22 March 2019

Business-Related Email Scams and Wire Fraud still a Challenge

Knowledge remains the best defense against email and wire fraud

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The latest data1 from Canada’s Better Business Bureau (BBB) shows that Canadians lost nearly USD100-million to scammers in 2017. However, the number is actually far bigger because it’s believed only five per cent of victims actually come forward to report the crime.

This cost estimate is based on information collected from the BBB Scam Tracker2 data, Canadian Anti-Fraud Centre3 statistics, and concerns brought forward by BBB community partners and sponsors.

Wire fraud and spear phishing were among the top 10 scams identified. It is estimated that Canadian businesses lost more than USD20-million to people posing as CEOs who instruct company money to be moved through wire and email transfers.

How to avoid this scam:

  • Implement payment redundancy systems
  • Make sure email addresses are correct
  • Educate your employees about these scams

Another popular scam highlighted by the federal government's Canadian Anti-Fraud Centre4 (CAFC) is the "supplier swindle"5 where a supplier's email accounts are hacked and fraudsters gather information on recent orders and money owing. An email from the supplier's address advises that they've had a problem with their usual account and need the buyer to send the amount owing to an alternative account.

CAFC says a variation to the supplier scam is the point of sale service scam where a caller claims to be your point of sales vendor who needs to update your debit machine. In fact, the caller is trying to get you to sign up for point of sale services with the scam company.

How to avoid this scam:

  • Be suspicious of unsolicited emails from individuals or financial institutions presenting an urgent situation requiring immediate attention
  • Before sending any funds or product, contact existing clients in person or by telephone to confirm that the request is legitimate
  • Watch for spelling and formatting errors and be wary of clicking on any attachments as they can contain viruses and spyware
  • Educate employees at every level to be suspicious of unsolicited calls
  • Compile a list of companies that are typically used by your business and give authority to certain staff only to approve purchases and pay bills
  • Inspect invoices thoroughly before paying a supplier/vendor

The 2018 Association of Financial Professionals Payments Fraud and Control Survey6 shows that payments fraud reached a record high in 2017 with 78 per cent of organizations reporting that they are still being impacted in spite of financial professionals implementing controls to prevent fraud. This number was up from 74 per cent in 2016 and 60 per cent in 2013.

Cheques remain the most frequent payments fraud method, with 74 per cent of finance professionals reporting that their organization’s cheque payments were exposed to fraud.

Business email compromise also remains popular with fraudsters according to the survey, with 77 per cent of organizations saying that anyone from CEOs to treasury analysts is a likely target.

How to avoid these scams:

  • Minimize the risk of cheque fraud by using daily recognition and other internal processes,
  • Protect your organization from business email compromise by providing active training for staff to identify a scam and validate wire transfer requests
  • Limit the possibility of Automated Clearing House fraud by conducting a daily reconciliation of accounts

Other popular scams focus more on individuals. As with cybercrimes targeting businesses, understanding the threats and risks is the best defence when it comes to protecting yourself, your business and your employees.

Online purchase scams. This was the most reported scam to the BBB Scam Tracker, and included everything from fake websites and counterfeit goods to free trial traps. The estimated losses from this scam were more than USD13-million.

How to avoid this scam:

  • Shop on reputable websites
  • Read all terms and conditions
  • Be wary of offers that are “too good to be true”

Employment scams. Although this scam did not rank as high on the list as the year before, it targeted Canadians through reputable employment websites and caused losses estimated at more than USD5-million.

How to avoid this scam:

  • If you didn’t apply, you didn’t get hired
  • A legitimate company would not ask you to wire money as a “test”
  • Look for poor grammar, lack of job details and over-the-top pay scale

Income tax scams. While Canadians are getting better at recognizing income tax scams, the threatening phone calls keep coming and resulted in losses estimated at more than USD5-million.

How to avoid this scam:

  • Remember that the Canada Revenue Agency (CRA) does not make threatening phone calls
  • The CRA will not solicit personal information over the phone or by email
  • Canadian government agencies do not accept payment in Bitcoin

Remember, HSBC will never request information that could be used to make a payment, such as asking you to provide security device codes or requiring you to divulge any of your security details over the phone.

Disclaimers

The information presented is not meant to be comprehensive and does not constitute financial, legal, tax or other professional advice. You should not act upon the information contained in this document without first obtaining specific professional advice. While reasonable care has been taken in preparing this document, HSBC does not make any guarantee, representation or warranty (express or implied) as to its accuracy or completeness. The information presented in this document is subject to change without notice.

Certain of the products and services offered by HSBC and its subsidiaries and affiliates are subject to credit adjudication and approval. This document does not constitute an offer to provide the services and products described and the provision of such services and products remains subject to contract.

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