CEO Fraud Scam Costs Chief Executive His Job (And His Company 40.1 Million Euros)

A successful CEO fraud scam that resulted in a fraudulent bank transfer being made from company accounts to a cyberattacker has cost the CEO his job.

CEO Fraud Scan Results in Losses of 40.9 Million Euros

Earlier this year, FAAC – an Austrian aircraft component manufacturer –  was targeted by attackers who managed to pull off an audacious 50 million Euro ($55 million) CEO fraud scam. A wire transfer was made for 50 million euros by an employee of the firm after receiving an email request to transfer the funds from CEO Walter Stephan. The email was a scam and had not been sent by the CEO.

Unfortunately for FAAC, the CEO fraud scam was discovered too late and the transfer of funds could not be stopped. While the company was able to recover a small percentage of its losses, according to a statement released by FAAC, the company lost 41.9 million Euros as a result of the attack which contributed to annual pretax losses of 23.4 million Euros.

The bank transfer represented approximately 10% of the company’s entire annual revenue. Given the high value of the transfer it is surprising that the transfer request was not queried in person – or over the telephone with the CEO.

The CEO and the employee who made the transfer were investigated but do not appear to have been involved in the scam. The attackers were not believed to be linked to FAAC in any way.

Heads Roll After Huge Losses Suffered

Earlier this year, FAAC sacked its chief finance officer as a direct result of the scam. The CEO was recently sacked following a meeting of the company’s supervisory board. Stephan had worked at the company as CEO for 17 years.

This CEO fraud scam is one of the largest ever reported, although this type of scam is becoming increasingly common. Earlier this year the FBI issued an advisory about the high risk of CEO fraud scams following many attacks on U.S companies over the past year. In April, the FBI reported that $2.3 billion has been lost as a result of this type of scam.

CEO email fraud involves a member of the accounts department being sent an email from the CEO – or another senior executive – requesting a bank transfer be made from the company accounts. A reason is usually supplied as to why the transfer request needs to be made, and why it must be made urgently.

Oftentimes, the scammer and the target exchange a few emails. An email is initially sent asking for a transfer to be made, followed by another email containing details of the recipient account where the funds must be sent and the amount of the transfer. The scams are effective because the request appears to come from within the company from a senior executive or CEO. Oftentimes the attackers manage to compromise the CEO’s email account, and spend time researching the style the CEO uses for emails and who transfer requests have been sent to in the past.

According to the FBI, the average transfer amount is between $25,000 and $75,000, although much larger scams have been pulled off in the past. Irish budget airline Ryanair fell victim to a CEO fraud scam and wired $5 million to a Chinese bank, although the funds were able to be recovered. The Scoular Co., wired $17.2 million to scammers in February last year, while Ubiquiti suffered a loss of $46.7 million as a result of a CEO fraud scam.

Easy Steps to Prevent CEO Email Fraud

There are steps that can be taken that can greatly reduce the risk of these scams being successful.

  1. Implement policies that require all bank transfers – or those above a certain threshold – to be authorized by telephone or through other communication channels.
  2. Ensure bank transfer requests are authorized by a supervisor and are not left to one single employee
  3. Configure spam filters to block spoofed domains to prevent scam emails from being delivered
  4. Provide training to all accounts department staff and warn of the risk of CEO fraud scams
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Elizabeth Hernandez

Elizabeth Hernandez is a news writer on Defensorum. Elizabeth is an experienced journalist who has worked on many publications for several years. Elizabeth writers about compliance and the related areas of IT security breaches. Elizabeth's has a focus data privacy and secure handling of personal information. Elizabeth has a postgraduate degree in journalism. Elizabeth Hernandez is the editor of HIPAAZone. https://twitter.com/ElizabethHzone