Summary: Fraudsters often use advanced technology, AI, and psychological manipulation to target employees, compromise internal controls, and siphon funds under the guise of legitimate investment opportunities or executive directives.
According to the Federal Trade Commission (FTC), reported losses to fraud jumped to $12.5 billion in 2024. Investment scams accounted for the largest share, with losses reaching $5.7 billion. Scammers are no longer relying solely on poorly worded emails or obvious phishing attempts. Today’s bad actors utilize advanced technology, artificial intelligence (AI), and psychological manipulation to target employees, compromise internal controls, and siphon funds under the guise of legitimate investment opportunities or executive directives.
A compromised employee, a deceived executive, or a manipulated payment process can expose a company to significant financial liability and reputational damage. Understanding the mechanics of investment scams and implementing proactive controls is a critical component of financial governance.
Rising Cost of Investment Scams
While traditional checks and balances once slowed the movement of illicit funds, digital payment methods have accelerated the process. The FTC notes that in 2024, consumers and organizations lost more money to scams involving bank transfers and cryptocurrency than all other payment methods combined.
For business leaders, the risk is twofold. First, there is direct financial loss if company funds are diverted. Second, there is the operational disruption required to investigate the breach, the potential for regulatory scrutiny, and the exposure of control weaknesses that could affect future valuation or audit readiness.
We are also seeing a shift in the global regulatory environment regarding corporate responsibility. For example, recent legislative updates in the United Kingdom have introduced stricter requirements for companies to prevent fraud, potentially holding leadership accountable if they fail to implement reasonable prevention procedures. While regulations vary by jurisdiction, this trend suggests a growing expectation for boards and executives to take a more active role in fraud prevention, regardless of where they operate.
How Modern Investment Scams Infiltrate Organizations
Investment scams often begin with a breach of trust, rather than a breach of software. Scammers frequently target specific departments (e.g., finance, accounting, human resources) using social engineering tactics that exploit the desire to be responsive and efficient.
Imposter Scams
One of the most prevalent tactics involves imposter scams. In these scenarios, fraudsters pose as known and trusted figures: a CEO, a board member, a vendor, or even a bank representative. They may use spoofed email addresses or deepfake audio technology to issue urgent instructions regarding a confidential acquisition, a new investment opportunity, or a vendor payment change.
Consider the scenario of a non-profit organization where a trusted leader believes they have found a lucrative investment opportunity to grow the organization’s endowment. The leader, authorized to move funds, might transfer capital from the organization’s bank account to a mobile payment app, and subsequently to a cryptocurrency exchange, believing they are securing a high return. The reality is that the opportunity is a fabrication, and once the funds are converted to cryptocurrency, recovery becomes difficult and uncommon.
This type of authorized push payment fraud is particularly dangerous because the person initiating the transfer is authorized to do so, bypassing standard cybersecurity alerts.
Role of Technology and Cryptocurrency
Technology companies and platforms are often the unwitting facilitators of these crimes. Scammers leverage legitimate fintech applications, peer-to-peer (P2P) payment platforms, and cryptocurrency exchanges to move stolen funds quickly across borders.
For high-growth and tech-focused companies, this presents a unique challenge. Employees accustomed to moving fast and using modern financial tools may be less suspicious of requests to use non-traditional payment methods. Scammers exploit this comfort level, directing payments via wire transfers, ACH, or crypto under the pretense of modernizing the investment process, avoiding bureaucratic delays.
Why Employees Are Effective Targets
Detecting an investment scam requires looking beyond the transaction itself and to the behaviors and patterns surrounding it. Scammers rely on urgency, authority, and secrecy to override critical thinking. By training teams to recognize common red flags, companies can build a human firewall against fraud.
Behavioral Warning Signs
Scammers often coach their targets on how to respond to internal questions, creating a script that explains away irregularities. Leaders should be vigilant for specific changes in employee behavior or communication styles, such as:
- Unusual Secrecy: An employee emphasizes that a transaction is highly confidential and should not be discussed with other team members or standard approvers.
- Urgency and Pressure: There is an intense push to act quickly to secure a deal or avoid a penalty. Scammers know that if a target has time to think, the scheme often fails.
- Resistance to Protocol: An employee or executive shows frustration with standard verification procedures and attempts to bypass established internal controls to expedite payment.
- Scripted Responses: If questioned by finance or compliance teams, the individual requesting the payment offers vague, repetitive, or rehearsed answers that do not align with standard business logic.
Transactional Red Flags
Beyond behavior, the details of the transaction often contain clues that something is amiss. Companies should scrutinize any payment request that deviates from the norm. Take for example:
- Test Transactions: Fraudsters often request an initial transfer to verify the account or process. Once this small amount clears without raising alarms, they follow up with a much larger request.
- New Payment Methods: A request to send funds via cryptocurrency, gift cards, or to a new bank account that does not match the vendor’s typical profile is a major warning sign.
- Misaligned Beneficiaries: Payment instructions where the beneficiary’s name does not strictly match the entity known to the company, or where the bank location does not match the vendor’s known geography.
- Public Information Exploitation: Scams often take advantage of publicly available information about executive travel or company announcements to time their requests, adding a layer of credibility to the impersonation.
Controls and Prevention Strategies
Implementing Effective Financial Controls
- Dual Approvals: Require two separate approvals for all wire and ACH transfers above a certain threshold. No single individual, regardless of rank, should have the ability to initiate and approve a significant outbound transaction. In addition, a second set of eyes often catches details that the primary initiator might miss due to pressure or distraction.
- Verification Channels: Establish a strict policy that all changes to payment instructions (e.g., a new bank account number) must be verified through a secondary channel. If a request comes via email, the verification must happen via a phone call to a known contact at the organization, and never the number provided in the suspicious email.
- Limit Payment Methods: Restrict the use of high-risk payment channels. Corporate funds should rarely, if ever, be transferred via P2P apps or converted to cryptocurrency without an extensive, multi-layer approval process.
Creating a Culture of Skepticism and Support
Employees in Finance, HR, and Executive Administration are often in the first line of defense against investment scams. This means that they are also the most frequently targeted. New hires, eager to please and unfamiliar with company norms, are particularly vulnerable.
Training programs should go beyond basic cybersecurity awareness. They must empower employees to question authority when financial protocols are challenged. An executive assistant should feel supported, not threatened, when verifying the CEO’s urgent request for a wire transfer. Building a culture where verification is praised rather than punished is essential for long-term security.
Immediate Steps When Fraud Is Suspected
Despite even the best controls, sophisticated investment scams can sometimes penetrate defenses. If a suspicious transaction is identified, speed is the critical factor in mitigating loss.
1. Stop or Recall Payments
Immediately contact the financial institution involved. If the funds were sent via wire transfer, request a recall. If sent via other methods, ask the provider to freeze the transaction if possible.
2. Notify Authorities
Report the incident to relevant law enforcement agencies and regulatory bodies. This creates an official record which is necessary for insurance claims.
3. Internal Review and Containment
Conduct an immediate internal review to understand the scope of the breach. Was it a compromised email account? A malicious insider? An external social engineering attack? Isolate affected systems to prevent further loss.
4. Engage Forensic Specialists
Third-party investigations are often necessary to trace complex financial flows, especially those involving cryptocurrency. Forensic specialists can prepare detailed reports for law enforcement, support insurance claims, and provide a clear summary of events for the Board of Directors.
Final Thoughts
Navigating the aftermath of an attempted or successful investment scam requires a partner who brings both technical precision and deep industry understanding. Aprio’s Forensic Services team combines time-tested experience with deep industry knowledge to safeguard the financial health of your business and assist you in navigating litigation challenges. Utilizing current fund tracing tools and technology, our team can help you understand exactly where your cash is going and who is receiving it. Beyond investigations, our forensic specialists provide tailored guidance on implementing proper accounting control policies and procedures.
