What to know about wire transfer woes in Canada

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A Mississauga man says he faced severe business disruptions after more than $16,000 went missing following a rejected wire transfer.

Adam Skoczylas told CTV News that he facilitates vehicle purchases through online auctions but recently encountered significant problems when a client sent him US$11,800, which he then wired from the Bank of Montreal to Wells Fargo in the U.S., only for the money to disappear.

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Skoczylas said the transfer was rejected without explanation, and though the money was supposed to be deposited back into his account promptly, weeks went by without it being returned.

CTV reports that the issue was resolved and the funds were returned after the network contacted BMO on Skoczylas’s behalf.

However, he is not alone, as significant delays and complications associated with wire and e-transfers have caused many Canadians grief.

While scammers have plenty of tricks to dupe unsuspecting Canadians into sending money via e-transfer, such as the grandparent scam, sometimes the money simply goes missing. That was the case last year for a B.C. couple who lost $950 twice due to e-transfer issues with TD Canada Trust. The couple was trying to pay rent and were informed their e-transfers never reached their landlord, despite receiving a confirmation email, per Global News.

After six months of interactions with the bank, no resolution was provided. When the couple went public with Consumers Matter, they received a refund for only one of the e-transfers.

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In 2022, a number of RBC customers across Canada reported missing funds despite receiving confirmation emails of successful transfers. After going public, the impacted parties received refunds and RBC said “a technical issue” was to blame for the missing money.

Here’s what to know about the risks associated with online transfers and the steps you can take to protect yourself.

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What are the common risks associated with wires and e-transfers?

While both e-transfers and wires do the same thing, send money electronically, e-transfers are generally used domestically while wires are used around the world. These types of transfers are generally safe but several risks can arise, including fraud, cybercrime, errors and other delays.

Inadequate security measures can exacerbate these risks. Financial institutions may not always flag suspicious activities or adequately protect against cyber threats, leading to successful fraud attempts.

Fraudsters can impersonate company employees or hack accounts to provide fraudulent instructions and once a wire transfer is completed, it is usually irreversible, making it challenging to recover funds.

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That was the case earlier this year when more than 140 BMO customers lost a combined $1.5 million in unauthorized wire transfers.

The customers allege that cybercriminals accessed their accounts and withdrew significant sums without reimbursement from BMO, reports CBC. The bank maintains that the transfers appeared legitimate, occurring on the customers’ devices without failed login attempts.

Errors in entering the transfer details can also lead to delays and missing money. When incorrect account numbers, branch codes, or recipient names are entered, the funds may be sent to the wrong account or become stuck in the banking system, requiring extensive investigation to locate and retrieve the money.

How do Canadian courts assign liability in wire transfer fraud cases?

Canadian courts determine liability based on which party was best positioned to prevent the loss, according to Torys LLP, a Toronto-based business law firm.

Financial institutions, in particular, are required to adhere to a high standard of diligence. However, contracts can shift liability.

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If a bank has a contract with a client that permits processing wire transfers based on email instructions, for example, the bank is usually protected from liability if a fraudster sends fake instructions. But if the bank ignores clear red flags, like unusual transaction patterns, and proceeds with the transfer, it could be deemed gross negligence and still be held responsible.

The extent of a bank’s duty to warn clients about known fraud risks is also not fully settled. In 2020, the Ontario Court of Appeal ruled that banks must ensure transfers are properly authorized but are not required to inform clients about specific fraud risks they know of.

What steps can you take to protect yourself from wire and e-transfer fraud?

The most important step is to always verify financial details before sending a transfer, including the account, branch and institution numbers.

Most banks also offer the option to sign up for automatic alerts to notify you of unusual activity or large transactions. It’s also important to report any suspicious activity to your bank to address potential fraud promptly.

In the case of large transactions, consider using bank drafts or cheques, as physical documents can sometimes be safer and more reliable.

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