Funds transfer fraud is no longer a rare edge case that happens to “other” companies. It shows up in ordinary payment runs, vendor updates, salary files, and treasury operations. A single well-crafted email or compromised login can move money out of a business faster than most approval chains can react.
Most of this fraud now flows through digital channels: online banking portals, ERP payment files, instant payment rails, and cross-border wires. To control it, you need to understand how the schemes work end to end and where your own processes are easiest to exploit.
This article walks through the main patterns behind funds transfer fraud, how attacks typically unfold, and what a realistic prevention and detection stack looks like in practice. It also outlines how KYC Hub helps firms close some of the most common gaps.
Funds transfer fraud is any unauthorised or deceptive movement of money from a legitimate account to an account controlled by a criminal. The key feature is that the transfer often looks “approved” on paper: the payment comes from a real profile, through normal channels, using credentials or authorisations that appear valid.
In practice, funds transfer fraud usually involves three ingredients:
That pattern can target a large corporate treasury team or a small business sending a single international wire. The mechanics are similar; only the scale and sophistication change.
Funds transfer fraud is a category, not a single tactic. Several well-known patterns sit under the label.
In BEC, an attacker impersonates a senior executive, a finance lead, or a trusted supplier. Sometimes they fully compromise the mailbox; sometimes they spoof the domain or register a look-alike address. They watch real email threads, learn approval habits, and then send a carefully timed instruction such as “we are closing a deal, please process this urgent payment today” or “our bank details have changed, use this new account”. Because the email sits in a real thread and uses internal language, it often slips through.
Here, the criminal does not fake an instruction; they take over the account that would typically send the instruction. Stolen credentials, phishing pages, remote access tools, or malware give them access to online banking, ERP systems, or payment platforms. From there, they initiate transfers, change payee details, or insert new beneficiaries. The payment looks like it came from the right user on the correct device, unless behavioural controls say otherwise.
Not all fraud comes from outside. Employees with access to payment systems, vendor master data, or approval workflows can abuse that access. Typical patterns include creating fictitious suppliers, altering bank details for genuine suppliers, submitting duplicate invoices, or quietly approving transfers to accounts they control or to accomplices.
Phishing and social engineering are often the first step rather than the final move. Fake login pages, urgent security alerts, fake IT helpdesk calls, or messages from “the bank” are all designed to get one thing: credentials or one-time passcodes. Once the attacker has what they need, they move into account takeover or BEC.
In some cases, the fraudster creates a customer account that will later be used to push or receive fraudulent transfers. They combine real and fabricated data to open accounts that pass basic checks, then use those accounts as stepping stones or money mule endpoints. The funds transfer itself might look legitimate; the underlying identity is not.
The details change from case to case, but most incidents follow a recognisable sequence.
First, the attacker does their homework. They identify an organisation with meaningful payment flows, learn its reporting structure from sources like LinkedIn and the company website, and map out who is likely to approve payments or manage vendor relationships. They may also probe for weakly protected email accounts or remote access points.
Next comes infiltration. This might be a phishing email that captures credentials, a malware payload that reads email, or simple domain spoofing. The attacker watches honest conversations, payment schedules, and approval habits. In some cases, they wait for a moment of pressure, such as quarter-end or a significant transaction, when urgency is normal and controls are more likely to be relaxed.
Once they are confident, they initiate the move. They send a payment instruction, insert a new beneficiary, adjust vendor bank details, or submit a fraudulent invoice that looks close enough to the real ones. Because the instruction fits the tone, timing, and context of past emails, and often appears to come from a real mailbox, the fraud can pass through manual checks.
Finally, the money is moved out of reach. Funds are routed to mule accounts, converted into other currencies or crypto, or bounced across several banks and jurisdictions. The objective is to drain and layer the funds faster than the victim or their bank can recognise and recall the transfer. Recovery becomes exponentially harder with each hop and each hour that passes.
The apparent impact is financial loss. Cases routinely involve six- or seven-figure sums, and recovery is uncertain even when the fraud is detected quickly. For many smaller firms, a single enormous hit can create a liquidity shock.
The reputational damage is harder to quantify but just as real. Customers, investors, and partners expect basic payment controls to work. When a firm loses money to a fraudulent transfer, it raises questions about what other controls might be weak.
There is also a regulatory angle. Supervisors expect institutions to operate effective fraud prevention and AML frameworks. If an investigation shows that obvious warning signs were ignored, that approvals were perfunctory, or that monitoring was poorly tuned, the discussion can move from “victim of crime” to “deficient controls”.
Finally, there is the operational burden. Investigating the incident, working with banks and law enforcement, reviewing past payments, tightening controls, and responding to customer concerns all consume time and attention that would otherwise go into running the business.
Detecting funds transfer fraud is about spotting what does not fit: behaviour that is unusual for this user, this account, this customer, or this counterpart.
Banks and payment firms increasingly use analytics to do that at scale. Transaction monitoring systems look for patterns that do not match past behaviour: unusual amounts, new beneficiaries in higher-risk countries, changes in timing, or sudden spikes in specific corridors. When combined with risk scores and model outputs, these systems can prioritise alerts that deserve human review.
Email and domain analysis is another important layer. Simple checks for display-name spoofing, look-alike domains, unexpected changes in reply-to addresses, or attachments with suspicious characteristics can catch many BEC attempts before a human ever sees them as “normal” email.
User and device behaviour offer additional signals. Logins from new locations or devices, unusual session times, and changes in how users navigate payment screens can all indicate that an account is being operated by someone new. Multi-factor authentication helps, but it is only effective if the second factor is not trivially capturable by phishing or social engineering.
On the prevention side, most effective programmes combine three things: people who know what to look for, processes that make fraud more complicated to execute, and technology that supports both.
Employees who handle payments or approve invoices need regular, concrete training. Generic security tips are not enough. They should see real examples of BEC emails, fake invoice chains, bogus vendor change requests, and login pages designed to harvest credentials. Simulated phishing exercises and post-incident debriefs help keep the lessons fresh.
Process design matters just as much. High-value or unusual payments should require out-of-band verification, such as a call back to a known contact using a number from the master record rather than from the email signature. Changes to supplier bank details should be checked against independent data and, where possible, validated with the supplier through a separate channel. No single individual should be able to create a new vendor, approve their details, and release a payment to them without oversight.
Technology ties these elements together. Strong authentication, including multi-factor methods resistant to simple phishing, raises the bar for account takeover. Role-based access controls and segregation of duties make it harder for a single insider to move money without another pair of eyes. Monitoring tools can watch both transactions and changes to master data, so that suspicious patterns in supplier updates or user permissions generate alerts as quickly as suspicious payments.
KYC Hub focuses on the parts of the workflow where identity, risk, and transaction behaviour meet. That is where many funds transfer fraud cases either start or could have been stopped.
At onboarding, KYC Hub’s identity verification tools help prevent fraudulent or synthetic accounts from entering the system in the first place. Document checks, biometric verification, and data validation make it harder for criminals to open mule accounts or impersonate existing customers.
Once the relationship is live, risk-based transaction monitoring can flag fund transfers that do not fit the expected profile for a customer or account. Instead of treating every payment the same way, the system looks at value, destination, corridor, counterparties, and historical behaviour to decide which transfers deserve closer scrutiny.
Automated due diligence and compliance checks support this by continuously screening customers and counterparties against sanctions, watchlists, and adverse media. That reduces the chance that payments are being routed to or through high-risk entities without anyone noticing until an alert from a regulator arrives.
KYC Hub’s multi-layered approach—combining identity verification, behavioural analysis, and ongoing screening—gives compliance and fraud teams a more complete view of who they are dealing with and how money is moving. That makes it easier to block suspicious transfers before they settle and to explain to auditors and regulators how decisions were made.
Adverse media screening adds an extra layer for counterparties and partners. By scanning structured news and regulatory sources for signs of financial misconduct, corruption, or other serious issues, the platform helps institutions avoid relationships that are more likely to be used as channels for fraud or money laundering.
Funds transfer fraud thrives on gaps: a gap between what a system can technically do and how it is actually configured, a gap between formal policy and messy real-world practice, or a gap between what a user thinks they are approving and what will really happen once they click “submit”.
Closing those gaps takes more than one control. It requires understanding how attackers work, training staff to be sceptical of unusual instructions, designing processes that make it harder to redirect funds unnoticed, and using technology that can spot and prioritise suspicious behaviour at speed.
KYC Hub fits into that picture by strengthening the points where identity, risk, and payments intersect. With better onboarding, sharper monitoring, and ongoing due diligence, businesses have a better chance of stopping fraudulent transfers before they turn into losses.
People are also reading:
AI in fraud detection uses machine learning and real-time monitoring to identify financial crimes...
Read More
