Before fraudsters commit the attack, they must gain access into the business’ email system by sending the business a phishing email. Once an employee has opened the email and their email account has been compromised, the fraudster sets an email rule to forward copies of the employee’s email account in order for the fraudster to gain information about the company’s vendors and payment practices. The fraudster will then contact the company pretending to be a representative of one of their vendors and change the payment information to be re-routed to the fraudster’s bank account. The fraudster bills the company and the payment is made to the fraudster, not the vendor.
Help Protect Your Company
Organizations should train employees on vendor email compromise. Training should include how the fraud works, how to identify a phishing email and what procedures to follow if you suspect a potential compromise. Precautionary measures may include requiring another employee to confirm vendor changes are valid and implementing two-factor authentication for employee remote access.
Take Action on Suspected Fraud
If you suspect fraud has occurred, call law enforcement and your bank to attempt to get the funds returned. You may also need to notify the vendor in order for them to investigate if you feel they may have been compromised as well.
Vendor email compromise turning into an ACH Fraud is just one of many types of schemes fraudsters put in play regularly. Be on the lookout for additional types of schemes that could relate to your organization.
Identify Accounts Payable Fraud
Accounts Payable Fraud typically involves an employee disguising a fraudulent transaction with numerous legitimate transactions. Red flags to identify this type of fraud include employees who never take off work, work overtime or live a lavish lifestyle. Other red flags could be; unusual vendors, large payments to a single vendor, unprofessional invoices, multiple invoices paid at one time, large entertainment and gift charges and/or close relationships between employee and a vendor.
Be Alert to Billing Schemes
A Billing Scheme involves an employee creating fake payments that will be paid to themselves. An employee could do any of the following to create this scheme; create false invoices, create orders and payments for personal use, build fake vendor accounts, process duplicate payments to a vendor, send duplicate payments to produce a credit with a vendor and keep the next payment and/or involve a third party to use as a pass-through account and keep a cut of the payment.