Online money transfer provider Xoom suffers multimillion-dollar fraud

Digital money transfer provider Xoom has admitted to suffering a $30.8m loss at the hands of fraudsters who managed to transfer cash to overseas accounts.

The company’s chief financial officer, Matt Hibbard, resigned following the revelation.

The US company, which provides money transfer services to banks, money transfer companies and retailers, revealed the fraud when it filed financial documents to regulators. 

“The incident involved employee impersonation and fraudulent requests targeting the company’s finance department, resulting in the transfer of $30.8m in corporate cash to overseas accounts,” said Xoom in the documents.

“While the company has internal controls in place and has implemented additional internal procedures, its audit committee and advisors are reviewing these controls and processes as part of the investigation [into the fraud],” said Xoom. 

“While this matter will result in some additional near-term expenses, the company does not expect this incident to otherwise have a material impact on its business,” it added.

A criminal investigation is underway.

Xoom, which was founded in 2001, said no customer data or money were involved in the fraud. In the UK, Barclays, HSBC and Lloyds use its services.

Businesses that deal with people’s money need to be seen as having the right security in place. A fraud like this will be very damaging to a company in the financial services sector. The company's share price dropped by 6.2% following the announcement of the fraudulent losses.

Such is the fear of scaring customers off through cyber attacks, banks are under-reporting cyber fraud, a UK parliamentary committee was recently told.

A University of Cambridge researcher told a Treasury select committee that the amount of money being taken from people's accounts through cyber crime is twice as much as what is reported.

Speaking at a meeting in November 2014 about the treatment of customers by finance firms, Richard Clayton, a senior researcher in security economics at the University of Cambridge, said: “Insiders tell me about twice the amount of money [reported by banks] goes walkies out of people’s accounts.”