'Fake chairperson' frauds follow approximately the same scenario: the fraudster impersonates the chairperson or another senior employee of a company (eg, by appearing to use his or her email address) and asks another employee (usually working in the finance or accounting department) to make a confidential and urgent wire transfer to a specified bank account. The fraudster instructs the employee not to discuss this with anyone (even the instructing chairperson, senior employee or director) under various pretexts – for example, a confidential acquisition, a confidential deposit or a change in the bank details of an account to which the company is due to make a payment. The money is then sent to the fraudster's account, generally located offshore.
In France, this type of fraud has become an increasing problem over the past few months – for example, in November 2014 an international tyre manufacturer was defrauded of €1.6 million.
Originally, fraudulent messages were relatively easily to detect due to mistakes such as spelling mistakes, incorrect company logos or unusual accents. However, the frauds are becoming increasingly sophisticated, and therefore increasingly risky.
Employers can take the following steps to reduce the risk of employees being taken in by fake chairperson frauds and to tackle such fraud should it occur:
- Alert employees – particularly in the accounting and finance departments – to the risk of such frauds through a clear email communication or other notification, to ensure that they are warned of the risks (and to be able to demonstrate that they have been warned).
- Make it clear that senior officers will not ask other employees to make confidential bank transfers by email informing them not to discuss this with anyone, including the instructing party.
- If an employee has negligently made such transfer, the employer should ensure that the employee is called to a pre-dismissal meeting no later than two months after the employer becomes aware of the fraud (after such time, the employer can no longer take disciplinary action against the employee).
For further information on this topic please contact Emma Röhsler or Lauriane Gregor at Herbert Smith Freehills LLPby telephone (+33 1 53 57 70 70) or email (firstname.lastname@example.org or email@example.com). The Herbert Smith Freehills LLP website can be accessed at www.herbertsmithfreehills.com.
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