CEO fraud: Definition, types, and prevention tips

Calls, text messages, and social media sites can all be used to send fake messages that impersonate CEOs. However, email is still the most common way these scams are executed. For this reason, the term business email compromise (BEC), which refers to using email to carry out fraudulent activities, is often used to describe CEO fraud.

How does CEO fraud work?

Hackers usually follow a set plan to figure out their target and craft a convincing message to make the CEO fraud attack worthwhile.

1. 1.Research. Hackers begin by researching the company they plan to attack. They identify who is responsible for key roles, especially employees who manage finances or have access to sensitive data.
2. 2.Surveillance. They monitor these employees over time to learn about ongoing business projects. During this phase, the scammers also study how the CEO communicates, their travel schedule, and their typical work patterns.
3. 3.Initial contact. Once they gather enough information, the scammers reach out to a targeted employee. When the employee responds, the attackers send a fraudulent request, such as instructions to transfer money, buy gift cards, or send sensitive documents, while pretending to be the CEO.
4. 4.Execution. Throughout the interaction, the scammers maintain their fake identity to build and maintain trust, ensuring the victim follows through with the fraudulent action.
5. 5.Cover-up. After securing the desired information or funds, the attackers move quickly to conceal their tracks. They often use multiple international bank accounts to transfer money or act immediately on stolen data, making recovery extremely difficult.

Is CEO fraud common?

CEO fraud attacks have been around for more than a decade, but scammers have become more interested in them within the last few years. Based on the most recent data, 89% of BEC attacks in late 2024 were directed at business leaders and CEOs. 

Recent CEO fraud attacks have been very successful, with each one reportedly costing the targeted company an average of $80,000. It's already a big problem that these scams involve financial damage, but what's even scarier is that AI tools are helping hackers to more effectively carry out the scams.

With AI widely available, cybercriminals can quickly replicate an executive’s voice, writing style, and even appearance through deepfake videos. AI can also assist in adding specific business details to communication and craft convincing calls or messages in minutes. Naturally, this increased speed and precision make it harder to detect fraudulent CEO messages, boosting both the frequency and impact of these attacks.

CEO fraud methods

Cybercriminals employ a few well-known tactics when carrying out CEO fraud attacks. Understanding the main tactics will help ensure your business won't fall victim to these scams.

Phishing

Phishing is a common type of online fraud in which people are asked to give up private, sensitive information through social engineering. It's a broad term that includes many different types of scams, including CEO fraud.

Phishing attacks are often used alongside spoofing, which is the practice of hackers imitating legitimate websites and messages from reliable sources. The purpose of phishing combined with spoofing is to trick victims into believing that fake messages are coming from reliable sources. Unlike targeted attacks, phishing is usually used to send misleading emails to a lot of people at once to get as many victims as possible.

Attacks that use phishing usually have an urgent or threatening tone, notifying the victim about information like account suspension warnings, forcing recipients to make quick decisions, for example. In a typical case of CEO fraud, business employees might receive an email that mimics their CEO's writing style, complete with spoofed company headers and a signature. For a "confidential acquisition," the message urgently asks that they transfer some money and directs employees to a fake banking portal where their typed-in credentials get stolen.

Spear phishing

While spear phishing falls under the broader category of phishing, it works in a more focused way. Instead of trying to trick as many people via email at once, hackers who use spear phishing choose specific victims.

For example, instead of emailing all employees a message that is disguised as being from the CEO, a hacker using a spear phishing tactic targets just one or two people in, for example, accounting. Fraudulent messages include personal information or company terminology and reference real projects to make them seem more believable. Successful spear phishing attacks usually enable criminals to steal significantly more money than they would be able to using regular phishing scams, which is why they find it so appealing.

Deepfake CEO messages

Since AI tools are now widely accessible, cybercriminals use them for malicious purposes that go beyond crafting convincing emails or messages. One such technique is the creation of deepfakes, which has become a fraud technique of choice for proficient attackers.

Deepfakes are made with AI algorithms that analyze videos and pictures of a CEO to figure out their voice patterns, facial expressions, and body language. Then, the AI system makes new fake media that can either add the person's image to existing footage or create brand-new content that sounds and looks real.

In the case of CEO fraud, deepfake could look like an emergency video call from the CEO saying they're stuck overseas because their flight was canceled before an important meeting. The AI-generated video copies the CEO's voice, facial expressions, and way of talking. It tells the recipient (most likely from the finance team) to quickly transfer funds for "last-minute travel arrangements." It also stresses that the normal approval process should be skipped because the business opportunity is time sensitive.

Who are the primary targets of CEO fraud?

CEO fraud usually targets four categories of employees: those in finance, human resources (HR) personnel, IT professionals, and C-level executives. Each group has specific vulnerabilities that hackers exploit when carrying out CEO fraud attacks.

• Finance departments. People in finance departments can directly access company funds and make transfers. For this reason, fraudsters pretend to be CEOs and ask for urgent money transfers for what they say are secret business deals, payments to vendors, or emergencies.
• HR. This department is often targeted because it has access to lots of personal information about employees and the company’s payroll system. Cybercriminals attack HR if they want to see information about salaries or make changes to direct deposits.
• IT departments. Criminals ask people who work in the IT department to give them access to sensitive systems so they can change security protocols. Fraudsters can also pretend to be executives to ask for password resets, security exceptions, or the installation of what they say are monitoring tools but are actually malware.
• C-level executives. When scammers pretend to be CEOs, they also like to target other company executives. The organization's structure makes people trust and feel pressured to do what the CEO says without question. Attackers take advantage of this by creating situations that need immediate action, such as crisis response, knowing that executives are used to handling sensitive matters with little involvement from others.

How to recognize CEO fraud attacks

It's getting more challenging to recognize CEO fraud attacks. However, when you want to tell the difference between real communications and scam attempts, look for the following red flags:

• Suspicious email address or domain. Always check to see if the sender's email looks odd or not quite the same as the official one.
• Urgent or unusual requests. Be wary when messages make you feel like you need to act right away on matters that aren't typical.
• Requests to bypass standard procedures. Be suspicious of any instructions that ask you to ignore standard company security protocols or procedures.
• Language and tone inconsistency. Look for ways the style differs from how the CEO usually speaks or writes.
• Unfamiliar communication channels. If someone contacts you through a platform your CEO doesn't normally use, be alert.
• Requests for completion of financial transactions or the handing over of sensitive data. Be especially cautious when receiving messages requesting money transfers or confidential information.
• Lack of prior context. Question messages that mention projects or discussions you've never heard of before.
• Unusual time of contact. Pay attention to messages that come at odd hours when the CEO is not usually working.

How to prevent CEO fraud

Recognizing CEO fraud attempts is one thing, but learning how to avoid falling for them is another. After all, it's much better to prevent an attack than to deal with the damage it causes.

Follow these steps to prevent CEO fraud scams that might circulate within your company:

• Organize training to help employees recognize potential scams. Employees learning to spot social engineering tricks can go a long way, as can running simulated phishing attacks to check whether everyone paid attention to the training.
• Verify all requests involving sensitive actions. Always confirm unusual or urgent requests through a different channel. Adding two-factor authentication and requiring two people to approve money transfers or access to sensitive information can also create better security.
• Restrict public access to executive information. Limit what the public can see about company leaders' schedules, roles, and responsibilities.
• Be cautious of emails asking for personal information. Never reply to emails requesting private details about you or your company without confirming the sender first.
• Avoid suspicious links and attachments. Don't click links or open files sent from unknown or questionable senders.
• Double-check unusual requests. Before approving, confirm any unusual instructions directly with the company's CEO or other executives through regular communication channels.
• Use a strong security basis. Set strong and unique passwords for each account you use and add extra security features to them, such as login alerts. Also, use email filters to catch and block suspicious messages before they can cause any damage.

What to do if you fall victim to CEO fraud

If you suspect you've fallen for CEO fraud, act immediately to reduce damage and prevent further loss. Here’s what to do:

• Report immediately. Alert your cybersecurity, IT, and leadership teams without delay.
• Secure affected systems. Change passwords, disable compromised accounts, and check for unauthorized access.
• Inform your team. Let colleagues know about the scam to prevent others from being targeted.
• Notify affected parties. If sensitive data was leaked, inform any impacted customers, vendors, or partners.
• Strengthen security. Improve email filtering, enforce MFA, and tighten approval steps for financial and sensitive actions.

What is another name for CEO fraud?

Business email compromise (BEC) and executive impersonation fraud are two other names commonly used to refer to CEO fraud scams. However, while they are related, they are not exactly the same.

BEC affects more than just the CEO's email address. It can put the entire company's email system at risk. When attackers specifically target the CEO’s email, it can escalate into CEO fraud. Executive impersonation fraud is closely related, as criminals pose as any high-level manager to deceive employees.

Other terms related to CEO fraud are CEO email scam, C-suite fraud, and whaling, which means going after high-level executives. All of these scams use the same approach: They use the structure of an organization to get around security. Like CEO fraud, these attacks use social engineering to trick people into acting based on urgency and fake messages from leaders they trust.