Email is the lifeblood of business communication, particularly when it comes to high-value transactions and the exchange of sensitive information. It is used every day by corporations and municipalities to share crucial data, manage workflows, and finalize deals. However, this reliance on email has also introduced a significant vulnerability—one that cybercriminals are quick to exploit through a tactic known as Business Email Compromise (BEC).
Despite warnings from financial institutions to “never send wire transfer instructions via email,” email remains the default method for distributing sensitive financial information. This disconnect between best practice and actual practice creates a dangerous gap, one that BEC exploits with devastating consequences.
What is Business Email Compromise (BEC)?
Business Email Compromise (BEC) is a type of cyberattack where criminals use fake or compromised email accounts to trick individuals into fraudulent transfers of money or disclosing sensitive information. BEC typically targets finance departments, executives, or anyone in an organization who handles financial transactions or sensitive data.
There are several common types of BEC attacks:
- CEO Fraud: Attackers impersonate high-level executives and request urgent wire transfers or confidential information.
- Account Compromise: An employee’s email account is hacked and used to send fraudulent requests to colleagues, clients, or vendors.
- Vendor Fraud: Criminals pose as trusted vendors and request payment to a fraudulent bank account.
- Attorney Impersonation: Attackers pretend to be legal counsel involved in a critical transaction, pressuring employees to release sensitive information or make payments under the guise of urgency.
Why Does BEC Exist Today?
BEC thrives in today’s business landscape for several reasons:
1. Email Dominance: Email remains the primary mode of communication for most organizations, especially for handling financial transactions. Despite the warnings, companies and municipalities still use email to distribute wire instructions and other sensitive data because of its convenience and ubiquity.
2. Human Trust and Social Engineering: BEC exploits the natural human tendency to trust, especially when a message appears to come from a senior executive or a familiar partner. Cybercriminals often study their targets, learning internal processes and communication styles before they strike with an urgent, convincing, email.
3. Inadequate Security Practices: While many organizations invest in antivirus software and firewalls, these defenses are often ineffective against BEC because the attack doesn’t usually involve malware. Instead, it relies on email impersonation or compromised accounts, which traditional security tools may not detect.
4. Lucrative Targets: BEC attacks can yield enormous financial rewards with minimal effort. By impersonating trusted figures, attackers can trick organizations into transferring large sums of money, making it an attractive option for cybercriminals worldwide.
Real World Examples of BEC Attacks
1. A Municipal Construction Project BEC Incident
In one case, a city government handling a major construction project was targeted by a BEC attack. Cybercriminals impersonated the contractor working on the project, requesting a change in payment details. The municipal officials, believing the request was legitimate, transferred over $1 million to the fraudulent account. The fraud wasn’t detected until the legitimate contractor inquired about missing payments, but by then, the funds were already moved offshore.
2. A County Infrastructure Project Scam
Another incident involved a county government managing a large infrastructure project. Attackers impersonated a trusted vendor through email and requested an urgent change in banking details. Without following up through an alternative communication channel, county officials authorized the transfer of nearly $2,000,000. The urgency in the email and the timing of the request during a busy financial period made the scam highly effective, resulting in a significant loss for the county.
3. A School Construction Project Fraud
A local government involved in a school construction project fell victim to a BEC attack when cybercriminals posed as the project’s lead contractor. The attackers requested a change in payment details, which led to a transfer of over $700,000 to a fraudulent account. By the time the local government realized they had been scammed, the funds had already been transferred and could not be recovered. The incident highlighted the risks of relying on email for high-stakes financial communication in municipal settings.
4. BEC at a Law Firm During a Real Estate Closing
In another case, a law firm that was handling a real estate closing was targeted by cybercriminals. The attackers gained access to the email account of a firm employee and sent an email to the client with fraudulent wire instructions for the down payment. The client, assuming the instructions came from the law firm, wired over $500,000 to the scammer’s account. In this instance, the BEC attack caused significant financial damage, delayed the closing process, and created legal headaches for all parties involved.
These examples demonstrate how BEC can strike not just corporations, but also government agencies and municipalities, making them vulnerable to significant financial losses.
How Can BEC Be Prevented?
Preventing BEC requires a combination of employee education, strong financial controls, and advanced security measures. Here are several strategies that can significantly reduce the risk:
1. Employee Training and Awareness
Since BEC is primarily a form of social engineering, training employees to recognize suspicious emails is critical. Employees should be taught to:
- Look for Red Flags: Unusual requests for wire transfers, sudden changes in bank account details, and emails from unfamiliar addresses should all be treated with suspicion.
- Verify Requests: Always confirm wire transfer requests or payment changes via a separate communication channel, such as a phone call or secure messaging system.
- Stay Vigilant: Employees should be particularly cautious when dealing with urgent requests for large financial transactions, especially if they come through email.
2. Implement Multi-Factor Authentication (MFA)
Multi-Factor Authentication (MFA) adds an additional layer of security by requiring users to verify their identity through multiple methods, such as a password and a one-time code sent to a mobile device. Implementing MFA across all email accounts helps prevent unauthorized access, even if an attacker manages to steal or crack login credentials.
3. Improve Email Security
Organizations should always follow email security best practices but, given the prevalence of impersonation tactics and BEC attacks, even these additional layers can leave an organization exposed:
- Email Encryption: Encrypting emails ensures that sensitive data, such as wire instructions, is not easily intercepted by attackers.
- Anti-Phishing Tools: Use email filters and anti-phishing software to detect and block suspicious emails before they reach employees.
- Monitor Email Activity: Regularly monitor email accounts for signs of compromise, such as unusual login locations or changes in email forwarding rules.
4. Strengthen Financial Controls
Creating robust financial protocols can help prevent fraudulent transfers:
- Verify Payment Changes: Always verify any request to change a supplier's payment details through a separate communication channel, such as a phone call.
- Multi-Level Approval: Implement a multi-level approval process for wire transfers, requiring confirmation from more than one individual for high-value transactions.
- Audit and Review: Regularly audit financial transactions and review payment procedures to ensure compliance with security protocols.
Email Isn't Enough: The Need for Secure Platforms
For decades, email has been the default method for sharing financial details such as wire transfer instructions. But as BEC incidents show, email is not a secure channel for transmitting sensitive information. Even though banks often advise against sending instructions via email, businesses continue to do so because email is convenient and widely used.
However, as cyber threats grow in sophistication, it’s becoming increasingly clear that relying on email alone is insufficient for protecting high-value financial transactions. A more secure solution is needed—one that allows organizations to share sensitive information and transfer funds without exposing themselves to the risks of BEC and other email-based attacks.
Preventing Wire Fraud with Secure Closing
BaseFund has developed a solution to bridge this gap: the Secure Closing platform. Designed specifically to protect financial transactions, Secure Closings eliminates the need to send wire transfer instructions and other sensitive data over email. By using a secure, encrypted platform, organizations can ensure that all parties have authenticated access, transaction accounts are verified, and payment instructions are securely transmitted without the risk of email interception or manipulation.
Key Features of BaseFund’s Secure Closing Product:
- Encryption: All communication and transaction data are encrypted, ensuring that sensitive information is protected from interception.
- Authentication: Multi-factor authentication and identity verification ensure that only authorized parties can access the platform.
- Account Verification: Ensure that only verified accounts are able to send and receive funds during a transaction.
- Efficiency: The platform automates much of the transaction process, eliminating the need for back-and-forth emails and reducing the risk of errors or fraud.
By moving away from email and adopting a secure platform like BaseFund's Secure Closings product, businesses and municipalities can protect themselves from the growing threat of BEC and ensure that their financial transactions are handled securely.
Conclusion: A Safer Future for Financial Transactions
Business Email Compromise is a growing and costly threat that exploits the trust organizations place in email. Despite warnings from banks to avoid sending sensitive information over email, many businesses continue to use it out of convenience. This creates a dangerous security gap that attackers are quick to exploit.
However, by implementing strong security practices, educating employees, and adopting secure platforms like BaseFund’s Secure Closing product, organizations can protect themselves from BEC and ensure that their financial transactions are secure and efficient.
The future of secure transactions lies in moving beyond email and embracing tools that are built for the challenges of today’s digital landscape. Request a demo below to learn more about preventing Business Email Compromise attacks at your organization with Secure Closings by BaseFund.
