Business Impersonation Attacks: What They Are and How to Prevent Them

You’re probably familiar with identity theft, but have you ever considered it as a threat to your business?

Well, it is. Although this type of fraud may seem irrelevant, it affects large, small, and medium-sized companies, with the latter being especially vulnerable due to their limited resources. Not to mention the economic impact and the damage to trust from your customers and partners. That’s why it’s crucial to understand this type of fraud and know how to defend against it.

Next, we’ll explain what business identity theft is, provide real-life examples, highlight the associated risk factors, and share the best strategies to prevent and respond to this threat.

What is Business Identity Theft?

Business identity theft refers to the type of fraud in which an individual or entity impersonates a legitimate company to deceive third parties.

What’s the goal? To obtain confidential information, divert payments, scam customers, or even damage the reputation of the victim company. This phenomenon, known in the digital world as spoofing (we explain this concept in our blog 😉​), leverages modern technologies and tools to forge information and make it appear authentic.

It’s like someone dressing up as your company, using names, logos, emails, or even websites that mimic the originals. According to recent studies, business spoofing attacks are on the rise, and 8 out of 10 companies have been victims of business identity theft (which further underscores the urgency of taking preventive measures).

The main types of business identity theft include:

• Fake email (Email Spoofing): The attacker forges the email address of an employee or executive to send fraudulent messages requesting actions such as payments or the disclosure of confidential information.
• Website Spoofing (Pharming): A fake website is created to mimic a legitimate company site to steal user information, such as passwords or banking data.
• Caller ID Spoofing: The attacker alters the caller ID to make it appear as an official communication, tricking the victim into providing information or taking fraudulent actions.
• Social Media Spoofing: Fake profiles are created on social platforms, impersonating employees or executives to contact customers or partners and gather sensitive data.
• Payment Spoofing: Scammers impersonate financial institutions or suppliers, requesting payments to fake accounts.
• DNS Spoofing (Man-in-the-Middle Attacks): Attackers intercept and manipulate communications between the company and its clients or partners, redirecting information to counterfeit sites to steal data.

Real Example of Business Identity Theft: The Nikkei Case

To better understand the severity of identity theft in companies, let’s look at the Nikkei case.

In September 2019, Nikkei America, the U.S. subsidiary of the Japanese media group Nikkei, suffered a loss of approximately 29 million dollars due to a Business Email Compromise (BEC) attack. An employee was tricked into transferring funds to a bank account controlled by a malicious third party who impersonated an executive of the company.

With this incident, we aim to highlight the importance of implementing robust security measures, such as KYC and KYB identity verification and multi-factor authentication (which we always talk about, so if you want to learn more, visit our blog! 😁​), to prevent similar frauds in the future.

Factors That Increase the Risk of Identity Theft

It’s important to understand that certain factors can increase the likelihood of becoming a victim of identity theft. These factors include both internal vulnerabilities and external threats, and it’s crucial to understand them in order to implement appropriate preventive measures.

Here are the factors that can increase the risk of business identity theft:

🔹 Lack of employee training: Untrained employees are more likely to fall for fraud, especially those in sales, purchasing, and finance teams.

🔹 Insecure digital communication: Using emails or social media without proper verification facilitates spoofing attacks.

🔹 Lack of transaction verification: Without robust identity verification systems, attackers can more easily divert payments or steal sensitive information.

🔹 High company visibility: Well-known companies are more likely to be targeted for impersonation due to their reputation and access to valuable data.

🔹 Outdated security systems: Obsolete systems are vulnerable to attacks, making impersonation easier.

🔹 Unverified suppliers: Working with unverified suppliers can expose the company to fraud through fake transactions.

How to Prevent Business Identity Theft: The Key Role of KYC and KYB

Identity verification (KYC/KYB) can be very useful to prevent potential impersonations in your company. So, in these cases, KYC (Know Your Customer) and KYB (Know Your Business) will be your best friends.

These are the two essential solutions to prevent business identity theft. Both allow you to verify the identity of clients and suppliers, ensuring that the individuals or companies you interact with are legitimate.

✔️ KYC focuses on verifying the identity of individuals, such as customers, employees, or partners. This includes collecting documents such as passports, official IDs, and proof of address to confirm that the person is not an attacker.
✔️ KYB, on the other hand, is the process of verifying businesses. It ensures that the suppliers, business partners, and other entities you work with are legitimate and operate legally. This involves validating business records, ownership structure, and compliance with local regulations.

Both tools are critical to preventing attackers from posing as a legitimate part of your business, protecting you from fraud and other illegal activities, such as money laundering.

To further protect your company from business identity theft, here are additional measures to help in the process:

👤 Employee training

Educate your employees about spoofing tactics, how to recognize fraudulent emails, and suspicious calls to prevent fraud.

👤 Email authentication

Use technologies like SPF, DKIM, and DMARC to verify that emails come from legitimate sources and avoid spoofing.

👤 Keep your software up to date

Ensure all security systems are up to date to prevent attacks that exploit known vulnerabilities.

👤 Advanced security solutions

Implement firewalls, IDS, and IPS to identify and block attacks before they cause damage.

👤 Multi-factor authentication (MFA)

Use MFA to add an extra layer of security and make it harder for attackers to access sensitive information.

👤 Network traffic monitoring

Monitor network traffic and logs to identify suspicious activities and prevent spoofing attacks.

With these practices, your company can significantly reduce the risk of business identity theft and protect itself effectively from this type of fraud.

What to Do if Your Company Has Been a Victim of Identity Theft

Facing a case of business identity theft can be challenging, but acting quickly and accurately is essential to minimize damage and prevent future attacks. Here’s an action plan to manage this situation:

🔸 Identify the scope of the attack
Conduct a thorough analysis to determine how the business identity theft occurred and which areas of your business have been affected. This includes reviewing compromised systems, involved communications, and any potential data or financial losses.

🔸 Notify affected parties
If your customers, suppliers, or partners were impacted, notify them immediately. Being transparent about the situation helps maintain trust and allows the affected parties to take preventive measures on their own.

🔸 Contact the authorities
Report the incident to the relevant authorities. Many cases of spoofing and fraud require formal investigations to track down the perpetrators and take legal action against them.

🔸 Strengthen your security measures
Fortify your systems to prevent future attacks. Implement tools like KYC and KYB identity verification solutions, fraud detection systems, and multi-factor authentication. These will make it more difficult for attackers to impersonate your company again.

🔸 Train your team
Once the incident is resolved, it’s crucial to educate your staff on how to recognize business identity theft attempts and avoid falling for them. Prevention starts with well-informed employees.

🔸 Evaluate and adjust your processes
Review your security policies and make the necessary adjustments to close gaps. This includes updating protocols, conducting regular audits, and incorporating advanced technology such as facial verification to ensure secure operations.

With Silt, Identity Theft Has No Place

As we’ve seen, business identity theft is a serious threat, but with proper prevention and our KYC and KYB tools, it’s possible to minimize risks.

Now you know that protecting your company requires a combination of technology, training, and constant monitoring.

At Silt, we offer the most effective and advanced verification solutions to help you prevent fraud and ensure all your business relationships are secure.

And if you want to shield your company against fraud, as if it were your state-of-the-art vault, we recommend trying our demo.

And you know what the best part is? It’s free 🩵

If you have any further questions, feel free to contact us.

Cheers and always to data protection 🌠.