Watch out SMBs for NEW banking fraud!

I recently was contacted by a friend warning me of a new fraud scheme perpetrated on his bank account. Over the past 9 months several unauthorized charges had gone unnoticed for a total of $1200 missing from his account.

Of course, this is NOT an unusual story. However, as a forensic accountant I dug a little deeper into his loss to discover the classic Spear-Fishing E-mail Scam.
Unfortunately, small to medium size businesses are the usual target for these scams as they tend to rely on smaller regional banks that lack the resources to institute proper safeguards and firewalls.

With the advent of online information sharing, such frauds have become easier to perpetrate. To pull off this scam, the fraudster needs the email address of an individual within an organization who handles financial transactions online. Often, businesses publish organization charts, and /or contact information of their staff on their website. Once the fraudster identifies the target, he will send out contaminated e-mail attachments or links to infected websites. When the attachment is opened or website visited the fraudster will install the malware “banking Trojan” that will harvest the bank access userID and password. This is, however, only half of the equation.

The second half is how the funds are transferred out without causing any red flags. For this, fraudsters use many unsuspecting individuals recruited to serve as “money mules”. Most of these individuals are recruited via advertisements or legitimate jobsites, such as Monster.com. Craiglist.com. They are hired to work from home to “process payments” and to direct the funds to the fraudster account via wire transfers or Western Union. They believe they work for legitimate businesses. One fraud scheme can utilize 100s of such “money mules” to cover up their tracks and make the fraud harder to identify.

Therefore, 100s of unauthorized payments from a victim’s account can go missing, starting in small increments and increasing gradually, causing small businesses to-date to lose over $100M, according to the Association of Certified Fraud Examiners.

To safeguard agains such frauds read my next blog "5 Tips to Help Prevent Bank Fraud"