CEO Impersonation - widespread fraud targetting multinationals

HONG KONG – International lawyers Baker & McKenzie have issued a Client Alert after representing a number of clients who have fallen victim to similar but unrelated scams targeting multinational companies with subsidiaries around the globe. “The patterns are so strikingly similar that we are issuing this Global Alert to minimise the risk of other clients falling prey to this fraud,” B&M says. 

“The hallmark features of these scams are:
 •     Skilful impersonation of a CEO or other senior executive of the victim company;
 •     A request, usually to the finance department of a foreign subsidiary, for payment to be made outside the normal approval processes to facilitate a "confidential transaction" in China;
 •     Comparatively modest amounts at stake (usually less than US$1 million);
 •     A demand by the bogus CEO or other senior executive that the payments be kept highly confidential;
 •     Invoices emanating from China; and
 •     Payments to be made to banks, often in China or Hong Kong.
 “While the focus jurisdiction for documents and payments is often China or Hong Kong, other destination countries might also be used.
“The impersonator contacts an individual in the target company's accounting department, most likely in a subsidiary in a location where English is not the first language, and pretends to be the North American or UK based CEO or a senior director of the victim and parent company,” B&M says.

“The impersonator begins with a call to the individual and starts the conversation with relevant facts about the company, such as commenting on the company's year-end, at a time when year-end has just closed. 
 “The impersonator tells the target individual that there is a highly sensitive or confidential deal in progress and to not mention it to anyone else. The impersonator then advises the individual that a lawyer will be sending invoices relating to the transaction that will require payment and should be processed as quickly as possible outside the usual checks and procedures.
 “These invoices, often filled with typing errors and other red flags, are sent from an individual masquerading as a lawyer, sometimes from an email account with a domain name of "lawyer.com", and are purportedly from Chinese  companies. The description on the invoice is commonly "investment" and payment is requested to be made to bank accounts in China or Hong Kong.”
 “This fraud has succeeded due to the individual contacted feeling flattered, overwhelmed or anxious at being contacted by a senior figure in their business.” The Client Alert says.

“Since the amount in question is in the often below US$1 million, the person contacted feels the request is consistent with a confidential deal in progress.
 “One variation on this CEO fraud is where the fraudsters impersonate a supplier, using an email address very similar to the supplier's genuine email address and attach a letter, often unsigned, on the supplier's letterhead, requesting all future payments be sent to a different bank account set up by the fraudster, but in the name of the supplier. The scam is usually only uncovered when the genuine supplier follows up on unpaid invoices.”
 “In our experience,” B&M says,” these frauds are aimed at personnel in the accounts payable function. We suggest that they and their colleagues be made aware of the scams and reminded (that) under no circumstances should they depart from proper procedures; they are there for a purpose.”

www.bakermckenzie.com (ATI).