The closing coordinator followed the typical process...
The email from bond counsel looked legit, the letterhead checked out, and every internal verification box was ticked. So the $2.8 million wire went out.
Days later, the devastating call came: "We never received the bond proceeds. Those weren't our banking details."
The firm had top-tier cyber insurance—$200,000 a year, with promises to cover just this kind of attack. But when they filed the claim, the response came fast and sharp: "Denied. This was social engineering, not a system breach."
It’s a costly blind spot—one too many businesses discover only after it’s too late.
🎯 Why Public Finance Is a Prime Target
Public finance transactions—like municipal bond deals—often include details that are part of public records and official filings. Trustee contacts, payment instructions, bond counsel info, and schedules are publicly accessible. Fraudsters use this transparency to research and craft highly convincing scams that look authentic to the people handling these transactions.
This open data exposure makes public finance especially vulnerable to business email compromise (BEC) and wire fraud. The attackers can mimic trusted parties using real names, timing, and details, making it hard to spot deception.
The Wire Fraud Protection Gap in Traditional Cyber Insurance
Wire fraud and business email compromise (BEC) now make up 60% of all cyber insurance claims. But most policies weren’t built for this kind of fraud. They were designed for breaches, ransomware, and network intrusions—not scams that trick people rather than systems.
Here’s the reality: 70% of organizations were targeted by BEC attacks in the last year, and 63% actually experienced one. Wire fraud isn’t niche—it’s everywhere. And it often falls outside your insurance’s fine print.
⚠️ Why Traditional Cyber Insurance Struggles with Wire Fraud
1. The "Voluntary Authorization" Problem
Most cyber policies don’t know what to do with wire fraud because, technically, your team said yes. Even if they were tricked.
Real scenario: A closing coordinator gets an email from bond counsel asking to wire funds. Everything looks right—the sender’s name, the deal terms, the urgency. She sends the funds. Only later do they learn the email was spoofed.
What traditional insurance might say: "This was a voluntary transfer. That falls under our voluntary parting exclusion."
2. No System Intrusion, No Coverage
Many insurers only pay when there’s a breach of your own systems. But wire fraud often starts with someone else’s compromised email.
Real scenario: Criminals hack a law firm’s email and try to redirect $22 million in bond proceeds. Their spoofed messages look almost identical to the real thing. The attack never touches the finance team’s systems directly.
Potential insurance response: "Your systems weren’t breached. Our policy doesn’t apply to third-party compromises."
3. Limited Social Engineering Coverage
Cyber policies were built for tech-based threats. Social engineering? It’s often tacked on as an endorsement—with a small sublimit.
Real scenario: Attackers monitor conversations between a bond issuer and trustee for weeks. Then they send a fake closing instruction, swapping out the real banking info for their own.
Potential insurance response: "This was social engineering. You’re only covered up to $50,000 under our policy."
4. Tough Verification Requirements
Even when coverage does apply, insurers often require airtight verification steps. But what happens when fraudsters already control the verification channels?
If one step was missed—or followed but easily manipulated—coverage can vanish.
The Bigger Issue: Evolving Threats, Stagnant Policies
The FBI says BEC attacks have led to more than $55 billion in global losses over the last decade. Cyber insurance is adapting, but many policies still aren’t built for this kind of deception.
While the average wire fraud loss across all industries may hover around $185,000, that number barely scratches the surface for sectors like public finance. In capital markets, where wire amounts regularly exceed millions, a single compromised transaction can result in seven- or even eight-figure losses. Fraudsters know this—and they target closings and high-value disbursements where the payoff is enormous. Public records give them the information they need; the lack of targeted protection gives them the opportunity.
Companies often assume their crime or fidelity policy will cover the loss. But when they file the claim? The gap becomes painfully clear.
🔒 Basefund’s Approach: Built for Wire Fraud
We flipped the question. Instead of asking, “Will insurance cover this after the money’s gone?”, we ask, “How do we prevent it from being misdirected in the first place?”
With Basefund, protection starts before funds move. We verify the people, validate the details, and confirm the instructions. And if fraud still slips through, our transaction-specific insurance covers up to $10 million—per disbursement.
Traditional cyber insurance is still critical—for breaches, ransomware, and system attacks. But it wasn’t built for wire fraud.
That’s where Basefund comes in. Not as a patch or add-on, but as a purpose-built solution for the specific risks of disbursements. We prevent fraud at the source and provide a backstop when things go wrong—without the insurance gray area.
⁉️ Questions to Ask Your Carrier—Before Your Next Transfer
Want to stress-test your coverage? Ask these questions:
- If my employee follows our process but still gets tricked, are we covered?
- Do you cover vendor-side breaches or only attacks on our own systems?
- What counts as ‘voluntary parting’ in our policy?
- Does following best practices guarantee we’ll get paid?
The answers may surprise you. Better to find out now.
The Bottom Line
Wire fraud is evolving fast. AI-driven scams and GenAI-powered deception make it even harder to detect.
You need protection that understands how wire fraud really happens—then does something about it.
Basefund doesn’t replace your cyber policy. It completes it. By covering what others don’t.
The best protection? Knowing what your coverage actually does—and having a plan for what it doesn’t.
