How to Prevent CEO Fraud

According to a report by the Federal Bureau of Investigation, over $3 billion has been lost in the past three years due to CEO fraud or Business Email Compromise. And the impact has been nothing short of significant in all the reported cases. In fact, since the FBI started tracking the CEO frauds, it has compiled about 7000 plus victimized U.S companies and losses amounting to about $740 million and counting.

Beware of the signs

While most times you will barely realize that there has been a Business Email Compromise until it's too late, there are certain red flags that could help you mitigate the problem well in advance. For instance, most fraudsters either start with a phishing attempt on an executive or the use of psychological manipulation to trick people into divulging confidential information. Another common technique is where the impostor poses as the CEO and describes the need for the CFO to act as part of a secret project that no one should learn about. To make matters worse, criminals have learned the craft of employing malware to infiltrate company networks and in the process gain access to legitimate email, threads touching on billing and invoices hence making the request appear even more credible.

Implementing best practices to protect against the risks

• Ensure that there is proper documentation and approvals for all wire transfers.
• Get into the habit of requesting verbal approval for large wire transfers.
• Create awareness about CEO fraud and implement training programs that teach employees to be vigilant in matters security.
• Advise the administrative staff against conveying information about the CEO's whereabouts as this information could be used to trigger a fraudulent scam.

Although CEO frauds impact companies of all sizes, it is particularly prevalent in companies that seem to have rigid management cultures that don't care much about doing the necessary checks and balances with the accounting department. And implementing best practices might just be your best shot at protecting your company from becoming yet another statistic adding to the many cases that have already been reported.