When Wire Fraud Strikes: The Liability Risk Facing Every Industry

Business email compromise (BEC) and wire fraud are often discussed as banking or real estate problems. Any organization that sends payments, manages vendors, or relies on email to exchange financial information can be exposed. 

A fraudulent request to update wire instructions may look entirely legitimate. It can come from a known contact, reference a real invoice, and even appear in an existing email thread. In many cases, the attacker has compromised a legitimate email account and is using it to redirect funds before anyone realizes there is a problem. 

Industries at Risk 

Construction companies are frequent targets because they manage large payments among general contractors, subcontractors, suppliers, owners, lenders, and project teams. A single fraudulent bank-detail change can disrupt a project, strain vendor relationships, and create a significant financial loss. 

But construction is far from alone. Wire fraud affects organizations across industries, including: 

• Financial services and investment firms 

• Private equity and portfolio companies 

• Real estate and property management 

• Manufacturing and distribution 

• Universities, schools and nonprofits 

The common risk is not the industry; it is the payment process. Criminals target organizations where payments are frequent, time-sensitive, and handled through email. 

One Email Can Change Everything 

A typical attack starts when a criminal gains access to a vendor, customer, executive, or employee email account. The attacker monitors real conversations, waits for a payment opportunity, and sends a message asking the recipient to use “new” banking information. 

If the request is accepted without correct verification, the payment goes to the criminals instead of the intended recipient. 

The financial loss can be immediate, but the consequences often continue. The organization may still owe the legitimate vendor, contractor, or supplier. It may also face project delays, internal investigation costs, damaged relationships, and difficult questions about who was responsible for verifying the change. 

The Liability Question: Who Is Left Holding the Loss? 

After a fraudulent wire transfer, the central question is often simple: who still has to pay? Unfortunately, there is rarely a simple answer. 

Courts have taken different approaches depending on the facts, contracts, state law, the parties’ conduct, and the security controls in place. That uncertainty can leave the victim of the fraud in a difficult position - particularly when stolen funds cannot be recovered. 

In construction, for example, a general contractor may receive what appears to be a legitimate request from a subcontractor to update wire instructions. If the general contractor sends payment to the fraudster instead of the subcontractor, some courts have approached the dispute as a contract issue: if the general contractor’s payment never reaches the subcontractor, the general contractor may still be liable under the contract for failing to pay the subcontractor. 

Put plainly, sending funds to the wrong account may not satisfy the original payment obligation. 

Other courts have examined the issue through agency law. If the fraudster appeared to have authority to change payment instructions such as by communicating from a legitimate but compromised vendor email account, the payer may argue that the fraudster had “apparent authority” to act on the vendor’s behalf. 

Whether that argument succeeds can depend on the specific circumstances. Courts may consider what made the request appear legitimate, which party was in the best position to prevent the fraud, whether agreed payment-verification procedures were followed, and whether warning signs were overlooked. 

This legal ambiguity is exactly why organizations must focus on prevention, not recovery. 

Build Technical Controls into Every Payment Workflow 

Even highly disciplined teams can be targeted by sophisticated business email compromise. Having a secure processes is table-stakes – firms need technical controls that help identify suspicious activity before payment instructions are changed or funds are released. 

Conduit Security helps leading organizations strengthen the technical safeguards around high-risk financial communications.  

The goal is not to slow down accounts payable, project teams, or vendor relationships. It is to give strong teams security controls and confidence to move quickly, without allowing a fraudulent email to become an unauthorized wire transfer. 

Read more here. 

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