Payment Method Risks in International Trade

The payment method your supplier requests is one of the most reliable indicators of fraud risk in international trade. Legitimate suppliers accept standard bank transfers to their registered company account. Fraudsters almost always steer victims towards payment channels that are irreversible, untraceable, or difficult to dispute. Understanding the risk profile of each payment method is the single most important thing an importer or SME owner can do before wiring money overseas.

The Payment Risk Spectrum: From Safest to Most Dangerous

Not all payment methods carry equal risk. The table below summarises the risk profile of the most common international payment methods, from the perspective of the buyer (importer or SME owner paying a supplier).

Bank Wire Transfer: The Standard — But Not Risk-Free

SWIFT bank wire transfers are the standard payment method in international trade. They are not inherently fraudulent — the vast majority of legitimate international transactions use them. However, they carry a critical risk: once a wire transfer is sent, it is extremely difficult to reverse. Banks are not obligated to recall funds, and in practice, recovery rates for fraudulent wire transfers are very low.

The key due diligence check for wire transfers is account name verification. The account name on the invoice must exactly match the legal name of the company you are contracting with. A mismatch — even a subtle one — is a major red flag. Invoice fraud (also called Business Email Compromise or BEC) often involves substituting the supplier's real bank details with the fraudster's account at the last moment, typically via a spoofed email.

Always call your supplier on a verified phone number to confirm bank details before sending any payment, especially if the details have changed since your last transaction.

Letters of Credit: The Gold Standard for High-Value Imports

A Letter of Credit (LC) is a commitment from your bank to pay the supplier only when specific conditions are met — typically the presentation of shipping documents proving the goods have been dispatched. LCs are the standard payment mechanism for large import transactions and provide the highest level of buyer protection available in international trade.

The main drawback of LCs is cost and complexity. Bank fees typically range from 0.5% to 2% of the transaction value, and the documentation requirements are strict. For transactions under €50,000, the cost-benefit calculation often favours other methods. However, for first-time transactions with an unverified supplier, or for high-value orders, the cost of an LC is almost always justified. Read more in our country risk guide for guidance on when LCs are essential.

Cryptocurrency Payments: A Near-Universal Fraud Indicator

A legitimate supplier of physical goods has no operational reason to require payment in Bitcoin, USDT, or any other cryptocurrency. Crypto payments are irreversible, pseudonymous, and operate outside the banking system's fraud protection mechanisms. When a supplier requests crypto payment, it is a near-universal indicator of fraud.

The only legitimate use cases for crypto in B2B trade are in the digital asset industry itself (crypto exchanges, NFT platforms, DeFi protocols) or in jurisdictions where the banking system is severely restricted. If your supplier is a Chinese textile manufacturer, an Indian software house, or a Turkish steel supplier, there is no legitimate reason for them to require crypto payment.

Western Union, MoneyGram, and Informal Transfers

Western Union and MoneyGram are consumer remittance services designed for sending money to individuals. They are not designed for B2B trade payments and offer no buyer protection whatsoever. Once the money is collected, it is gone. No legitimate supplier of goods or services requires payment via Western Union or MoneyGram.

The same applies to hawala networks, informal value transfer systems, and requests to pay via a third-party individual. These channels are used almost exclusively for fraud, sanctions evasion, and money laundering in a trade context.

Advance Payments and Deposits: Managing the Risk

Advance payments (paying before goods are shipped) are common in international trade, particularly for custom-manufactured goods or first-time transactions. The risk is that you have no leverage once the money is sent. Best practices for managing advance payment risk include:

• Limit advance payments to 30% of the total order value for new suppliers
• Use a Documentary Collection (D/P) arrangement for the balance, so the remaining payment is released only against shipping documents
• Verify the supplier's company registration and directors before any advance payment
• Use trade credit insurance to protect against supplier default
• For orders over €20,000, consider requiring a performance bond or bank guarantee

Invoice Fraud and Business Email Compromise (BEC)

Invoice fraud — also known as Business Email Compromise (BEC) or Authorised Push Payment (APP) fraud — is the fastest-growing category of business fraud in the UK and EU. The mechanism is simple: a fraudster intercepts or spoofs email communication between a buyer and a legitimate supplier, substitutes the supplier's real bank details with their own, and the buyer unknowingly sends payment to the fraudster.

BEC attacks are highly targeted and often involve months of email monitoring before the substitution. The fraudster knows the exact transaction details, the names of the people involved, and the expected payment amount. The emails are often indistinguishable from genuine supplier communications.

The only reliable defence is out-of-band verification: calling the supplier on a phone number you have independently verified (not a number provided in the suspicious email) to confirm bank details before every payment, especially for new transactions or when details have changed.

Practical Checklist Before Wiring Money

• ✅ Verify the supplier's company registration in the official national registry
• ✅ Confirm the bank account name exactly matches the company name on your contract
• ✅ Call the supplier on an independently verified phone number to confirm bank details
• ✅ Check the supplier is not on OFAC, EU, or UN sanctions lists
• ✅ Ensure you have a signed contract or at minimum a pro-forma invoice
• ✅ For first-time transactions over €10,000, consider a small test order first
• ✅ For transactions over €50,000, consider a Letter of Credit

For a broader assessment of your supplier's risk profile, use our free Supplier Due Diligence Risk Checker. For guidance on verifying company registration documents, see our guide to reading company registries.