate transactions. Wire Fraud is a federal offense that can result in up to 20 years in prison and a $250,000 fine for individuals and $500,000 for corporations. 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.

Wire fraud involves four basic elements, according to section 941.18 U.S.C.1343 of the United States Department of Justice’s Criminal Code:

1) the defendant’s intent to participate in a scheme to defraud another
2) with intent to deceive
3) the use of interstate wire communications is foreseeable
4) the defendant’s actual use of interstate wire communications.

One notable example of wire fraud is the Six Defendants Arrested for Multi-Million Dollar Wire Fraud and Money Laundering Scheme. They have conspired to commit wire fraud and money laundering via a business email compromise (BEC) scheme. Spoofing attacks were used to trick victims into sending approximately $5.8 million to fraudulent bank accounts opened with fake and stolen information. For their roles in this massive wire fraud and money laundering scheme, the defendants now face harsh penalties, including up to 20 years in prison.

Money laundering, on the other hand, is the process of concealing the source of illegally obtained funds to make them appear legitimate. Money laundering is also a federal offense with serious consequences, including lengthy prison sentences and large fines. The Money Laundering Control Act of 1986, 18 U.S.C. 1957, prohibits a defendant from knowingly engaging in a monetary transaction in criminally derived property in an amount greater than $10,000. One of the most notorious money laundering cases in recent history is the 1Malaysia Development Berhad (1MDB) scandal.

History of Wire Fraud:

Wire fraud dates back to the late 19th century, with the invention of the telegraph. As communication technologies improve, so do the opportunities for criminals to exploit them. Here’s an overview of a pivotal moment in wire fraud history: Not long ago, scammers were making countless phone calls in an attempt to defraud unsuspecting people, usually retirees. Although traditional phone systems are still in use, the Internet’s vast power allows fraudsters to search for potential victims online.

Wire fraud’s history reflects its international scope and sophistication. In one notable case, a Russian entertainer, Vladimir Levin, used an elaborate scheme in 1994 to transfer $10 million from Citibank subsidiaries to banks all over the world. Levin’s arrest and deportation to the US resulted in a three-year prison sentence as well as restitution to Citibank. The precise methods of gaining access to account information are not disclosed, and wire fraud remains a global issue.

Types of Wire Fraud and Money Laundering:

Wire fraud can be extremely damaging, even on an individual level. For example, according to a 2021 Ponemon study, large US businesses lose $15 million per year due to phishing attacks, while 92,000 elders over 60 reported $1.7 billion in losses to the Internet Crime Complaint Centre in the same year.

Advance payments:

Scams involving advance payments: it is often known as a “Nigerian prince” scam. These scams typically involve e-mails or messages with various stories, frequently involving rich people, including Nigerian leaders, who claim to require your assistance. If you send money as an initial deposit, they promise to pay you well. Stories can be imaginative, but the main goal is to persuade you to send money on time. However, if you send the money, you will not receive the promised reward and lose your funds.


Phishing is a type of scam in which fraudsters send fraudulent emails or messages impersonating legitimate companies such as banks, government agencies, or reputable companies to trick you into providing confidential information. These messages may indicate that your online account requires verification or that there is an urgent security issue. They frequently include links to fake websites that look real and ask you to enter your username, password, credit card information, or other personal information. Scammers can gain unauthorized access to your account and use your information for illegal purposes if you do this.

Paying scams:

These con artists prey on job seekers, particularly on popular platforms such as LinkedIn. Scammers impersonate employers who offer high-quality positions, luring candidates to lucrative opportunities. By requesting birthdays or Social Security numbers, some hiring scams attempt to steal personal information. Others operate like advance-fee scams, in which applicants are asked to send money upfront for ambiguous processing fees. In either case, the victims lose money or become vulnerable to identity theft.


The rise of cryptocurrencies and blockchain technology in recent years has presented both opportunities and challenges in the fight against wire fraud. While cryptocurrencies increase transaction transparency, they have also been used by criminals for money laundering and other fraudulent activities.

One such case is Celsius Network CEO Alex Mashinsky has been charged with seven criminal counts, including securities fraud, commodities fraud, and wire fraud. He is charged with market manipulation of the company’s crypto token, Cel, and a fraudulent scheme to manipulate its price, as well as wire fraud in connection with the token manipulation. The US Securities and Exchange Commission (SEC) also filed a lawsuit against Mashinsky and Celsius, alleging that the company raised billions of dollars by selling unregistered crypto securities and misled investors about its financial situation.

Some Notable Cases of Wire fraud and Money Laundering

Domestic wire fraud trends continue, with California, New York, Florida, and Texas being the top destination states due to population density and the potential for mule recruitment, which conceals criminals’ identities and sources of funds while facilitating the global movement of illicit proceeds. By occurrence, Hong Kong, Mexico, and Thailand were the most frequent international destinations for wire fraud and money laundering attempts.

Foreign National Indicted for $1.8M Wire Fraud and Money Laundering Scheme

Amadou Kane Diallo, a Senegalese national residing in Laguna Niguel, has been charged with 19 counts of wire fraud and two counts of money laundering in a California court. As the CEO of two companies, Diallo allegedly deceived 11 investors by soliciting funds for various business opportunities but instead used the money to support his extravagant lifestyle. If convicted, he faces up to 20 years in prison for each wire fraud count and up to 10 years for each money laundering count. The FBI is currently investigating the case.

Real Estate Wire Fraud on the Rise: A Growing Threat to the Industry

According to a recent FinCEN Financial Trend Analysis report, the Real Estate industry saw a 205% increase in attempted wire fraud by value between Q4 2021 and Q4 2022. This concerning trend highlights the growing threat of fraud against real estate transactions, as criminals take advantage of the high monetary values involved as well as the communication channels between entities involved in the title and closing processes.

Elder financial exploitation remains a widespread problem, with people aged 65 to 74 having the highest risk of wire fraud attempts, accounting for 37.4% of total attempts by value and 31.7% by occurrence in Q4 2022, according to FinCEN.

Tyler Adams, co-founder and CEO of CertifID said

Real estate transactions represent some of the largest transactions a consumer will ever make, so losses due to fraud can be devastating. Consumers need to understand the importance of protecting their transactions; they need to be more aware and educated on how to recognize fraud; and they need to know what immediate next steps to take if disaster strikes and recovery is necessary.

FATF Travel Rule

The FATF CryptoTravel Rule is an update to the FATF 16 Recommendation, which governs international and domestic wire transfers. The update aims to address the challenges of anti-money laundering/counter-terrorism (AML/CFT) issues arising from the global adoption of cryptocurrencies, as well as to improve companies and law enforcement’s ability to go after criminals involved in money laundering. The travel regulations emphasize that the new regulations will have a significant impact on financial service providers (VASPs), including cryptocurrency exchanges and wallet providers.

FATF Recommendation 16 was created to primarily combat the illegal use of wire transmission by terrorists and criminals. Its goal is to prevent these criminals from freely transferring money via electronic transfers and, if they do, to punish them.

How to Prevent Wire Transfer Fraud

Protecting your company from wire transfer fraud is critical, and the following preventative measures can help protect your financial interests:

Employee Training:

Teach your employees how to spot and avoid fraud. Teach them to be cautious when sharing sensitive information and to use the two-step verification process to confirm wire transfers.

Two-Steps Verification:

Use a multi-factor authentication process to regularly monitor wire transfers. Transferring money over the phone or to unknown recipients increases the risk of falling victim to fraud schemes.

Avoid Public Domain Email Accounts:

Encourage your employees to avoid using public domain email accounts for business communications. These accounts are frequently targeted by cybercriminals for phishing attacks and unauthorized access.

Use encrypted email:

To protect sensitive information from potential scammers, use encrypted email services. Encryption ensures that only authorized recipients have access to the data, providing an additional layer of security to your communications.

Verify Payment:

Before initiating a wire transfer, double-check the recipient’s bank account information, especially for new payees or changes to existing payees. Verify the request’s validity using known contact information.

Due Diligence:

Do your due diligence when dealing with third-party sellers to ensure their integrity and security measures. Avoid disclosing sensitive information to unknown or untrustworthy companies.

Real-Time Monitoring:

Ensure that your organization’s network is protected by a security environment that includes features like firewalls, web content filtering, malware protection, and geolocation blocking. The security environment detects unique patterns and malicious behavior immediately by continuously monitoring incoming and outgoing web activity, allowing for immediate action against potential attacks.

Bottom Line:

Finally, combating wire fraud and money laundering necessitates the collaboration of financial institutions, law enforcement, and individuals. We can create a safer financial landscape and thwart the efforts of fraudsters seeking to exploit the system by staying informed, adopting best practices, and implementing robust security measures.


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M Abd'al Bari
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Muhammed Abd'al Bari is a certified Research Professional of KYC AML Guide. Connect with Muhammed on Linkedin