Funds Transfer Fraud: How It Works & How to Prevent It in 2025

Funds transfer fraud is a growing problem that threatens banks and businesses everywhere. If you work in banking, finance, or anti-fraud, you know how important it is to stop financial crime. This article will explain bank transfer scams, how they happen, the different types, and how to stop them. We’ll also show how the FOCAL platform helps businesses keep their money safe from these threats.

What is Funds Transfer Fraud?

A scammer obtains personal information either through phishing tactics or by purchasing stolen data online and then they use these compromised details to submit a deceptive transfer request to a financial institution, attempting to initiate or reroute a money transfer in the victim’s name.

How Does Funds Transfer Fraud Happen?

A huge part of solving any problem is knowing exactly how this problem works, so if you’re looking into stopping or preventing funds transfer fraud, you first need to understand the mindset and the techniques the criminals use. You need to put yourself in their shoes to be able to stop them. 

They either manipulate the victim into revealing their personal details or buy those details from the dark web. If they didn't move funds from the original account to the fake one, another way they would use is sending a fraudulent transfer request to the bank asking them to move or redirect a payment. And falling victim to bank transfer scams is exactly what you, as a banker, don't want to happen because if this happens it is your responsibility to make sure the request is genuine and created by the real owner of the account.

1. Phishing

How often have you received an email and wondered if this email is legit or not? Phishing is in fact one of the oldest and most common techniques used in all types of fraud because criminals know that most people use emails on a daily basis so they send fake emails or messages to trick the victim into giving away their bank details or login information. Once they have this information, they will have unauthorized access to the bank account of the victim and can easily move the money without permission, which is bank transfer fraud.

2. Social Engineering

Instead of sending you an email or hacking into the bank's system, the criminal uses psychology to exploit human behavior. To make it more clear, let's look at this example: 

The criminal would call you and pose as a trustworthy individual who works at your bank so that you give them the information they want and are looking for, but they would almost always stress the urgency aspect and convince you that this matter is very urgent.
They might also pretend to be a company executive and ask for a payment to a new account, resulting in a bank transfer fraud.

3. Exploiting System Weaknesses

Now, if the criminal has IT skills, they look into loopholes in the bank’s system, and once they find the weak spot, they will have all the access they need to transfer money to the account of their choice. The weak spot might be due to old software, weak passwords, or poor security measures.

Types of Funds Transfer Fraud

Fund transfer criminals do not always transfer actual funds from one account to another; they might use the funds to shop online or pay back a loan, but the main thing is that the real account holder is not involved with or aware of the transfer request.

1. Business Email Compromise (BEC)

Here, fraudsters hack a business email and use it to send fake payment instructions. They might pretend to be top managers or business partners to trick employees into transferring money to their own accounts. 

Read more about ChatGPT fraud

2. Account Takeover

Scammers gain access to a real account using stolen login details. Once they have control, they can make unauthorized transfers.

3. Invoice Fraud

Fraudsters send fake invoices to businesses, convincing them to pay for goods or services that don’t exist, but the money goes to a scammer’s account.

4. Card Not Present (CNP) Fraud:

This involves using stolen credit card details to make online purchases, a type of Card Not Present Fraud, which is harder to detect since the card isn’t physically present.

Read more about Digital Fraud & E-Commerce Fraud & Wire Transfer Fraud

Detection and Prevention Measures in Funds Transfer Fraud

As an anti-fraud professional, your job is to carefully detect any fraud attempt or, better stop it before it even happens. Some detection and prevention techniques apply to different types of fraud, but you can also tailor a strategy for a specific situation or type of fraud. For fraud protection on cash transfers, we suggest that you follow the following steps:

1. Strong Verification Procedures: The #1 rule is to use a strong password. It won’t be clever to use your pet’s name or 1234 as a password. And to make it even more difficult for them, use multi-factor authentication, whether by receiving a text message to your personal phone number or using an authenticator application on your smartphone. Just don’t skip this step.

2. Employee Training: Criminals are learning each and every day how to manipulate the system and so should you (learn what they know to be able to stop them). Regularly teach your team how to spot phishing emails and other scams, because the better they are at recognizing fraud, the safer your bank and customers will be.

3. Transaction Monitoring Systems: If your enemy is using systems to defeat you, you should utilize a better system to win. Set up transaction monitoring systems to watch for unusual transactions. If something seems off, these systems can alert you so you can investigate before any money is lost. If you’re looking for the best transaction monitoring system for your business, read our review of the Top 5 Transaction Monitoring Software Solutions in 2025.

4. Regular Security Audits: Check your security measures often. Keeping your software updated and fixing any weaknesses helps protect against money transfer fraud.

5. Fraud Detection Tools: Use tools designed to spot and stop fraud. These tools can help you catch suspicious activities quickly. Here is a review of the 6 Best Fraud Detection Software in 2025.

How Does FOCAL Protect Businesses from Funds Transfer Fraud?

FOCAL offers intelligent solutions to help protect businesses from funds transfer fraud:

1. Real-Time Monitoring: FOCAL keeps an eye on transactions as they happen and sends alerts if something seems suspicious. This helps you act fast to stop fraud.

2. Advanced Analytics: Using innovative technology, FOCAL looks for unusual patterns in transactions. It helps identify fraud before it becomes a bigger problem.
   
   
3. Detailed Reports: FOCAL provides reports that show fraud trends and help you understand where your risks are. This helps you make better decisions about how to protect your business and perform better fraud protection on cash transfers. 

4. Easy Integration: FOCAL works with your current systems without causing disruptions. It makes adding extra security simple and effective.

Learn more about Fraud prevention techniques in this ebook.

Conclusion

Funds transfer fraud is a serious problem, but understanding how it works and using the right tools can help keep your money safe. By learning about the types of fraud, putting good security measures in place, and using anti-fraud solutions like FOCAL, you can protect yourself and your business from these threats. Staying informed and prepared is the best way to fight against funds transfer fraud.

Taking proactive steps now can save a lot of headaches later. Regularly updating your security protocols, investing in employee training, and using advanced fraud detection systems like FOCAL aren't just precautions; they're essential strategies in today’s digital age. The financial landscape is always changing, as are the tactics fraudsters use. By staying ahead of these changes, you protect your assets and build trust with your clients and partners. Remember, the key to defeating fraud is a combination of knowledge, vigilance, and the right technology. The more prepared you are, the less likely you’ll become a victim of money transfer fraud.