How to check an IBAN?

The IBAN ensures that funds are directed to the correct account. Fraudsters often exploit vulnerabilities by manipulating IBANs to divert payments to unauthorized accounts. By carefully checking the IBAN for accuracy and authenticity, you can significantly reduce the risk of falling victim to these fraudulent schemes. Implementing robust verification processes is not just a precaution—it’s a necessary step to maintain the integrity and security of your financial operations.

What is an IBAN?

An IBAN consists of several essential components:

Country Code

This two-letter code helps direct the transaction to the appropriate country.

Check Digits

These digits are used to validate the IBAN, minimizing the risk of errors and ensuring the accuracy of the transaction.

Bank Code

This part specifies the financial institution handling the transaction, allowing the system to direct the payment to the correct bank.

Account Number

The final segment refers to the individual bank account within the specified institution.

Why is it Important to Check an IBAN?

Given the IBAN’s role in identifying bank accounts, even a minor mistake can lead to significant issues.

The importance of verifying an IBAN extends beyond preventing errors. In recent years, there has been a notable increase in wire transfer fraud, which exploits errors in IBAN entries. Criminals often use fraudulent methods to divert funds to incorrect accounts, leveraging the complexity of banking transactions. By double-checking the account number and other elements of the IBAN, individuals and businesses can safeguard against such risks.

The increase of Wire Transfer Fraud

Increasingly, businesses are falling victim to fraud. Fraud is becoming more common and manifests in various forms depending on the fraudster’s target.

Supplier Fraud: The fraudster impersonates a legitimate supplier and provides a fake IBAN to the company, attempting to redirect payments to a fraudulent account.
President Fraud: The fraudster poses as the company’s president and urgently requests an employee to make a transfer using a false account number.
Phishing: The fraudster gains access to the email accounts of clients or suppliers to request payment of invoices using fake banking details.

These techniques can divert substantial sums of money, exploiting vulnerabilities in systems. To protect against these risks, it is essential to implement robust verification processes.

How to Check an IBAN?

Step 1: Understand the Components

Each IBAN consists of several components. By understanding these elements, you can better interpret the IBAN format and ensure its correctness.

Step 2: Use Online Validation Tools

They analyze the structure of the IBAN to ensure it adheres to the correct format. Some reliable tools, such as Sis ID, even cross-check with databases to verify the existence of the bank details and the owner’s account, providing an extra layer of confidence in the payment process.

Step 3: Verify the Country Code

This step is crucial as discrepancies in the country code can indicate potential errors or fraud. Cross-referencing the IBAN with the bank’s country can help confirm that the IBAN is intended for the correct geographical region.

Step 4: Cross-Check with the Bank

This step is especially important for large or critical payments, as it provides a final verification from the source. The bank can confirm whether the IBAN is correct and associated with the intended account number.

IBAN vs. BIC/SWIFT: What’s the Difference?

Both play crucial roles in ensuring accurate and efficient transactions, but they serve different purposes.

IBAN is a standardized format used to identify individual accounts across borders. It ensures that the payment is directed to the correct account.
BIC, also known as SWIFT code, complements the IBAN by identifying the specific bank involved in the transaction.

Conclusion

The IBAN system, with its standardized format, helps streamline processes and facilitates secure transactions. Ensuring the correctness of the IBAN not only protects against potential fraud but also enhances the efficiency of cross-border payments.

Stronger together

Back to blog