Risk Insider: Greg Bangs

Social Engineering Schemes: 3 Ways to Mitigate Risk of Big Losses

By: | June 19, 2018 • 2 min read

Gregory W. Bangs is senior vice president, crime regional leader for North America at AXA XL, a division of AXA XL. Over the last 30 years, he’s been underwriting insurance and developing new products in the U.S., UK, Hong Kong and France. He can be reached at [email protected]

One of the oldest forms of crime — the con — is causing massive losses for businesses and individuals. The basic tactic in these increasingly sophisticated schemes is social engineering, in which criminals persuade victims to help the fraudsters obtain access, data or money.

Topping the list in financial losses in the Federal Bureau of Investigation’s 2017 Internet Crime Report is what the FBI calls “business email compromise/email account compromise.” In 2017, BEC/EAC incidents took $676.2 million from 15,690 victims. “Confidence fraud/romance,” was second on the list, generating $211.4 million in losses from 15,372 victims.

The FBI and other federal authorities in June announced the culmination of a six-month coordinated operation to stop international BEC schemes. Operation WireWire resulted in 74 arrests, the seizure of $2.4 million and the recovery of $14 million in fraudulent wire transfers.

Since the FBI’s Internet Crime Complaint Center began tracking BEC/EAC, victims have reported losses totaling more than $3.7 billion. Because many crimes go unreported, these numbers on social engineering fraud may be only the tip of the iceberg.

Social engineering fraud tends to fall into three main categories, each of which can harm a business’s balance sheet and reputation:

Vendor impersonation. Vendor impersonation has become a frequent loss as fraudsters persuade victims to divert recurring payments to new bank accounts or pay bogus invoices. These scams succeed when unsuspecting recipients don’t verify details or check existing records.

Executive impersonation. Less common than vendor impersonation but with much higher stakes, executive impersonation is a highly sophisticated con game, often using data stolen through phishing or other means to earn trust and create plausible scenarios, such as a foreign subsidiary’s acquisition requiring the release of funds. Common elements in these scams include urgency and pressure to avoid displeasing senior management. Numerous companies have been defrauded of tens of millions of dollars through this crime.

Since the FBI’s Internet Crime Complaint Center began tracking BEC/EAC, victims have reported losses totaling more than $3.7 billion. Because many crimes go unreported, these numbers on social engineering fraud may be only the tip of the iceberg.

Client impersonation. These losses have tended to be smaller, but they also are rising. The scams typically target professional services firms and involve overpayments by fake but official-looking checks. Fraudsters ask the firm to remove their retainer and send back the remainder.

Fraud risk mitigation

Variants exist for nearly all types of social engineering, and criminals adapt their tactics, but businesses can mitigate the risk. Three key elements are:

  • The first line of defense is training employees to recognize potential frauds, whether phishing emails or calls from someone purporting to be a vendor, client or company executive.
  • Creating a convenient way to report suspicious activity, such as sending dubious emails to a folder the IT department investigates, can reduce the chance that employees will inadvertently help criminals.
  • Computer security solutions continue to improve. For example, some tools let corporate systems set apart Internet browsers in a “sandbox” so malware cannot infect the network. Two-factor authentication with a time-sensitive passcode sent to a user’s cell phone reduces the risk of fraudsters obtaining access to data with only a computer password.

Social engineering attacks are likely to continue, but smart risk management can help businesses stay ahead of the criminals.

More from Risk & Insurance

More from Risk & Insurance

4 Companies That Rocked It by Treating Injured Workers as Equals; Not Adversaries

The 2018 Teddy Award winners built their programs around people, not claims, and offer proof that a worker-centric approach is a smarter way to operate.
By: | October 30, 2018 • 3 min read

Across the workers’ compensation industry, the concept of a worker advocacy model has been around for a while, but has only seen notable adoption in recent years.

Even among those not adopting a formal advocacy approach, mindsets are shifting. Formerly claims-centric programs are becoming worker-centric and it’s a win all around: better outcomes; greater productivity; safer, healthier employees and a stronger bottom line.

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That’s what you’ll see in this month’s issue of Risk & Insurance® when you read the profiles of the four recipients of the 2018 Theodore Roosevelt Workers’ Compensation and Disability Management Award, sponsored by PMA Companies. These four programs put workers front and center in everything they do.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top,” said Steve Legg, director of risk management for Starbucks.

Starbucks put claims reporting in the hands of its partners, an exemplary act of trust. The coffee company also put itself in workers’ shoes to identify and remove points of friction.

That led to a call center run by Starbucks’ TPA and a dedicated telephonic case management team so that partners can speak to a live person without the frustration of ‘phone tag’ and unanswered questions.

“We were focused on building up a program with an eye on our partner experience. Cost was at the bottom of the list. Doing a better job by our partners was at the top.” — Steve Legg, director of risk management, Starbucks

Starbucks also implemented direct deposit for lost-time pay, eliminating stressful wait times for injured partners, and allowing them to focus on healing.

For Starbucks, as for all of the 2018 Teddy Award winners, the approach is netting measurable results. With higher partner satisfaction, it has seen a 50 percent decrease in litigation.

Teddy winner Main Line Health (MLH) adopted worker advocacy in a way that goes far beyond claims.

Employees who identify and report safety hazards can take credit for their actions by sending out a formal “Employee Safety Message” to nearly 11,000 mailboxes across the organization.

“The recognition is pretty cool,” said Steve Besack, system director, claims management and workers’ compensation for the health system.

MLH also takes a non-adversarial approach to workers with repeat injuries, seeing them as a resource for identifying areas of improvement.

“When you look at ‘repeat offenders’ in an unconventional way, they’re a great asset to the program, not a liability,” said Mike Miller, manager, workers’ compensation and employee safety for MLH.

Teddy winner Monmouth County, N.J. utilizes high-tech motion capture technology to reduce the chance of placing new hires in jobs that are likely to hurt them.

Monmouth County also adopted numerous wellness initiatives that help workers manage their weight and improve their wellbeing overall.

“You should see the looks on their faces when their cholesterol is down, they’ve lost weight and their blood sugar is better. We’ve had people lose 30 and 40 pounds,” said William McGuane, the county’s manager of benefits and workers’ compensation.

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Do these sound like minor program elements? The math says otherwise: Claims severity has plunged from $5.5 million in 2009 to $1.3 million in 2017.

At the University of Pennsylvania, putting workers first means getting out from behind the desk and finding out what each one of them is tasked with, day in, day out — and looking for ways to make each of those tasks safer.

Regular observations across the sprawling campus have resulted in a phenomenal number of process and equipment changes that seem simple on their own, but in combination have created a substantially safer, healthier campus and improved employee morale.

UPenn’s workers’ comp costs, in the seven-digit figures in 2009, have been virtually cut in half.

Risk & Insurance® is proud to honor the work of these four organizations. We hope their stories inspire other organizations to be true partners with the employees they depend on. &

Michelle Kerr is associate editor of Risk & Insurance. She can be reached at [email protected]