The rash of incidents involving whale-phishing has created new challenges for risk managers. In these cases, criminals use a combination of emails and phone calls to scam companies out of large sums of money through fraudulent wire transfers.
Perpetrators use emails that appear to come from senior executives to instruct employees that have access to a company’s finances to transfer large sums of money to temporary accounts held by the criminals. By the time the fraud is discovered, accounts typically have been closed and the criminals can’t be traced.
Managing this exposure calls for careful planning and a coordinated effort both within the organization and with external providers and trading partners. For risk managers, navigating this exposure might involve the following steps:
• Assess your vulnerabilities. Form an “anti-whale-phishing” team with executives from your finance/treasury, security, legal, operations, IT and HR departments to identify where your firm might be vulnerable and the individuals most likely to be targeted by outside perpetrators.
• Establish clear protocols for any fund transfers. Make sure there are multiple internal steps for approval of any financial transactions that exceed defined sums. Don’t allow any exceptions and make sure all senior leaders of the firm are aware of the protocols, comply fully and consistently reinforce them with staff.
• Communicate protocols within your organization. Be sure everyone with access to funds who might be targeted for these types of scams is fully aware of the protocols, the reasons they are being implemented, understands there are absolutely no exceptions, and knows how to report any email, phone call or other communication that appears suspicious.
• Coordinate with your banking/financial institutions. Establish protocols with your financial institutions with respect to any requests for wire transfers that exceed clearly identified thresholds.
• Check your crime insurance coverage. Meet with your broker to review how your crime policy might respond to any claims related to whale-phishing losses. You may have to arrange a meeting with your insurer to clarify or add policy language that will extend coverage for these types of losses.
• Look for coverage opportunities under cyber policies. Your broker will help you determine how and whether your current cyber insurance policy might address first-party losses, such as those resulting from a whale-phishing attack. As protection under cyber insurance policies continues to expand, see if there is related coverage under newer stand-alone policies.
• Maintain organizational vigilance. Work with your anti-whale-phishing team to continue to monitor risks associated with whale-phishing. Monitor changes in employee responsibilities, promotions, new hires, adjustments in banking relationships, email system updates, and any other developments that may affect your organization’s vulnerability to potential risks.
• Remember, time is not on your side. Plan ahead to know what federal investigative agency is best for you, such as Secret Service or the FBI. Call them while the bad guys are still communicating and before you take actions to scare them off.
As these scams evolve and become more sophisticated, whale-phishing is likely to remain a significant risk for businesses and other employers. By taking steps before a loss occurs, risk managers can put their organizations in position to manage this difficult and potentially costly exposure.