We’ve all been hearing about BEC threats among Financial Institutions, small businesses and even large retailers such as Mattel. A recent article featured in JDSUPRA Business Advisor sheds light on another angle of this fraud scam, including how insurance companies are being held responsible to insure and cover such cases.
Principle Solutions, Group, LLC was a victim of a BEC scam when the controller released a $1.72M wire after receiving a corporate email from someone posing as the managing director of Principle. They presented a claim to their insurer, Ironshore, but it was denied; as they argued that it did not result directly from the fraudulent transaction. Principle filed suit against Ironshore and the judge ruled that the claim of the fraudulent wire should be covered, but that the insurance company did not act in bad faith. Even though this case was dismissed, in the future, corporations are sure to be smarter about this technicality and will ask their insurers to cover such cases.
As insurance companies move to cover the rise of BEC fraud, which from a recent FBI report is over $1+B dollars lost worldwide, a pressing question for them will be how to prevent or reduce such fraud. BEC fraud oftentimes originates from someone within the corporation under the impression that they are supposed to release money. Such behavior is difficult to detect with normal fraud detection solutions that rely on heuristic rules or email spam solutions, as eventually a person within the company receives the go-ahead to release money when not intended.
Behavioral Analytics, on the other hand, can be a very effective method to combat BEC fraud. These algorithms rely on the behavioral changes of the originators and surface when a newly requested wire is characteristically not different from previous wires. So even if a controller unwittingly releases money based on a falsified email, the money transaction will go through a high level of scrutiny with a behavioral analytics fraud detection solution.
At Guardian Analytics, one of the leaders in behavioral analytics for fraud detection, we have one of the highest detection rates for BEC wires. Our fraud detection methods have real time integration to detect fraud, quick investigation by fraud analytics, and a high accuracy of detection.