Understanding Payroll Diversion Fraud

The Small Business Cybersecurity Checklist You Need!
May 22, 2024
The Small Business Cybersecurity Checklist You Need!
May 22, 2024
payroll fraud cybersecurity protection

What Is Payroll Diversion Fraud and How to Avoid Becoming a Victim

Payroll diversion fraud growing threat in today’s digital workspace. This article aims to shed light on what payroll diversion fraud is, how it happens, and the steps you can take to protect yourself and your organization from falling victim to this type of scam.

What is Payroll Diversion Fraud?

Payroll diversion fraud, also known as direct deposit fraud, is a cybercrime where fraudsters redirect an employee’s paycheck into an unauthorized bank account. This is achieved by gaining access to an employee’s payroll information and altering the direct deposit details.

How Payroll Diversion Fraud Happens

  1. Phishing Emails:
    • The most common method used by cybercriminals to initiate payroll diversion fraud is phishing emails. These emails are crafted to look like legitimate messages from senior leaders or HR representatives within the company.
    • These emails often contain urgent requests or threats, pressuring employees to act quickly. They may include attachments or links that lead to fake websites designed to steal login credentials.
  2. Sophisticated Deception:
    • Modern phishing emails can be extremely convincing, mimicking company branding, logos, and email formats with high accuracy. This makes it difficult for employees to distinguish these fraudulent emails from legitimate ones.
  3. Credential Theft:
    • When an employee clicks on a link in a phishing email, they are often redirected to a fake website that closely resembles the company’s legitimate portal. If the employee enters their login details on this site, the fraudsters gain access to their payroll account.
  4. Account Manipulation:
    • With access to the payroll account, the fraudster changes the employee’s bank account details to divert direct deposit funds to their own account. They may also alter notification settings to prevent the employee from receiving alerts about the change.

How CompuType Can Help Your Company Avoid This And Other Types of Fraud

1. Employee Training:

  • CompuType and our partner organizations can educate your employees about the risks of phishing emails and the importance of not clicking on suspicious links. We can put systems in place to help you be sure they understand how to recognize phishing attempts and the potential consequences of falling victim to such scams.

2. Robust Password Practices:

  • Signing up for CompuType business cybersecurity services ensures that strong password policies will be implemented across your organization. These practices ensure employees use unique passwords for the different platforms that touch your organization and prompt them to change their passwords regularly. We can even help you implement a trusted password manager to keep track of passwords securely.

3. Multifactor Authentication (MFA):

  • CompuType’s cybersecurity services help your organization enforce multifactor authentication for accessing payroll systems and other critical platforms. MFA requires your employees to verify their identity through multiple methods, such as entering a password and a time-based one-time code sent via text message or phone call. This adds an extra layer of security, making it harder for fraudsters to gain unauthorized access.

4. Enhanced Approval Processes:

  • CompuType can assist your organization in implementing a multi-step approval process for changes to direct deposit information and other critical data. This might involve having multiple parties, including the payroll administrator, verify and approve any such requests. The additional oversight CompuType brings to your organization can prevent unauthorized changes from slipping through.

5. Internal Alerts and Monitoring:

  • CompuType can help you set up internal alerts for any changes in bank account details. We can train payroll system end users to monitor for any unusual or unauthorized modifications to direct deposit information. Prompt action on any suspicious activity can mitigate the risk of fraud.

6. Regular Security Audits:

  • CompuType’s Cybersecurity services include regular security audits of your critical systems and processes to help you identify and mitigate potential vulnerabilities. We also ensure that your systems are up-to-date with the latest security patches and protocols.

As cybercriminals become more sophisticated, the risk of payroll diversion fraud continues to grow. By understanding how these scams work and implementing robust preventative measures, both employees and employers can work together to safeguard against this threat. Even if your organization has never experienced payroll diversion fraud or the many other ways hackers take advantage of your vulnerabilities, now is the time to be proactive. Stay informed, educate your workforce, and adopt best practices to protect your payroll system from potential attacks.

Call to learn more about the cybersecurity and managed IT services that CompuType offers small and mid-sized businesses in the St Louis and Metroeast: 877-233-8500