CEO fraud is a growing threat to companies of all sizes. criminals pose as senior executives to trick employees into transferring funds, sharing sensitive information or performing unauthorized actions. Understanding CEO fraud, how it works and what can be done to prevent it can help your company avoid significant financial and reputational damage.
This article contains:
Key Insights
- High frequency: 69% of Belgian and Dutch companies have experienced fraud attempts in the past 2 years.
- Methodology: investigation, identity theft, and urgent requests to deceive employees.
- Prevention: use email security, train employees, verify requests and implement double approval to prevent fraud.
What is CEO fraud?
CEO fraud occurs when criminals pose as senior executives - often the CEO or CFO - to trick employees into transferring money or divulging confidential information. These attacks usually exploit the trust employees place in senior management and the urgency of the requests. CEO fraud is unfortunately one of the most financially damaging frauds.
How does CEO fraud work?
CEO fraud often follows a multi-stage process:
- Research: criminals gather information about the company's hierarchy, often from information publicly available on social media or company websites.
- Identity theft: They create an email that looks legitimate, by imitating the CEO's email address, phone number or communication style.
- Urgency: The fraudulent email contains an urgent request to bypass normal protocols, such as transferring funds or sharing sensitive data.
- Execution: The employees, believing the request to be from a trusted executive, comply with the instructions before realizing that it is a fraud.
Example: An employee in the finance department receives an email from what appears to be the CEO, urgently requesting a transfer to a supplier. The email insists on confidentiality and asks the employee to act quickly. The employee sends the funds, but later realizes that the email was fraudulent.
Increased risk of fraud
Every year, we conduct a survey on corporate fraud. Our 2024 survey shows that Belgian and Dutch companies are still victims of fraud and scams with great regularity: 69% of companies have experienced fraud attempts in the past 2 years.
Increasing digitalisation and the rise of artificial intelligence make it even more difficult to detect fraud.
How can you avoid CEO fraud?
To avoid CEO fraud, there are preventive measures you can take:
- Use e-mail filtering and security tools: Invest in e-mail security solutions capable of detecting spoofed e-mail addresses, suspicious attachments and phishing attempts.
- Educate your employees: Regularly train your employees to detect phishing emails, fraudulent requests and unusual modes of communication from managers.
- Verify requests: Establish a company policy requiring employees to confirm transfer requests or sensitive actions by an alternative method of communication, such as a phone call or face-to-face verification.
- Apply dual approval: Ensure that financial transactions are approved by more than one person, to reduce the likelihood of a single point of failure.
Fraud insurance as ultimate protection
Unfortunately, fraudsters are becoming more creative, constantly improvising new techniques depending on events and contexts. Preventive measures can reduce the risk of fraud, but you will never be able to avoid them all. A fraud insurance can provide essential protection against the financial repercussions of CEO fraud.
Whether fraud is committed from inside or outside your company, the financial losses have a major impact on your business. With our fraud insurance, you can protect your business against financial loss due to both internal and external fraud. Our insurance covers not only financial loss, but also damage to systems and reputation. Moreover, you can count on expert advice to help you avoid fraud.
Do you want to know more about our fraud insurance? Contact our team. Our experts will be glad to help you.
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