CSS has observed more and more investment advisers falling victim to Business Email Compromise, or “BEC” schemes over the past year. Unfortunately, they are in good company, as the trend is consistent with a worldwide increase in such attacks by increasingly skilled hacker networks around the world.
On June 10, 2018, the FBI announced in a press release that it had coordinated with the U.S. Department of Justice and international authorities over the course of six months to cripple an international hacker network, ending in the arrest of 74 people across the U.S., Nigeria, Canada, Mauritius, and Poland. According to the FBI, the hackers used publicly available information including data from SEC filings to target key employees at firms. Social media sites also include a wealth of information useful in performing reconnaissance on a target, including identification of which employees are in which roles, and with which business partners they are connected. Furthermore, an investment adviser’s own website may include specific information about which IT vendor the firm is using to host its website, which vendor is used for a client or investor portal, and in which portfolio companies the private equity firms may have invested.
The scam has numerous variations but generally works like this:
- Information is combed from SEC filings, social media sites, firm websites, and other public sources to identify target employees
- The information is then used to create very targeted spear-phishing attacks against C-suite and other key employees at firms, with the ultimate goal of inducing the target into entering their email credentials into a fake web form. In some cases, the hackers have registered fake domains and websites that appear similar to the real websites. Often, the spear phishing email induces the target to enter credentials under the guise of updating a password to improve security or to access a file shared by a trusted third party.
- Once the hackers have obtained the email credentials, they log into the employee’s business email account. There, they peruse information in emails to paint a picture of the parties with whom you regularly communicate and style of grammar.
- The hackers then create email rules wiEthin the email account settings to forward a copy of inbound and outbound emails to the hackers’ own email addresses. In some instances, the hackers also direct communications involving certain third parties into hidden or infrequently accessed sub-folders in the account’s inbox. This way, the hacker can use the employee’s business email account to communicate with the employee’s contacts, and the employee is none the wiser because he or she can still access the email account and nothing nefarious appears in the regular inbox or outbox.
- The hackers then induce either the email account owner, or a trusted contact of the email account owner, to wire money to the hacker, or in some cases to a “money mule” through whom the funds pass and who gets to keep a small fraction of the money.
CSS has observed hackers going so far as to mimic not only invoices from vendors, but also to mimic capital call notices, open accounts at custodians to direct the money there and quickly liquidating and closing the accounts.
According to the Internet Crime Complaint Center (IC3), BEC schemes have resulted in over $3.7 billion in losses since it began tracking the schemes, and this number only reflects those scams which have been reported.
The FBI has a useful infographic about BEC schemes available here: https://www.fbi.gov/news/stories/business-e-mail-compromise-on-the-rise
- Conduct regular phishing testing of your staff to remain vigilant. Please contact us for more information about Shield, featuring our phishing testing service complete with detailed reporting.
- Include social engineering in the scope of your compliance training.
- Be wary of email requests to click links or enter information. You can hover over the email link to see if it points to a legitimate URL, or visit the website yourself by typing in the known URL directly.
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CSS frequently publishes blog posts which are written by our team from their observations in the field, at conferences and through experiences with compliance professionals. These posts are designed to further knowledge and share industry best practices. Topics run the gamut, including Form ADV, cybersecurity, MiFID II, position limit monitoring, technology challenges and more. Complete and submit the brief form below to receive notifications when we publish new content.