July 16, 2019
Losses due to business email compromise schemes increased to $301 million per month, according to the latest report from the Financial Crimes Enforcement Network (FinCEN).
This is increase from $110 million per month in 2016. FinCEN reported that overall, the number of BEC suspicious activity reports (SARs) increased to 1,100 per month last year, which was up from 500 reported per month in 2016.
BEC is a type of scam that targets businesses (and other types of organizations, such as educational institutions, government, and non-profits) and their fund transfers. Scammers generally target organizations that conduct large wire transfers in the course of their usual business and rely on email for much of their communication regarding the wires. Recent reporting indicates that other financial products, such as convertible virtual currency, automated clearing house transfers, and gift cards, can be used in BEC schemes. The perpetrators typically compromise a key email account by using computer intrusions or social engineering and send an email that fraudulently directs funds to criminal-controlled accounts. Perpetrators may use methods such as spear phishing, specialized malware, and spoofed emails. Often, the victim is tricked into thinking a legitimate email from a trusted person or entity is directing them to make a payment for a normal business activity.
According to FinCEN, real estate was the third highest targeted sector for BEC in 2018, accounting for 16 percent of all reported incidents. While real estate firms represented 9 percent of all targeted firms in 2017, they accounted for over 20 percent of fraudulent transaction amounts. Real estate firms have the highest average fraudulent transaction amount of $179,001.
“Frequent high-dollar transactions in the real estate industry along with the improving real estate market most likely continued to make real estate an attractive target for perpetrators of BEC fraud in 2017 and 2018,” according to FinCEN.
Manufacturing and construction businesses were the top targeted sector for BEC fraud in 2018. This sector accounted for a quarter of all reported incidents. Meanwhile, commercial services (such as professional services companies like landscaping, retail, restaurants, and lodging) increased more than other industries, up from 6 percent of reported incidents in 2017 to 18 percent in 2018. Financial firms fell significantly in the rankings, from 16 percent in 2017 to 9 percent in 2018.
BEC Scam Trends
FinCEN reports that trends in scam typology indicate that BEC actors are likely changing methods as awareness of their schemes evolves, and new scams emerge. The most frequently used BEC methodology in FinCEN’s 2017 sample involved fraudulent emails impersonating the CEO or president of a company (33 percent), but it declined to 12 percent in 2018, likely due to awareness of such schemes in the business community. Fraudulent vendor or client invoices were 30 percent of incidents in 2017, and grew to 39 percent in 2018, becoming the most common BEC method.
FinCEN started tracking impersonation of individuals outside the organization in 2018, to account for a shift in scam methods. In 2018, this type of activity accounted for 20 percent of BEC transactions. The vast majority of these SARs reported that the scammer was impersonating a real estate agent on the sale side of a transaction, directing the buyer or buyer’s representatives to wire money to a fraudulent account.
What to help stop wire fraud?
- Join the Coalition to Stop Real Estate Wire Fraud.
- Register and attend the wire fraud ALTA Innovation Boot Camp in Chicago, Aug. 11-12.
- Check out the resources ALTA provides.
Click on the link below to read the complete article online at ALTA.org