diff --git a/modules/apps/transfer/types/msgs.go b/modules/apps/transfer/types/msgs.go
index eafb6abd59e..be3420d233f 100644
--- a/modules/apps/transfer/types/msgs.go
+++ b/modules/apps/transfer/types/msgs.go
@@ -69,10 +69,22 @@ func NewMsgTransfer(
 // NOTE: The recipient addresses format is not validated as the format defined by
 // the chain is not known to IBC.
 func (msg MsgTransfer) ValidateBasic() error {
-	if err := validateSourcePortAndChannel(msg); err != nil {
-		return err // The actual error and its message are already wrapped in the called function.
+	if err := msg.validateForwarding(); err != nil {
+		return err
 	}
+	if !msg.Forwarding.Unwind {
+		// We verify that portID and channelID are valid IDs only if
+		// we are not setting unwind to true.
+		// In that case, validation that they are empty is performed in
+		// validateForwarding().
+		if err := host.PortIdentifierValidator(msg.SourcePort); err != nil {
+			return errorsmod.Wrap(err, "invalid source port ID")
+		}
 
+		if err := host.ChannelIdentifierValidator(msg.SourceChannel); err != nil {
+			return errorsmod.Wrap(err, "invalid source channel ID")
+		}
+	}
 	if len(msg.Tokens) == 0 && !isValidIBCCoin(msg.Token) {
 		return errorsmod.Wrap(ibcerrors.ErrInvalidCoins, "either token or token array must be filled")
 	}
@@ -99,30 +111,42 @@ func (msg MsgTransfer) ValidateBasic() error {
 		return errorsmod.Wrapf(ErrInvalidMemo, "memo must not exceed %d bytes", MaximumMemoLength)
 	}
 
+	for _, coin := range msg.GetCoins() {
+		if err := validateIBCCoin(coin); err != nil {
+			return errorsmod.Wrapf(ibcerrors.ErrInvalidCoins, "%s: %s", err.Error(), coin.String())
+		}
+	}
+
+	return nil
+}
+
+// validateForwarding ensures that forwarding is set up correctly.
+func (msg MsgTransfer) validateForwarding() error {
+	if !msg.ShouldBeForwarded() {
+		return nil
+	}
 	if err := msg.Forwarding.Validate(); err != nil {
 		return err
 	}
 
-	if msg.ShouldBeForwarded() {
+	if !msg.TimeoutHeight.IsZero() {
 		// when forwarding, the timeout height must not be set
-		if !msg.TimeoutHeight.IsZero() {
-			return errorsmod.Wrapf(ErrInvalidPacketTimeout, "timeout height must not be set if forwarding path hops is not empty: %s, %s", msg.TimeoutHeight, msg.Forwarding.Hops)
-		}
+		return errorsmod.Wrapf(ErrInvalidPacketTimeout, "timeout height must be zero if forwarding path hops is not empty: %s, %s", msg.TimeoutHeight, msg.Forwarding.Hops)
 	}
 
 	if msg.Forwarding.Unwind {
-		// When unwinding, we must have at most one token.
+		if msg.SourcePort != "" {
+			return errorsmod.Wrapf(ErrInvalidForwarding, "source port must be empty when unwind is set, got %s instead", msg.SourcePort)
+		}
+		if msg.SourceChannel != "" {
+			return errorsmod.Wrapf(ErrInvalidForwarding, "source channel must be empty when unwind is set, got %s instead", msg.SourceChannel)
+		}
 		if len(msg.GetCoins()) > 1 {
+			// When unwinding, we must have at most one token.
 			return errorsmod.Wrap(ibcerrors.ErrInvalidCoins, "cannot unwind more than one token")
 		}
 	}
 
-	for _, coin := range msg.GetCoins() {
-		if err := validateIBCCoin(coin); err != nil {
-			return errorsmod.Wrapf(ibcerrors.ErrInvalidCoins, "%s: %s", err.Error(), coin.String())
-		}
-	}
-
 	return nil
 }
 
@@ -164,25 +188,3 @@ func validateIBCCoin(coin sdk.Coin) error {
 
 	return nil
 }
-
-func validateSourcePortAndChannel(msg MsgTransfer) error {
-	// If unwind is set, we want to ensure that port and channel are empty.
-	if msg.Forwarding.Unwind {
-		if msg.SourcePort != "" {
-			return errorsmod.Wrapf(ErrInvalidForwarding, "source port must be empty when unwind is set, got %s instead", msg.SourcePort)
-		}
-		if msg.SourceChannel != "" {
-			return errorsmod.Wrapf(ErrInvalidForwarding, "source channel must be empty when unwind is set, got %s instead", msg.SourceChannel)
-		}
-		return nil
-	}
-
-	// Otherwise, we just do the usual validation of the port and channel identifiers.
-	if err := host.PortIdentifierValidator(msg.SourcePort); err != nil {
-		return errorsmod.Wrap(err, "invalid source port ID")
-	}
-	if err := host.ChannelIdentifierValidator(msg.SourceChannel); err != nil {
-		return errorsmod.Wrap(err, "invalid source channel ID")
-	}
-	return nil
-}
diff --git a/modules/apps/transfer/types/msgs_test.go b/modules/apps/transfer/types/msgs_test.go
index b0ccbb611bf..2fea4f4a5b2 100644
--- a/modules/apps/transfer/types/msgs_test.go
+++ b/modules/apps/transfer/types/msgs_test.go
@@ -87,6 +87,8 @@ func TestMsgTransferValidation(t *testing.T) {
 		{"invalid forwarding info port", types.NewMsgTransfer(validPort, validChannel, coins, sender, receiver, clienttypes.ZeroHeight(), 100, "", types.NewForwarding(false, types.Hop{PortId: invalidPort, ChannelId: validChannel})), types.ErrInvalidForwarding},
 		{"invalid forwarding info channel", types.NewMsgTransfer(validPort, validChannel, coins, sender, receiver, clienttypes.ZeroHeight(), 100, "", types.NewForwarding(false, types.Hop{PortId: validPort, ChannelId: invalidChannel})), types.ErrInvalidForwarding},
 		{"invalid forwarding info too many hops", types.NewMsgTransfer(validPort, validChannel, coins, sender, receiver, clienttypes.ZeroHeight(), 100, "", types.NewForwarding(false, generateHops(types.MaximumNumberOfForwardingHops+1)...)), types.ErrInvalidForwarding},
+		{"invalid portID when forwarding is set but unwind is not", types.NewMsgTransfer("", validChannel, coins, sender, receiver, clienttypes.ZeroHeight(), 100, "", types.NewForwarding(false, validHop)), host.ErrInvalidID},
+		{"invalid channelID when forwarding is set but unwind is not", types.NewMsgTransfer(validPort, "", coins, sender, receiver, clienttypes.ZeroHeight(), 100, "", types.NewForwarding(false, validHop)), host.ErrInvalidID},
 		{"unwind specified but source port is not empty", types.NewMsgTransfer(validPort, "", coins, sender, receiver, clienttypes.ZeroHeight(), 100, "", types.NewForwarding(true)), types.ErrInvalidForwarding},
 		{"unwind specified but source channel is not empty", types.NewMsgTransfer("", validChannel, coins, sender, receiver, clienttypes.ZeroHeight(), 100, "", types.NewForwarding(true)), types.ErrInvalidForwarding},
 		{"unwind specified but more than one coin in the message", types.NewMsgTransfer("", "", coins.Add(sdk.NewCoin("atom", ibctesting.TestCoin.Amount)), sender, receiver, clienttypes.ZeroHeight(), 100, "", types.NewForwarding(true)), ibcerrors.ErrInvalidCoins},