New Alert from the IRS – Watch Out for Business Email Compromise Scams

The Internal Revenue Service has issued a warning to businesses today about a new email scam. It involves scammers impersonating company executives in emails to gain access to W-2 forms, wire transfers, and other potentially damaging information. Read on to see how you and your business can protect yourself.

 

WASHINGTON – The IRS, state tax agencies and the tax industry today urged businesses to beware of a recent increase in email scams targeting employee Forms W-2.

Business Email Compromise

The W-2 scam – called a business email compromise or BEC – is one of the most dangerous phishing email schemes trending nationwide. The IRS saw a sharp increase in the number of incidents and victims during the 2017 filing season.

A business email compromise happens when a cybercriminal is able to “spoof” or impersonate a company executive’s email address. Then they target a payroll, financial or human resources employee with a request. For example, fraudsters will try to trick an employee to transfer funds into a specified account or request a list of all employees and their Forms W-2.

“These are incredibly tricky schemes that can be devastating to a business,” said IRS Commissioner John Koskinen. “Cybercriminals target people with access to sensitive information, and they cleverly disguise their effort through an official-looking email request.”

FBI Statistics

The Federal Bureau of Investigation reported earlier this year that there has been a 1,300 percent increase in identified losses – with more than $3 billion in wire transfers – since January 2015. The FBI found that the culprits behind these scams are national and international organized crime groups who have targeted businesses in all 50 states and 100 countries worldwide.

During the 2016 filing season, the IRS first warned businesses that the scam had migrated to tax administration and scammers were using business email compromise tactics to obtain employees’ Forms W-2. The criminals were immediately filing fraudulent tax returns that could mirror the actual income received by employees – making the fraud more difficult to detect.

In 2017, the IRS saw the number of businesses, public schools, universities, tribal governments and nonprofits victimized by the W-2 scam increase to 200 from 50 in 2016. Those 200 victims translated into several hundred thousand employees whose sensitive data was stolen. In some cases, the criminals requested both the W-2 information and a wire transfer.

The Form W-2 contains the employee’s name, address, Social Security number, income and withholdings. That information was used to file fraudulent tax returns, and it can be posted for sale on the Dark Net, where criminals also seek to profit from these thefts.

If the business victimized by these attacks notifies the IRS, the IRS can take steps to help prevent employees from being victims of tax-related identity theft. However, because of the nature of these scams, many businesses did not realize for days, weeks or months that they had been scammed.

The IRS established a special email notification address specifically for businesses to report W-2 thefts: dataloss@irs.gov. Be sure to include “W-2 scam” in the subject line and information about a point of contact in the body of the email. Businesses and organizations that receive a suspect email but do not fall victim to the scam can forward BEC to phishing@irs.gov, again with “W-2 scam” in the subject line.

Protecting Yourself from BECs

Employers should review their policies for sending sensitive data such as W-2s or making wire transfers based solely on an email request.

Businesses should consider taking these steps:

  1. Confirm requests for Forms W-2, wire transfers or any sensitive data exchanges verbally, using previously-known telephone numbers, not telephone numbers listed in the email.
  2. Verify requests for location changes in vendor payments and require a secondary sign-off by company personnel.
  3. Educate employees about this scam, particularly those with access to sensitive data such as W-2s or with authorization to make wire transfers.
  4. Consult with an IT professional and follow these FBI recommended safeguards:
    • Create intrusion detection system rules that flag e-mails with extensions that are similar to company email. For example, legitimate e-mail of abc_company.com would flag fraudulent email of abc-company.com.
    • Create an email rule to flag email communications where the “reply” email address is different from the “from” email address shown.
    • Color code virtual correspondence so emails from employee/internal accounts are one color and emails from non-employee/external accounts are another.

If a BEC incident does happen, notify the IRS immediately. You should also file a complaint with the FBI at the Internet Crime Complaint Center.

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