FBI report on email fraud schemes

Sophisticated email scams targeting businesses that regularly perform wire transfer payments has increased 1,300 percent and resulted in losses totaling $3.1 billion, according to the FBI.

The scams are carried out by compromising legitimate business email accounts through social engineering or computer intrusion techniques to conduct unauthorized transfers of funds.

Attacks have been reported in all 50 states and in 100 countries. Reports indicate that fraudulent transfers have been sent to 79 countries with the majority going to Asian banks located within China and Hong Kong.

According to the FBI, most victims report using wire transfers as a common method of transferring funds for business purposes; however, some victims report using checks as a common method of payment. The fraudsters will use the method most commonly associated with their victim’s normal business practices.

The Internet Crime Complaint Center has identified the following characteristics of business email compromises:

  • Businesses and associated personnel using open source e-mail accounts are predominantly targeted.
  • Individuals responsible for handling wire transfers within a specific business are targeted.
  • Spoofed emails very closely mimic a legitimate e-mail request.
  • Hacked emails often occur with a personal e-mail account.
  • Fraudulent email requests for a wire transfer are well-worded, specific to the business being victimized, and do not raise suspicions to the legitimacy of the request.
  • The phrases “code to admin expenses” or “urgent wire transfer” were reported by victims in some of the fraudulent e-mail requests.
  • The amount of the fraudulent wire transfer request is business-specific; therefore, dollar amounts requested are similar to normal business transaction amounts so as to not raise doubt.
  • Fraudulent emails received have coincided with business travel dates for executives whose emails were spoofed.
  • Victims report that IP addresses frequently trace back to free domain registrars.

Title and settlement companies can protect themselves by increasing staff awareness of these scams. According to the FBI, businesses that deploy robust internal prevention techniques at all levels (especially targeting front line employees who may be the recipients of initial phishing attempts), have proven highly successful in recognizing and deflecting email scam attempts. Some financial institutions reported holding their customer requests for international wire transfers for an additional period of time, to verify the legitimacy of the request. ALTA’s Title Insurance and Settlement Company Best Practices details policies and procedures title and settlement companies should follow to protect money and non-public personal information.

The following is a compilation of self-protection strategies provided by the FBI:

  • Avoid free web-based e-mail accounts: Establish a company domain name and use it to establish company e-mail accounts in lieu of free, web-based accounts.
  • Be careful what is posted to social media and company websites, especially job duties/descriptions, hierarchal information, and out of office details.
  • Be suspicious of requests for secrecy or pressure to take action quickly.
  • Consider additional IT and financial security procedures, including the implementation of a 2-step verification process. For example:
    • Out of Band Communication: Establish other communication channels, such as telephone calls, to verify significant transactions. Arrange this second-factor authentication early in the relationship and outside the e-mail environment to avoid interception by a hacker.
    • Digital Signatures: Both entities on each side of a transaction should utilize digital signatures. This will not work with web-based e-mail accounts. Additionally, some countries ban or limit the use of encryption.
    • Delete Spam: Immediately report and delete unsolicited email (spam) from unknown parties. DO NOT open spam email, click on links in the email or open attachments. These often contain malware that will give subjects access to your computer system.
    • Forward vs. Reply: Do not use the “Reply” option to respond to any business emails. Instead, use the “Forward” option and either type in the correct email address or select it from the email address book to ensure the intended recipient’s correct email address is used.
    • Consider implementing Two Factor Authentication (TFA) for corporate email accounts. TFA mitigates the threat of a subject gaining access to an employee’s email account through a compromised password by requiring two pieces of information to login: something you know (a password) and something you have (such as a dynamic PIN or code).

Sudden changes in business practices are a red flag that your company could be the target of an email scam. For example, if a current business contact suddenly asks to be contacted via their personal email address when all previous official correspondence has been through company email, the request could be fraudulent. Always verify via other channels that you are still communicating with your legitimate business partner.

  • Create intrusion detection system rules that flag emails with extensions that are similar to company email. For example, legitimate email of abc_company.com would flag fraudulent email of abc-company.com.
  • Register all company domains that are slightly different than the actual company domain.
  • Verify changes in vendor payment location by adding additional two-factor authentication such as having a secondary sign-off by company personnel.
  • Confirm requests for transfers of funds. When using phone verification as part of the two-factor authentication, use previously known numbers, not the numbers provided in the email request.
  • Know the habits of your customers, including the details of, reasons behind, and amount of payments.
  • Carefully scrutinize all email requests for transfers of funds to determine if the requests are out of the ordinary.

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