Wire Transfer - Security

Security

With bank-to-bank wire transfer, each account holder must have a proven identity. Chargeback is unlikely, although wires can be recalled. Information contained in wires is transmitted securely through encrypted communications methods. The price of bank wire transfers varies greatly, depending on the bank and its location; in some countries, the fee associated with the service can be costly.

Wire transfers done through cash offices are essentially anonymous and are designed for transfer between persons who trust each other. It is unsafe to send money by wire to an unknown person to collect at a cash office: the receiver of the money may, after collecting it, simply disappear. This scam has been used often, especially in the so-called 419 scams which often nominate Western Union for collection.

International transfers involving the United States are subject to monitoring by the Office of Foreign Assets Control (OFAC), which monitors information provided in the text of the wire to ascertain whether money is being transferred to terrorist organizations or countries or entities under sanction by the United States government. If a financial institution suspects that funds are being sent from or to one of these entities, it must block the transfer and freeze the funds.

SWIFT or IBAN wire transfers are not completely free of vulnerabilities. Every intermediate bank that handles a wire transaction can take a fee directly out of the wire payload (the assets being transferred) without the account holder's knowledge or consent. In many places, there is no legislation or technical means to protect customers from this practice. If bank S is the sending bank (or brokerage), and bank R is the receiving bank (or brokerage), and banks I1, I2 and I3 are intermediary banks, the client may only have a contract with bank S and/or R, but banks I1, I2 and I3 can (and often do) take money from the wire without any direct arrangement with the client. Clients are sometimes taken by surprise when less money arrives at bank R. Contrast this with cheques, where the amount transferred is guaranteed in full, and fees (if there are any) can be charged only at endpoint banks. Europe offers some partial protection from this practice by prohibiting European intermediate banks from taking a fee out of the amount being transferred, even for transatlantic transfers. However, it's still common practice for a European brokerage firm to state that they charge no transfer fee, and then contract their bank to take an unpublished fee from the amount transferred as a means to compensate their bank with their clients assets. E.g. CMC Markets implements this policy in partnership with Natwest.

European privacy law may be breached by some USA operators such as SWIFT, so EU users are sometimes required by their service provider to make an explicit declaration that seeks to circumvent EU privacy regulations.