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Cyber Criminals Scam Construction Firm Out of Cash

Compared to many other industries, construction companies have been slower to take up cyber insurance. Because they typically don’t hold large amounts of sensitive data and aren’t solely reliant on their computer systems to carry out their business operations, construction companies don’t often believe that they are overly exposed to cyber risk.

Nevertheless, even if a business doesn’t hold vast quantities of data or isn’t wholly dependent on their systems to function, it is still likely that the business in question has some form of cyber exposure. Most modern businesses will hold some data on employees and third parties, use email to communicate with customers and suppliers, and use business bank accounts to receive and disburse funds electronically.

The construction sector is no different, and one area where they are particularly exposed is funds transfer fraud. Most construction companies will regularly work with suppliers and subcontractors to carry out their projects, and these partners will usually invoice the construction firm for the goods and services provided. If the company pays these invoices electronically, then they can fall prey to cybercriminals who are constantly looking for opportunities to intercept these payments and divert them to fraudulent accounts.

One of our policyholders affected by such a loss was a small construction firm with revenues below $50 million. The business specializes in commercial construction projects, ranging from office buildings to warehouse units and regularly makes use of specialist subcontractors to assist with projects.

Digging for login credentials

The scam all began when an employee fell for a credential phishing email. Credential phishing emails are used by malicious actors to try and trick individuals into voluntarily handing over their login details, typically by directing them to a link that takes them through to a fake login page.

In this case, the employee received an email purporting to be from Microsoft which stated that in order to implement some urgent new security features on his Office 365 account, he would have to verify his account details by clicking on an attached link. Not wanting to miss out on these new features, the employee clicked on the link and inputted his email login details. However, despite the email appearing to come from a legitimate source, the employee had unwittingly handed his credentials to a fraudster.

To make matters worse, the construction firm had not enabled multi-factor authentication on staff email accounts, so the fraudster was able to use the credentials to access this employee’s email account remotely.  This allowed the fraudster to monitor communications to and from the account and gain valuable information about the nature of the policyholder’s business and the employee’s role within it.

The employee whose email account had been compromised was one of the firm’s project managers. As part of his role, he regularly liaised with subcontractors and they would often send invoices over to him, which he would then pass to the finance department for payment. As it happened, a few weeks after the fraudster had gained access to the inbox, an email was sent over to the project manager from the managing director of a firm that had been subcontracted by the construction company to carry out some structural steel fabrication work on a project. The email had an invoice attached for a month’s worth of work done on the project, amounting to $93,425. Having spotted an opportunity, the fraudster chose this moment to strike.

Fraudster hammers out a plan

The first step was to set up a forwarding rule in the project manager’s email account. Forwarding rules are settings that can be applied to an email account which ensure that emails that fall within certain criteria are automatically forwarded to a specific folder or to another email account. In this case, the fraudster set up a forwarding rule that meant that any emails that featured the steel fabrication firm’s genuine domain name were immediately marked as read and sent directly to the account’s deleted items folder.

The next step was to set up an email address impersonating the managing director of the steel fabrication firm. In order to do so, the fraudster created an email address which, to the untrained eye, was exactly the same as the managing director’s, but crucially omitted one character from the domain name. So rather than reading Joe.Bloggs@ABCfabricators.com, it read Joe.Bloggs@ABCfabicators.com.

The final step was to send an email to the project manager. In the email, the fraudster explained that the firm had recently changed banks and that the previous invoice had mistakenly included the old account details. The email went on to say that the new bank account details could be found on the new invoice attached to the email and that the construction firm should update its records so that all current and future payments went to the correct account.

The fraudster had used exactly the same invoice template as before, including the same company address, logo and statement of work, with the only amendment being the bank account details. In order to give the email an added sense of authenticity, the fraudster took the original email that had been sent by the subcontractor to the project manager and forwarded it on to the fake email account. The fraudster then replied to this original email when sending the fraudulent email to the project manager, making it appear as though it was part of the original email chain.

Missed verification opportunity

With the email forming a part of the original email chain and coming from a seemingly identical email address, along with the exactly the same invoice template, the project manager never doubted the legitimacy of the request. Assuming that the change of account was valid, the project manager sent the amended invoice over to the finance department for processing.

In theory, it was at this point that the scam should have been thwarted. The construction firm had previously sent out an email to staff regarding the verification of account changes, stating that all requests for account changes should be followed up with a call to an individual at the company requesting the changes to confirm that everything is in order. If this verification procedure had been carried out, it’s unlikely that the fake invoice would have been paid. Unfortunately, the member of the finance department dealing with the request failed to carry out this procedure and updated the bank details, resulting in the full $93,425 being transferred to the fraudulent account.

It was only when the managing director of the steel fabrication firm called up the project manager, several weeks later, to inquire about the status of the payment that the scam was uncovered. Both the banks involved and local law enforcement agencies were informed about the loss, but by this point it was too late and the funds had already been transferred out of the fraudulent account. With the funds deemed unrecoverable and the steel fabrication firm still expecting payment, the construction firm had little choice but to pay the invoice for a second time, resulting in a significant loss to the business. Thankfully, however, the construction firm was able to recoup the funds under the cybercrime section of its cyber policy with CFC.

Smarter criminals and other key takeaways

This case highlights a few key points. Firstly, it shows just how skillful cybercriminals are becoming at parting businesses from their money and how difficult it is for businesses to spot a fake.

In this case, the fraudster managed to successfully impersonate Microsoft and manipulate the project manager into volunteering his email login details; set up a forwarding rule to prevent any emails from the real subcontractor reaching the project manager and jeopardizing the scam; set up a fraudulent email address that was virtually identical to the genuine subcontractor’s; make it look as though the fake email sent to the project manager was part of the original email chain; and send over an identical invoice template to the one used by the genuine sub-contractor.

Secondly, it illustrates how human error plays a major role in cyber losses. Many organizations don’t think they need to purchase cyber insurance because they believe they have the IT security and risk management procedures in place to prevent a cyber loss. But as with so many cyber-related events, this loss stemmed from human error and it’s very difficult for any business to eliminate this risk entirely. The fraudster was able to compromise the email account because the project manager fell for a sophisticated credential phishing scam, and the funds were successfully intercepted because an employee in the finance department failed to carry out a verification procedure.

Finally, it highlights how almost all modern businesses have some form of cyber exposure. Even though the policyholder in this case was a construction firm that didn’t solely rely on its computer systems to carry out its business operations, the company still used emails to communicate with subcontractors and made payments electronically. All it took was for just one email account to be breached for the business to be defrauded out of $93,425. But by having a cyber insurance policy in place, the company was able to successfully recover the loss, illustrating the value that cyber insurance can bring to any modern business.

Source: www.cfcunderwriting.com


4 Takeaways from a Cyber Study

Cyber lock with chainsThe Scalar Security Study is an annual report that examines how prepared Canadian businesses are for cyber threats. Specifically, the study surveyed 654 IT and IT security practitioners to determine the average cost of a cyber attack, whether organizations feel prepared for cyber threats and what tactics they find most effective when it comes to protecting themselves. The following are some of the major findings from the study:

  1. The number of cyber attacks is increasing. Survey responders reported experiencing an average of 40 cyber attacks per year. This number represents a 17 per cent increase compared to last year’s report. It’s important to note that many of these cyber attacks related to the loss of sensitive information.
  2. Organizations are less confident in their ability to protect themselves. Cyber attacks are increasing in frequency and sophistication. What’s more, insufficient personnel or lack of in-house expertise were found to be the major reasons for why organizations felt unprepared for the increasing threat. In fact, only about 37 per cent of organizations felt they are winning the war against cyber criminals.
  3. Organizations are concerned about security threats from mobile devices. Mobile devices and applications were two of the major security concerns for organizations. These risks require both technological and internal governance to help mitigate the risk.
  4. Intellectual property is a major and expensive target of cyber criminals. The loss of intellectual property and other proprietary information due to cyber attacks impacted 33 per cent of the businesses surveyed, with the average cost of the loss coming in just under $6 million.

In addition to the above, the report found that cyber security threats will increase in severity. Businesses will need to adapt to the changing landscape if they are to protect themselves from the devastating losses associated with cyber crime.

©  Zywave, Inc. All rights reserved.


Cyber Crime’s Forgotten Victim—Your Company’s Reputation

Reputation 1Even though companies are finally starting to dedicate resources to prepare for cyber attacks, it’s possible that they may be overlooking a key exposure. While internal audits, hardware and software upgrades, and payouts to impacted customers can be costly, those costs can quickly be dwarfed by the damage a cyber attack can do to a company’s reputation.

The Dark Side of Social Media

Social media poses a huge threat to your company’s reputation. In the event of a data breach, traditional media coverage, blog posts and consumer reaction to the breach will dominate discussion of your company’s brand across social media platforms. Social media newsfeeds offer little to no distinction between legitimate news, biased reports, rumors and outright falsehoods, making the problem worse.

Additionally, social media is the perfect battleground for a competing interest to launch an attack on your brand. In fact, a white paper released by Hays suggests that the deliberate spread of false information about companies could be part of the next wave of cyber attacks launched by foreign governments.

Managing Your Reputation

In the wake of a cyber attack, it’s important to have a social media strategy in place and ready to roll out, as well as a team dedicated to monitoring social media in order to dispel any rumors and clarify any falsehoods. It’s also important to consider all avenues for mitigating your risk.

 

© Zywave, Inc. All rights reserved.


Spear Phishing: Targeted Cyber Crime

The word password hooked by fishing hook“Phishing,” a type of cyber attack in which a hacker disguises him- or herself as a trusted source online in order to acquire sensitive information, is a common scam that can put employees and businesses at risk. However, more resourceful criminals are resorting to a modified and more sophisticated technique called “spear phishing,” in which they use personal information to pose as colleagues or other sources specific to individuals or businesses. And, when attacks contain personal information, they are much more difficult to identify as malicious.

For businesses, the potential risk of spear phishing is monumental. The 2015 Internet Security Threat Report released by Symantec Corporation, a company that specializes in security software, states that, globally, 5 out of every 6 large employers were targeted in spear phishing attacks in 2014, and that there was an average of 73 spear phishing email attacks per day.

How to Protect Your Business

Though it is difficult to completely avoid the risk that spear phishing attacks pose, there are ways to prevent further damage to your business. For example:

  • Be cautious when you are asked to divulge personal information in an email. Even if it appears to be from a trusted source, it could be a hacker impersonating another person or group.
  • Only share personal information on secure websites or over the phone. When in a Web browser, you can ensure a website is secure when you see a lock icon in the URL bar, or when an “s” is present in the “https” of a URL. The “s” stands for “secure” at the end of the normal “http”.
  • Some spear phishing schemes use telephone numbers, so be sure to never share information over the phone unless you initiate the call to a trusted number.
  • Never click on links or open attachments from unknown sources. Even opening a file that seems familiar can give a spear phishing attacker access to personal information stored on your device.
  • Ensure that your company’s security software is up to date. Firewalls and anti-virus software can help protect against spear phishing attacks.
  • Encourage employees to think twice about what they post online. Spear phishing hackers often attain personal information through social media sites. Make sure that employees know how to keep this information private to protect their own security as well as that of your business.

Regularly check all online accounts and bank statements to ensure that no one has accessed them without authorization.

 

© Zywave, Inc. All rights reserved.


How Hackers Can Control Your Car

CYBER CRIMEFiat Chrysler Automobiles is recalling 1.4 million vehicles—not for a manufacturing flaw or a faulty part, but for a vulnerability to hacking. The company deemed the recall necessary after two software programmers demonstrated how easy it was to remotely tamper with a Jeep Cherokee’s radio, air conditioning, dashboard display, windshield wipers, brakes and transmission.

This hack is an example of what the security industry calls a zero-day exploit—a vulnerability in a piece of software that the vendor is unaware of. In the case of Fiat, hackers, through wireless access gained via the Internet, sent commands through the vehicle’s entertainment system, taking control of any number of vehicle functions. This could, in theory, be performed from a laptop across the country.

But this type of vulnerability isn’t limited to Fiat vehicles, as most auto companies produce models that are susceptible to breaches. Industry leaders like General Motors, Ford and Toyota are atop a long list of auto makers believed to be the most susceptible to hacking.

As vehicles become increasingly connected, the risk of hacking becomes more apparent and no longer limited to select models. By 2022, an estimated 82.5 million automobiles worldwide will be connected to the Internet.

Since the hack, Fiat has taken strides to prevent remote manipulation by distributing USB drives to vehicle owners that they may use to upgrade vehicle software and deter hackers—but that may not be enough. While automakers are aware of cyber risks and are even taking steps to prevent attacks, experts say that the auto industry is far behind when it comes to cyber security and that current solutions aren’t yet strong enough to thwart hackers.

 

 

© Zywave, Inc. All rights reserved.


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