The Expert Podcast

Is it even safe to transfer funds online or electronically? Look, in the old days, you wanted to give somebody money — you either handed them cash or you wrote a check. If it was a business, you might use a credit card through their merchant account. You paid by credit card whether it was online (you give them the number on your website or over the phone) or you swipe a card at a merchant. What about all of the new ways to pay money? PayPal, Zelle, TransferWise — are these safe? You can even do a wire transfer at your bank.

Well, it's a little bit different. You have to understand the differences of an online transfer versus using some other function. A couple of good articles talk about Zelle having some problems. But here's the basic thing to understand: once you do a transfer, that's not your money anymore. There's no take-backs on a wire transfer even if there's an error, the wrong name, the wrong account number — it's not your money. 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 a closing of an escrow account on a sale, or if you're sending a large amount for a purchase, send a small amount — a dollar or two dollars — something that you can throw away. Send that transfer to that source and verify that the person that you are trying to get it to actually received it. The reason why is because if for some reason you have the wrong information accidentally or on purpose, that small transfer won't get to where you're sending it.

If you send it to the wrong escrow company, the wrong attorney, the wrong car dealership — if you say, "Hey, did you get that two dollars I sent?" and they tell you no, well now you know that it went to the wrong place. So send a test amount, verify they have it, and get it in writing that they've received it. Yes, we received your money. 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 that doesn't keep the bank from processing it.

Banks may process wire and other transfers even if there's evidence the transaction is initiated by a fraudster, and the banks have been protected. There's a case of Lucky Star Enterprises versus Wells Fargo. The company sent money to a contractor through Wells Fargo and it went to a scammer. So they sued Wells Fargo saying, "Look, you shouldn't let this go through; it was obviously a different person."

They sent $125,000. The employee of Lucky Star followed the email instructions they received and they sent it. Unbeknown 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 afterwards the contractor account was actually controlled by fraudsters who found out about the remodel. Wells Fargo even flagged it as fraudulent, but the fraud service moved the money overseas and they lost it.

What happened? Well, the court ruled against the business and in favor of the bank. Even though the name was different, the bank may rely 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 can still put the money through — and you lose your funds.

So, if you sent a test transfer to the recipient and asked them, "Hey, did you get that two dollars?" and they say no, well now you're not going to send the $125,000 and lose all your money. How often does this happen? Well, according to an article, Zelle — which is an app used by banks to transfer money — it's extremely common. It's a scam that is more ubiquitous than people think. According to law enforcement, the scammers are out in full force, taking advantage of quirks in digital banking.

Mobile apps 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, the immediacy of transfers, also makes scams more effective — it's a favorite of fraudsters. And look, 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 going to 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 — all kinds of scams. Anything where you're sending money, buying a car online — it could be a fraud.

So if you're going to send money, again, do a test transfer. Get identification of who's receiving it so you know who it is you're doing business with. And 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 all are 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 investigation side. And a lot of times that money's gone for good. You can do an investigation if it's a high dollar amount. Sometimes you can locate the people and their assets to get a return of 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 and then 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 retype 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.