How does CEO fraud work?
Research and planning
The fraudsters begin with thorough research into the target company. They gather information about the structure of the company, the names and positions of executives, and analyze the communication habits of employees.
They often use social engineering techniques to gather additional details, for example by deceiving employees through phishing emails or phone calls.
Impersonation and deception
Criminals create email addresses that look deceptively similar to executives’ real addresses. Alternatively, they can compromise existing email accounts.
The fake messages often contain urgent and confidential instructions. The attackers emphasize the urgency of the transaction and ask for the instruction to be handled discreetly.
Implementation of the fraud
The aim of the attacks is usually to transfer a large sum of money to an account controlled by the criminals. Pressure is often exerted on employees to carry out the transfer immediately.
In addition to financial losses, attackers may also attempt to steal sensitive company data that can be used for further criminal activities.
Concealment and escape
The money is usually distributed across several accounts in different countries to make it more difficult to trace.
Attackers try to cover their digital tracks by deleting all means of communication and tools used.
Global damage
According to the FBI Internet Crime Complaint Center (IC3), CEO fraud has led to losses of over 43 billion US dollars worldwide between October 2013 and December 2021.
How does CEO fraud affect a company?
Financial loss
Companies can suffer significant financial losses due to unauthorized transfers, which can have a serious impact on their liquidity and financial stability.
In addition to the direct financial loss, costs may also be incurred for restoring the security systems and carrying out forensic investigations.
Reputational damage
Customers, partners and investors could lose trust in the company, which could have a negative impact on the business in the long term.
Negative media coverage can further damage the company’s reputation.
Business interruptions
The investigation and resolution of a fraud case can lead to significant disruption to daily business processes.
Successful fraud can affect employee morale, especially if they feel responsible or complicit.
Average loss per incident: The average financial loss per BEC incident is around 130,000 US dollars.
Affected sectors: Companies in the financial services, real estate, law firms and construction sectors are particularly hard hit.
Conclusion
CEO fraud poses a significant threat to companies, which can cause both financial and reputational damage. Given the increasing sophistication of these attacks, it is essential for companies to take preventative measures to ensure their security. By combining technological protection, strict security protocols and regular employee training, companies can significantly reduce the risk of CEO fraud and strengthen their resilience to cyber attacks.
Social Engineering