What Is Funds Transfer Fraud Coverage? (Cyber Liability 101)

In today’s digital world, one of the fastest-growing cyber threats for businesses isn’t ransomware or data breaches—it’s funds transfer fraud. And if your company sends or receives payments via wire, ACH, or email instructions, this type of fraud could cost you big time.

So, what is funds transfer fraud, and why should your business care?

Understanding Funds Transfer Fraud

Funds transfer fraud occurs when a cybercriminal deceives a business into transferring funds to a fraudulent account. This usually involves hacking into a system or impersonating a trusted contact, such as a vendor or executive.

Example:
Let’s say your accounting team is preparing to pay a regular vendor. But a hacker has breached the vendor’s email or invoicing system and quietly changed the bank account details. Your team sends the payment—thinking everything is normal—but the money lands in the hacker’s account instead. That’s funds transfer fraud.

This isn’t just a hypothetical. It’s happening to businesses every day, and the losses can be devastating.

How Does Funds Transfer Fraud Coverage Work?

Funds transfer fraud coverage is typically offered under a cyber liability insurance policy or a crime insurance policy. It helps reimburse the business when funds are stolen due to fraudulent electronic instructions.

This coverage can respond when:

A hacker gains access to a legitimate email account and changes banking info
A third party impersonates an executive or vendor with fake payment instructions
Malicious actors redirect funds before the business realizes the transaction was altered

Funds Transfer Fraud vs. Social Engineering Fraud: Know the Difference

It’s important to understand that funds transfer fraud and social engineering fraud are not the same thing, even though both involve deception.

Funds Transfer Fraud: Involves unauthorized access or manipulation of systems that directly alters payment instructions.
Social Engineering Fraud: Involves tricking an employee into voluntarily sending funds or sensitive information—often through fake requests or impersonation.

Some policies offer both coverages, but they may have different sub-limits, triggers, or exclusions. Make sure you understand exactly what is—and isn’t—covered.

Why Your Business Needs This Coverage

Funds transfer fraud is a growing threat due to the increasing volume of digital transactions and remote work communication. Even businesses with strong cybersecurity systems can fall victim to a well-orchestrated attack.

If your company:

Sends payments via email instructions
Regularly wires funds to vendors
Operates in a digital-first or remote environment

…then funds transfer fraud coverage is essential.

Final Thoughts: Don’t Overlook This Cyber Risk

As cybercriminals become more sophisticated, traditional cybersecurity tools alone may not be enough. Insurance coverage is the financial safety net your business needs.

Talk to a cyber insurance specialist to make sure your policy includes funds transfer fraud protection—and that it’s structured to reflect the way your business actually handles payments.

Want help reviewing your cyber liability insurance coverage? Contact us today to ensure your business is fully protected from modern financial threats.

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