Avoiding Money Transfer Scams
Identifying fraudulent schemes, unlicensed operators, and deceptive practices in the money transfer space.
Why Money Transfers Are Targeted by Fraud
International money transfers share characteristics that make them attractive to fraudsters. Transfers are often irreversible once completed. Recipients are in other countries, making verification difficult. Many senders are unfamiliar with the regulatory framework and cannot easily distinguish licensed providers from fraudulent operations.
The FTC, FBI, and CFPB all maintain consumer alerts about money transfer fraud. Understanding the most common schemes is the first step in avoiding them. This page covers the fraud types most frequently encountered by consumers sending money internationally from the United States.
Fraud Schemes Targeting Money Transfer Users
Advance Fee Fraud
The sender is told they will receive a large sum of money, a prize, or a lottery win, but must first send a smaller amount to cover fees, taxes, or processing costs. The promised funds never arrive. Each payment generates a new request for another fee. Legitimate money transmitters do not require advance payments to release funds that are supposedly waiting for the sender.
Impersonation Scams
Fraudsters impersonate government agencies, financial institutions, or licensed money transmitters. They contact victims by phone, email, or text claiming the victim owes taxes, has an outstanding debt, or has won a prize. Payment is demanded via wire transfer or money order. Government agencies and legitimate financial institutions do not demand immediate payment via money transfer.
Romance Scams
A fraudster develops an online relationship with a victim over weeks or months, then requests money via wire transfer for an emergency. Requests escalate over time. The FTC has documented this as one of the most financially damaging fraud types. The person requesting money has not met the victim in person and typically cannot be verified through any independent means.
Unlicensed Operators
Businesses offering money transfer services without state licenses operate outside the regulatory framework. They are not subject to bonding requirements, AML program obligations, or consumer protection rules. If an unlicensed operator fails or absconds with funds, consumers have no regulatory recourse. The state regulator cannot intervene and the CFPB remittance rules may not apply.
Phishing and Clone Websites
Fraudulent websites are designed to look identical to licensed money transmitters. They collect payment information and either steal the funds directly or capture credentials for use in other fraud. Clone websites may use domain names that closely resemble legitimate providers, with minor spelling variations or different top-level domains. Always navigate to provider websites directly rather than through links in emails or text messages.
Cryptocurrency Transfer Fraud
Requests to convert money to cryptocurrency and send to a wallet address are a common fraud vector. Cryptocurrency transfers are generally irreversible and the recipient cannot be identified through normal channels. Legitimate licensed money transmitters that handle cryptocurrency are subject to the same BSA and state licensing requirements as traditional transmitters, but many fraudulent operators use crypto specifically because of its irreversibility.
How to Verify a Money Transfer Provider
Check FinCEN MSB Registration
Visit fincen.gov and use the MSB Registrant Search to confirm the provider is registered as a money service business. Enter the company name or EIN. A registered business will appear with its registration type and location. No result indicates the provider may not be federally registered.
Verify State License via NMLS
Visit nmlsconsumeraccess.org and search for the provider by name. The result will show which states have issued licenses, the license numbers, and current license status. Active status means the license is current. Inactive or expired status is a concern.
Contact the State Regulator
If the provider is not in NMLS, contact the banking or financial services department in your state directly. Ask whether the named company holds a current money transmitter license. State regulators are required to maintain public records of licensees.
Review the Disclosure Documents
A compliant provider will give you a written pre-payment disclosure showing the transfer amount, exchange rate, all fees, and the amount the recipient will receive before you pay. If a provider cannot or will not provide this disclosure, they may not be compliant with Dodd-Frank remittance rules.
Where to Report Money Transfer Fraud
FTC
The Federal Trade Commission accepts reports of money transfer fraud at reportfraud.ftc.gov. Reports are shared with law enforcement agencies and contribute to federal enforcement actions against fraudulent operators.
CFPB
The Consumer Financial Protection Bureau handles complaints about remittance transfer providers at consumerfinance.gov/complaint. For regulated providers, the CFPB forwards complaints and requires a response within a defined timeframe.
IC3
The FBI's Internet Crime Complaint Center at ic3.gov accepts reports of internet-facilitated fraud including money transfer scams. IC3 data is used to identify fraud trends and coordinate law enforcement responses.
State Regulator
If the fraud involved a provider claiming to be licensed in your state, file a complaint with the state banking or financial services department. State regulators can take licensing action against non-compliant providers.