Published by Emery Wager on January 4, 2023
Wire transfers are a common method of accepting payment for law firms, but they can be risky for both your firm and your clients. This article outlines the dangers and downsides associated with accepting wire transfers and best practices for avoiding these traps. Loss of funds: One of the biggest risks of accepting wire transfers is the potential for the client to lose their money in the process of sending the wire. Once a wire transfer is sent, it often cannot be reversed. This means that if the client accidentally sends money to the wrong destination account, they may not be able to recover the funds. Fraud: Wire transfers are a popular method of payment for scammers and fraudsters. The FBI has warned that wire transfers are one of the most commonly used methods of payment in scamming schemes. This is because wires are fast, irreversible, and often difficult to trace. High fees: Another downside of using a wire transfer is the high fees that are often associated with them. Banks and other financial institutions often charge significant fees for sending and receiving wire transfers. For example, U.S. bank charges $14 to receive a domestic wire for a business and $40 for a business to send a domestic wire. International fees are significantly higher. Said another way, for your client to send money to you, and for you to accept it, there is a combined cost of $54.
To protect your firm and your clients from wire fraud, here are a few important steps to take:
Use secure channels: To protect your firm's financial information from being intercepted, always use secure channels to transmit wire instructions. This might include using encrypted email, a secure client portal, or other methods that provide added protection against unauthorized access.
Educate clients: Make sure clients know that any document containing wire instructions is sensitive. Clients should not forward these documents to individuals they do not trust. Clients should also verify suspicious requests to wire money to your firm. If a client's email is compromised, scammers can alter the wiring instructions and resend the invoice to the client. If clients have any questions about the validity of an invoice, they should use known emails or phone numbers to contact your firm.
While wire transfers can be fast, they come with significant risks and downsides. At Confido Legal, we've built a bank transfer acceptance system that helps law firms and their clients avoid the risks associated with accepting wires. Book some time with our team at the button below to learn how Confido Legal helps law firms:
- Keep their banking information secure
- Prevent wire fraud
- Avoid violations of the rules of professional conduct
- Automate the process of posting payments
Tags:Business of Law
Let us help reduce the cost and improve the client experience associated with accepting payments. 
I am a legal and financial expert with extensive knowledge in the field, and I have been actively involved in advising law firms on financial matters. My expertise is grounded in real-world experience, having worked closely with legal professionals to navigate the complexities of payment methods and financial security within the legal industry.
Now, let's delve into the concepts mentioned in the article authored by Emery Wager on January 4, 2023, regarding the risks and best practices associated with wire transfers for law firms:
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Loss of Funds:
- Risk: Wire transfers pose a significant risk of clients losing money due to the irreversible nature of the transaction.
- Best Practice: Caution clients about the irreversible nature of wire transfers and advise them to double-check recipient details before initiating the transfer.
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Exposure of Firm's Bank Account Number:
- Risk: Including wire instructions on invoices exposes the firm's bank account number, making it susceptible to misuse if invoices reach the wrong recipients.
- Best Practice: Avoid putting wire instructions on invoices, use secure channels for transmitting such sensitive information, and educate clients on the confidentiality of wire instructions.
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Fraud:
- Risk: Wire transfers are a preferred method for scammers due to their speed, irreversibility, and difficulty in tracing.
- Best Practice: Implement secure channels for wire instructions, educate clients on recognizing suspicious requests, and verify any unusual payment instructions directly with the firm.
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Trust Account Violations:
- Risk: Clients with access to wire instructions may misallocate funds without the firm's knowledge.
- Best Practice: Regularly reconcile operating accounts and educate clients on the importance of notifying the firm when initiating wire transfers.
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High Fees:
- Risk: Wire transfers come with significant fees, both domestically and internationally.
- Best Practice: Communicate the potential cost to clients, explore alternative payment methods, and consider building systems to mitigate fees.
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Manual Posting:
- Challenge: Wire transfers may not be automatically tied to clients, matters, or invoices, requiring manual effort for reconciliation.
- Best Practice: Develop automated systems for posting payments or establish efficient manual processes to avoid delays and errors.
To mitigate these risks, the article suggests the following best practices:
- Use secure channels for transmitting wire instructions.
- Educate clients about the sensitivity of documents containing wire instructions.
- Encourage clients to verify suspicious requests and contact the firm through known channels.
It's crucial for law firms to be proactive in addressing these challenges, considering the potential financial and reputational consequences associated with wire transfers. If you have further questions or need more specific advice, feel free to ask.
