Northeastern Retailer’s Costly Brush with Phishing: Thousands Lost, Followed by Repeat Attack

By: Brett Stoddard, Chief Operating Officer at One Step Tech

“We just thought we were sitting pretty,” said the owner of a resort-town retailer, until they found out that their business was not as safe as they had originally thought.

It was a day like any other at the seaside clothing store when the bookkeeper received an email from a vendor asking for payment. In the same manner, she had done countless times before, she emailed her boss to ask for payment approval.

The bookkeeper got a response from the owner via email saying, ‘Yes, go ahead and make the payment.’

Nothing seemed out of the ordinary.

The bookkeeper paid the vendor via wire transfer, as she usually did without issue. She then received an email from the vendor saying the wire didn’t go through.

“Could you send the payment again?” the email read.

Before sending the payment for a second time, she decided to check in with the owner. There normally weren’t any issues when sending wire transfers to vendors.

“She picked up the phone, and she called me and said ‘Do you want me to send this wire transfer again?’ and I said, ‘I don’t know what you’re talking about’”.

The panic kicked in. Who did the bookkeeper send the money to?

Fraudsters targeted the bookkeeper with a phishing scam. She received fake emails from a “vendor” she trusted. The same cyber criminals sent the emails from the business owner’s email address. She had been hacked. This was a well-planned, coordinated cyber attack, and the bookkeeper had fallen victim.

The business owner contacted the bank and found there was nothing they could do to get the money back since it was an authorized transaction. The bank tried to trace the wire transfer back to the “vendor’s” account, but it no longer existed.

Thousands of dollars. Gone.

Now the business owner knows the hackers had been inside of the company’s system — watching. They observed how business was conducted, communicated with her employees, and paid her vendors. They used that information to trick her employee and steal thousands of dollars from her business.

These types of advanced phishing scams, also called Business Email Compromise (BEC) are common and are becoming even more difficult to detect.

The era of easily detectable phishing emails, marked by glaring misspellings and awkward grammar, is long gone. With the advent of AI writing tools like ChatGPT, phishing attacks have evolved. They now arrive in inboxes as professionally crafted messages, often personalized, posing a significant threat to both individuals and businesses.

Cyber criminals now utilize AI not only for crafting emails but also to gather vast data on internal business operations and communications. This enables them to create highly personalized phishing emails. As AI advances, criminals can produce more convincing and sophisticated phishing attempts.

Phishing attacks stand out as one of the biggest threats for business owners today, statistically speaking. Research suggests that around 90% of cyber attacks originate from a phishing attempt.

How is AI Used in Phishing Scams?
Cyber criminals are increasingly leveraging artificial intelligence (AI) techniques, particularly natural language processing (NLP) and machine learning algorithms, to craft convincing phishing emails.

NLP enables computers to understand, interpret, and generate human language. Cyber criminals use NLP to analyze vast amounts of text data from legitimate emails, social media, websites, and other sources to understand common language patterns, writing styles, and industry and company-specific terminology.

Cyber criminals can direct this technology to tailor phishing emails to evoke specific emotions, such as urgency or fear, to prompt recipients to take immediate action.

Machine learning algorithms are pivotal in crafting phishing emails, allowing attackers to optimize content based on the recipient’s past behaviors. These algorithms learn from past interactions to refine and enhance the effectiveness of phishing campaigns over time. They analyze demographic and behavioral data to personalize emails, incorporating details like names and job titles to boost credibility and effectiveness.

Through data harvesting and social engineering tactics, AI-powered tools automate the collection of publicly available information from social media platforms, professional networks, and public databases. This data provides cyber criminals with valuable insights into potential targets’ interests, preferences, relationships, and organizational affiliations, enabling them to craft highly targeted and persuasive phishing emails.

As these techniques evolve, it becomes increasingly challenging for individuals and organizations to distinguish between legitimate and malicious emails.

The dawn of AI-driven phishing is upon us, and these next-level deceptions have already begun to wreak havoc. Without adequate defenses in place, it’s not a question of if but when an unsuspecting employee falls victim to these sophisticated scams.

The stakes are higher, and cyber criminals have armed themselves with cutting-edge tools. In the face of AI-generated phishing attacks, the time to fortify your defenses is now.

Phishing attacks are highly dangerous to retailers for several reasons:

• Financial Loss: They can lead to direct financial losses through stolen credentials and fraudulent transactions.
• Data Breach: Phishing exposes sensitive business data, risking legal liabilities, loss of trust, and reputation damage.
• Disruption: Attacks disrupt operations through malware, freezing of bank accounts, and the halting of transactions leading to downtime and productivity loss.
• Reputation Damage: Customer trust can erode, impacting business growth and viability. Particularly if customer information is compromised or if the scam becomes public knowledge.
• Regulatory Violations: Breaches may lead to fines and legal repercussions due to non-compliance with data protection regulations including the Payment Card Industry Data Security Standard (PCI DSS).

Businesses need to recognize the growing threat of phishing scams and ensure that employees grasp the rising complexity of these attacks. Let’s take a look at a few measures you should implement to start building your defenses.

What Can Business Owners Do to Protect Their Companies?

• Employee Training and Awareness: Invest in comprehensive cybersecurity training programs to educate employees about the risks associated with phishing attacks. Teach them how to identify suspicious emails, recognize common phishing tactics, and report potential threats promptly.
• Implement Multi-Factor Authentication (MFA): Require employees to use multi-factor authentication (MFA) to access sensitive systems and data. MFA adds an extra layer of security by requiring additional verification beyond passwords, making it harder for attackers to gain unauthorized access.
• Deploy Advanced Email Security Solutions: Deploy strong email security solutions that use AI and machine learning to spot and stop phishing emails instantly. These tools analyze email content, sender behavior, and other factors to flag potential threats and keep them out of employees’ inboxes by placing them in a “quarantine” area. If the email is confirmed as safe, the IT team can then release it to the recipient.
• Regular Security Updates and Patch Management: Keep software, operating systems, and security tools up to date with the latest patches and updates. Regularly review and update security configurations to address emerging threats and vulnerabilities effectively.
• Monitor Network Traffic and User Behavior: Deploy network monitoring tools to monitor network traffic and user behavior for signs of unusual or suspicious activity. Implement anomaly detection systems that can identify potential security breaches and unauthorized access attempts in real time.
• Regular Third-Party Vulnerability Scans: These assessments evaluate your email security, employee awareness, web application vulnerabilities, and network traffic to identify risks. They help ensure effective email filtering, assess employee susceptibility, identify web application weaknesses, and analyze network traffic for signs of phishing. With detailed reports and recommendations, third-party scans empower you to strengthen defense and address vulnerabilities.
• Establish an Incident Response Plan: Develop and regularly test incident response plans to ensure swift and effective responses to phishing attacks and other cybersecurity incidents. Define clear roles and responsibilities, establish communication protocols, and document response procedures to minimize the impact of security breaches. Having a plan in place reduces the likelihood of making rash decisions in a state of panic and keeps you on the path to recovery.
• Collaborate with Security Experts and Vendors: Partner with cybersecurity experts and vendors to stay informed about the latest threats and best practices for mitigating phishing attacks. Leverage their expertise to assess and improve your organization’s security posture continuously.

By implementing these proactive measures, business owners can enhance their organization’s resilience against AI-driven phishing attacks and minimize the risk of data breaches and financial losses.

Prepare for the Growing Threat
In the case of the retail business mentioned at the beginning of this article, what started as routine email correspondence swiftly spiraled into a costly lesson on the perils of modern cyber crime. The business owner’s experience sheds light on the sophisticated tactics employed by cyber criminals who leverage advanced phishing techniques to craft convincing, personalized emails that evade traditional security measures.

As the prevalence of AI-driven phishing scams continues to surge, businesses face an urgent imperative to fortify their defenses. With research indicating that 90% of cyber attacks originate from phishing attempts, taking proactive measures is crucial to defend against AI-driven phishing campaigns and reduce the risk of financial losses, data breaches, and reputational damage.

The retail owner’s cautionary tale underscores the critical importance of remaining vigilant and proactive in the face of evolving cyber threats. Small businesses are suffering cyber attacks every day, their stories just don’t make the news.

As the retail business owner said, “I think you don’t hear a lot about small businesses being hacked because they’re embarrassed. Not only that — if you are hacked, you really can’t find the person who’s doing it. All you can do is protect yourself.”

As technology advances, so too must our collective commitment to cybersecurity. By embracing robust defense mechanisms and fostering a culture of resilience, businesses can operate with confidence, safeguarding data and reputation against the pervasive menace of AI-powered phishing campaigns.