Funds transfer fraud (FTF) is one of the most common cyber insurance claims we see at Coalition — and for good reason. It’s a low-effort, high-reward attack method that continues to grow both in popularity and its payouts.

FTF frequency increased by 15% in the first half (1H) of 2023, according to Coalition’s 2023 Cyber Claims Report: Mid-year Update, while FTF initial severity increased by 39%. Though the average loss amount was more than $297,000, the recent spike in FTF claims comes with a silver lining.

When an FTF event occurs, threat actors often move money across various jurisdictions to cover their tracks. Through relationships with government entities, Coalition drastically increases the chance of recovery by moving quickly — and doing what others don't — to claw back stolen funds.

Coalition successfully clawed back more than $23 million in fraudulent transfers in 1H 2023. In instances where recovery was possible, we clawed back an average of $612,000 per FTF claim, which represented 79% of all FTF losses.

Let’s look at what goes into a successful clawback, what businesses can do to prevent FTF events in the first place, and why Coalition’s approach to recovery is unparalleled.

3 keys to a successful FTF clawback

Speed is the name of the game when it comes to recovering stolen funds. Coalition should be the first call when any unusual activity is noticed because time is the primary factor in each of our three keys to a successful FTF clawback. 

Reporting time

The sooner we get on the case, the greater our chance of recovery. We’ve managed to claw back money up to two weeks after the initial wire, but our chances are much better if Coalition is notified within two days of the transaction.

Transaction size

The larger the fraudulently wired amount, the greater the chance of recovery. Big transactions have a lot of eyes on them and take longer for the banks to approve. This gives us more time to swoop in and freeze the funds.

International transfers

The more countries the money travels through, the more time we have to hunt it down. Similar to the big-money transfers, funds that have to travel across borders go through a stringent review process that can substantially slow down the transaction.

Remember: The transaction size and destination aren’t always in a policyholder’s control. However, anything they can do to reduce the time between the transaction and the moment the fraud is discovered is helpful.

In the first half of 2023, Coalition successfully clawed back more than $23 million in fraudulent transfers.

What businesses can do to avoid FTF events

While we’re proud of our clawback success, the best way for policyholders to keep their hard-earned money is to prevent the FTF event from happening in the first place. Here are our recommended best practices when performing wire transfers. 

Be suspicious of requests to change information

Changing a bank account is extremely rare, and alarm bells should go off any time a vendor requests to update banking information. Call a trusted person at the company to make sure the vendor request is legitimate. It’s much more likely that a fraudster is sending those instructions.

Read wiring instructions over the phone

For large transactions or first-time transactions with a new business partner, exchange the wire/ACH number over the phone between two familiar parties.

Verify the address of instructions that come via email

Don’t just accept the name in an email. Review the full email and make sure it’s the legitimate account. If anything seems off at all, try calling — and never use the number from the email. Independently verify the phone number outside of the suspicious email. 

Train (and test) employees

Keep anyone who is authorized to send wire transfers on their toes with occasional testing. Most employees won’t fall for the same trick twice, and it’s much better for their mistake to happen during a drill.

Speed is the name of the game when it comes to recovering stolen funds. Coalition should be the first call when any unusual activity is noticed. 

Why Coalition’s approach to FTF claims is unparalleled

Upon receiving an FTF claim, most carriers move straight toward the coverage process and do nothing more than provide their policyholders with a Proof of Loss form. But when Coalition gets that call, we immediately prioritize clawing back the stolen funds. 

When there’s a new FTF claim coming in on our 24/7 Coalition Claims Hotline, my first instinct is never to check if there’s coverage. I get the ball rolling immediately and leap into action to do all that we can to get those funds back — and I always end that initial call saying, “As soon as we hang up, you’ll get an email from me asking for details of the transaction. Get it to me ASAP.”

In my experience, there’s no policy on the market that’s going to cover a seven-figure wire transfer loss. The recommendations shared above can help prevent the “big loss,” but nothing is foolproof. Choosing a carrier that prioritizes clawbacks over everything else is the best tool a business and its broker have at their disposal. 

Plus, telling a business that we’ve helped recover their money is truly the best part of my job. Our policyholders often come to us amidst a crisis that can completely destroy their business. On that first phone call, they ask things like, “How will we ever recover from this?”

Being able to tell our policyholders, “Your money is secure and will be back to you soon,” never gets old.

Want to learn more about FTF clawbacks and Coalition’s other recovery tactics. Download the 2023 Cyber Claims Report: Mid-year Update.

Coalition Insurance Solutions Inc. (“CIS”) is a wholly-owned subsidiary of Coalition, Inc.  Insurance products referenced herein are offered in the U.S. by CIS, a licensed insurance producer and surplus lines broker, (Cal. license # 0L76155) acting on behalf of a number of unaffiliated insurance companies, and on an admitted basis through Coalition Insurance Company (“CIC”) a licensed insurance underwriter (NAIC # 29530). See licenses and disclaimers. Copyright © 2023. All rights reserved. Coalition and the Coalition logo are trademarks of Coalition, Inc.

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