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Wire Fraud

A criminal act of fraud or an attempt to commit fraud with the aid of some form of electronic communication

What is Wire Fraud?

Wire fraud is a criminal act of fraud or an attempt to commit fraud with the aid of some form of electronic communication – such as a telephone or computer – and/or communication facility. It is the means of communication used in a fraud scheme that distinguishes wire fraud from mail fraud. Both crimes are covered in the United States under U.S. Code, Title 18.

 

Wire Fraud

 

Both wire fraud and mail fraud are federal crimes, with the Department of Justice claiming jurisdiction either on the basis that the fraudulent activity effectively crossed state lines by using interstate wire communications, or on the basis that the services of the U.S. Postal Service were used in the perpetration of the crime.

While the investigation and prosecution of wire fraud crimes normally fall under the jurisdiction of the Department of Justice and the Federal Bureau of Investigation, someone committing wire fraud may also be in violation of state and/or local laws and, therefore, are subject to arrest and prosecution in state criminal courts.

 

Summary

  • Wire fraud is a criminal act or attempt to commit fraud with the aid of some form of electronic communication (e.g., telephone, internet, etc.).
  • S. Code, Title 18 sets out the laws that govern the commission of both wire fraud and mail fraud.
  • Phishing scams – the attempt to fraudulently obtain a person’s personal financial information for purposes of theft or identity theft – is a common wire fraud scheme.

 

Elements of the Crime

The necessary elements required to constitute an act as wire fraud are as follows:

  • The perpetrator of the crime must have the intent to defraud someone (you can’t accidentally commit wire fraud)
  • Interstate wire communications were used in the perpetration of the fraud
  • It was reasonable to expect that the use of interstate wire communications would be a necessary part of the fraudulent scheme

 

The definition of “interstate wire communications” is extremely broad concerning the wire fraud statutes. It may consist of the transmission of words, pictures, or sound, and may be transmitted utilizing a landline telephone, a cell phone, a computer, or a public internet service (such as an internet service offered at a public library or wi-fi services offered at a restaurant or retail store).

Common forms of wire fraud include telemarketing schemes and online phishing scams. Phishing refers to the fraudulent use of emails with the intent to obtain the email recipient’s personal information, such as their bank account numbers or identity information like their Social Security number.

 

Penalties for Fraud

The penalties for wire fraud are up to 30 years in prison and up to $1 million in fines. The fraudster can be prosecuted and convicted regardless of whether the fraud scheme was successful or not. The purposeful attempt to commit such fraud is sufficient for conviction.

Also, each individual act of wire fraud may be charged as a separate offense. So, for example, if a fraudster sent out emails to five different people as part of a scam, then they could end up being fined a total of $5 million, not just $1 million, and sentenced for to up to 150 years in prison (30 years x 5 = 150).

As of 2018, the FBI estimated that wire fraud costs victims over $150 million annually.

 

Wire Fraud – Example

A common wire fraud scam since the advent of the internet is the practice of sending an email to someone in which the fraudster claims to possess millions of dollars, but because of legal or political circumstances, cannot directly access their funds. They ask the recipient of the email to help them by accessing the funds on their behalf and transferring the funds to some account where the fraudster can access them. In return for their assistance, the fraudster promises to share a large portion of the funds with the email recipient.

In the email scam, there are, of course, no millions of dollars. The purpose of the scam is to obtain the email recipient’s private financial information – such as their date of birth, bank account numbers, and Social Security number – which the fraudster can then use to steal money from the email recipient.

Alternately, the scam may be used to perpetrate the crime of identity theft. The fraudster, after obtaining the recipient’s personal information, may apply for credit cards or a major loan using the recipient’s identity and information.

 

Another Example

A common mail fraud scheme unfolds as follows: You receive a check in the mail for $5,000, along with a letter explaining that you are a sweepstakes or contest winner (a red flag warning should be the fact that you don’t remember entering the sweepstakes or contest referred to). The check looks legitimate, although it is not. A common element of this scam is the check being written on an account that has since been closed.

The letter that accompanies the check informs you that you need to pay a $500 processing fee. It typically asks you to send the fee by using a payment system such as Western Union or MoneyGram. You deposit the check into your bank account and happily send off the $500 fee, as requested, thinking that you are net $4,500 to the good.

Unfortunately, a few days later, your bank contacts you and informs you that the $5,000 check you deposited is no good and that your account’s been debited back that amount. Instead of being $4,500 to the good, you are now out the $500 that you sent to the fraudster, along with any fees your bank may charge in relation to the deposit or processing of the bad check.

While the scam is commonly thought of as mail fraud, the use of an online payment system such as MoneyGram makes the crime also an act of wire fraud.

 

Learn More

CFI offers the Certified Banking & Credit Analyst (CBCA)™ certification program for those looking to take their careers to the next level. To keep learning and advancing your career, the following resources will be helpful:

  • Fraud Triangle
  • Online Payment Companies
  • Transaction Costs
  • White-Collar Crime

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes and training program!