What is CEO Fraud?

Protecting Your Business from Costly Deceptions

Businesses are facing a wide array of threats, and one of the most insidious and costly is CEO Fraud. This type of fraud involves cybercriminals posing as company executives to deceive employees into revealing sensitive information or making unauthorized financial transactions. Per the FBI, CEO fraud is a $26 billion scam!

Let’s delve into the world of CEO Fraud, exploring its attack methods, identifying warning signs, discussing vulnerable targets, and offering practical prevention and reporting measures to protect your business.

What is CEO Fraud?

CEO Fraud, also known as Business Email Compromise (BEC) attacks, is a type of cybercrime where malicious actors impersonate high-ranking executives, typically the CEO or CFO, to manipulate employees into performing certain actions. It often involves wire transfers or sharing confidential information.

The attackers rely on social engineering tactics, exploiting human vulnerabilities rather than hacking into systems directly.

Attack Methods of CEO Fraud

a. Phishing Emails: CEO Fraud often begins with phishing emails. Cybercriminals meticulously craft convincing emails that appear to originate from the CEO's email address or use email addresses similar to what a CEO would use, creating an illusion of authenticity.

Example: The attacker sends an email from "ceo@bergerking.com” instead of “ceo@burgerking.com” requesting urgent action, such as wiring funds to a designated account for a secret acquisition. This is the technique of name spoofing, where the attackers flip just a letter or two in the email address, tricking the mind.

b. Spear Phishing: This is a more targeted form of phishing where the attacker tailors the message to a specific individual, making it even more convincing.

Example: The attacker researches a company's staff (mostly employees in the finance, accounting, payroll, legal, or HR departments) on social media and sends an email to the CFO, using personal details to increase credibility.

c. Email Account Compromise: Cybercriminals may gain access to a legitimate email account of a company executive, using it to send fraudulent instructions to employees.

Example: The attacker hacks into the CEO's email account and sends a message instructing the HR manager to share employee W-2 forms for tax-related reasons. There are other use cases as well, the most prominent being supplier invoices, where the attacker eavesdrop on accounts of the accounting staff who have access to setting up merchant payment processor accounts, changing the payment clearinghouse bank account details swapping them for offshore bank account owned by cybercriminals.

In some instances, on a much bigger scale, the attacker compromises the email account of a management executive and studies the M&A activities to later drop an email to the accounting department for executing a wire transfer to complete an acquisition.

How to Recognize CEO Fraud?

Recognizing CEO Fraud can be challenging due to its sophisticated nature, but there are red flags to watch out for:

  • Urgent and unusual requests: Be cautious of emails that demand immediate action, especially when it involves transferring money or sharing sensitive information.
  • Email address discrepancies: Scrutinize the sender's email address for subtle differences, such as "david@nothendassociates.com" instead of "david@northendassociates.com."
  • Unusual language and tone: Pay attention to language inconsistencies or unusual tone in the email, as attackers may not be familiar with the CEO's communication style.

CEO Fraud Targets

CEOs and CFOs are prime targets due to their authority and access to sensitive information. However, any employee handling finances or confidential data can be targeted.

Small and medium-sized businesses are particularly vulnerable as they may lack robust email security measures and dedicated cybersecurity teams.

Who is at the Greatest Risk of Being the Target of CEO Fraud Attack?

While all businesses are potential targets, cybercriminals especially target the ones that display vulnerable traits:

  • Employees who are not trained to recognize and report potential phishing attacks may inadvertently fall victim to CEO Fraud.
  • Businesses without multi-factor authentication, email encryption, and advanced threat detection are more susceptible.
  • Companies with high-profile CEOs or those often featured in the media become attractive targets for cybercriminals seeking a big payoff.

How to Prevent CEO Fraud

Preventing CEO Fraud requires a multi-layered approach that combines technology, employee education, and strict protocols:

a. Implement Strong Email Security Measures: Utilize multi-factor authentication, email encryption, and email security gateways to prevent unauthorized access and phishing attacks.

b. Conduct Regular Security Awareness Training: Train employees to identify and report phishing attempts, emphasizing the importance of verifying unusual requests through alternative channels.

How to Report CEO Fraud

If you suspect CEO Fraud or have fallen victim to such an attack, take immediate action:

  • Contact law enforcement: Report the incident to your local law enforcement agency or the FBI's Internet Crime Complaint Center (IC3).
  • Inform your bank: If money was transferred, contact your bank to attempt to stop or recover the funds.
  • Notify your IT and Security teams: Inform your IT and cybersecurity teams to prevent further damage and investigate the attack.

What to Do if Your Business is a Victim of CEO Fraud?

If your business falls prey to CEO Fraud, follow these steps:

  1. Contain the situation: Isolate compromised accounts and secure your systems to prevent further damage.
  2. Investigate the incident: Work with cybersecurity experts to understand the extent of the breach and how it occurred.
  3. Notify relevant parties: Inform your employees, customers, and partners about the incident and any potential data breaches.
  4. Enhance security measures: Use the lessons learned to bolster your email security and the overall cybersecurity posture.