United States: Phishing For Corporate Dollars: The Emerging Global Threat Posed By Spear Phishing And Business Email Compromise

In August 2015, the FBI issued an alert describing the newest form of cyberattack—the Business Email Compromise ("BEC").ⁱ BEC is a sophisticated mutation of the now-common spear phishing data breach technique.ⁱⁱ In a BEC scam, a hacker often impersonates a high-ranking corporate executive and sends a "spoofed" emailⁱⁱⁱ to a carefully selected target who generally has access and authority to transfer large sums of money on behalf of the company. Unlike traditional phishing schemes, BEC scams are well researched. Successful hackers troll the social media sites of the target employee, review corporate web pages for contact information, and read professional writings to better understand the corporate culture as well as the individual characteristics of the target employee, all with the goal of convincing that employee to part with the company's cash. Consider the following three scenarios (all based on actual cases reported to the FBI):

• A corporate accountant receives a spoofed email that appears to be from the CEO of the company requesting an urgent wire transfer relating to a top secret acquisition. The email contains instructions to wire corporate funds to a new bank account of a known business partner at an offshore bank. The accountant, wishing to appear responsive to her boss, drops everything and wires the funds immediately. By the time the accountant and CEO speak in person and realize the error, the money is long gone from the fraudulently opened offshore bank account.^iv
• A business receives a fraudulent invoice from what appears to be a longstanding supplier requesting that the next payment be sent via wire to an alternate account. The spoofed email contains a PDF file of an invoice that appears to be from the trusted supplier, and the email text and header information appear to contain the hallmarks of an actual business communication from the supplier. Because the supplier is located overseas and in a different time zone, it is common practice that communication about payment of invoices be done electronically, rather than verbally. The unsuspecting business wires the funds to the new account, and the money disappears almost immediately. Weeks later, the supplier follows up with the business, sending an angry email expressing frustration that the funds were not timely sent. When the two business partners realize the mix-up, it is too late to recover the funds.^v
• An employee's hacked personal email account sends fraudulent invoices to a number of vendors requesting immediate payment to phony company bank accounts. The hacker has researched the vendor relationships and knows that several of the invoices are overdue. As a result, the scheme uses social engineering—a form of manipulation and trickery based on the human tendency to obey orders—to influence the actions of the vendors by inserting a sense of urgency ("Please send payment immediately, or future deliveries will be cut off!"). Many of the vendors quickly comply for fear of having their supplies embargoed. The result is a windfall to the hacker and a loss to both the vendors and the victim company.^vi

Although the factual scenarios vary, the general BEC scheme follows a very specific pattern:

Taking the Bait: How Hackers Gain Access

In the first generation of phishing schemes, most attacks relied on a combination of fraudulent emails with links to bogus websites to obtain internet users' information.^vii In recent years, however, cybercriminals have refined their methods and increased the amount of research performed on each target so as to maximize the return on each cyber attack. Whereas a traditional phishing attack may have blanketed an entire database of email addresses, new spear phishing schemes target specific individuals within specific organizations.^viii

A BEC scam, therefore, usually begins in one of two ways: (i) by getting an unsuspecting employee to click on an email attachment that compromises the network (i.e., malware); or (ii) by spoofing an email of a high-ranking official in the company. Spear phishers, however, usually research their target and the company as a whole in order to craft highly convincing emails. The telltale signs of scam emails—poor grammar, suspicious requests, and uncharacteristic language—won't give the BEC scammer away. By mining corporate webpages and social networks, for example, the personalization and impersonations used in the spear phishing emails can be extremely accurate and compelling. Because the email appears to come from a known and trusted source, the request to release valuable data or to take urgent action appears more plausible. Thus, hackers actually employ low-tech tactics to achieve high-dollar corporate fraud.

Hook, Line and Sinker: Using Trust, Urgency, and Social Engineering to Commit Financial Fraud

The metaphoric "spear" in spear phishing is the email itself, received by a carefully selected yet unsuspecting employee. The email looks official, appears to come from a high-ranking corporate executive, and generally contains attachments on company letterhead directing the target employee to wire corporate funds to a particular person (usually a trusted vendor contact) at an overseas bank. But before the hacker ever spoofs the email account of the high-ranking corporate executive or drafts the text of the email, the attacker does a significant amount of legwork.

• In many cases, the hacker has gained access to the corporate email server and may have access to the high-ranking executive's calendar. As a result, the hacker knows to send the email when the executive is traveling or otherwise out of the office (and unavailable for verbal confirmation before the wire transfer is made).
• The hacker has also likely researched—perhaps extraordinarily carefully—the target employee and possibly compromised his or her email account as well as that of someone in the accounting department. The amount of money requested in the fraudulent transfer is carefully tailored to be within the expected range of the payments capable of being authorized by the target employee. The language of the request mimics past email requests; uses similar vocabulary; pertains to goods, services, or business partners with whom the company normally deals; and is requested in accordance with usual payment schedules.
• In some cases, the email will identify or even cc an employee in the accounting department to give an added sense of authenticity. Although the email address of the target employee is accurate, all others cc'd on the email chain will have slightly modified email addresses (at times the emails are modified so slightly that the change is undetectable), so that only the hackers are receiving the messages. For example, Accounting@CompanyABDC.com instead of Accounting@CompanyABCD.com.
• In another scenario, a hacker may compromise and monitor the email account of someone who receives invoices from vendors or suppliers. The hacker then modifies a legitimate invoice to reroute payment to a new bank account number or address. The hacker doesn't need to compromise the vendor's system; a spoof email from John@Vendorcorp.com instead of John@Vendorco.com including the fraudulent invoice is enough to accomplish the goal.
• Hackers often use social engineering to trick their victims into acting quickly. Thus, the hacker may insert a false sense of urgency into the text of the email to spur the target employee to wire the funds while the executive is out of the office. In other cases, the hacker may convince the target that the financial transaction relates to a secret business acquisition or a merger, thereby encouraging the target not to disclose the transfer of funds to others. Both tactics are designed to manipulate the target by portraying the orders as coming from an authority figure.

Unfortunately, the hacker's research efforts are often successful. Recent examples demonstrate that companies of all sizes in all sectors are at risk. Over the past several months, many have fallen victim to similar schemes, losing millions of dollars.^ix

Once the target wires the money, the hackers work to quickly transfer the funds from the overseas bank account before the company discovers the breach.

Removing the Hook: Conducting an Internal Investigation after a BEC Attack is Discovered

Discovering a data breach within your organization can be alarming, especially in the early hours and days when it is impossible to ascertain the full extent of the damage to corporate systems and reputation. At the outset, there are a number of operational, legal, and strategic questions the company's in-house legal team should explore:

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.