Form W-2 data thefts are rocketing, warns FBI

Businesses beware! Online criminals have ramped up their attempts to steal W-2 information from the finance and human resources departments of organisations, according to a warning issued by the FBI.

In an alert issued last week, the FBI warned that it had observed a significant increase in reports from companies who had received emails requesting valuable W-2 information from either spoofed or compromised email addresses.

Typically an attacker might pose as a member of the targeted company’s senior management, tricking an unwitting member of staff to send them workers’ IRS W-2 tax form data.

In some cases the initial communication may be a friendly, “Hi, are you working today?” that then leads to a fraudster requesting copies of all employees’ W-2 forms to be sent to them.

The data held on the forms holds enormous value to criminals because a single W-2 record contains an employee’s name, address, income, and Social Security Number, alongside other personal information.

The stolen information can then be used by fraudsters to file fraudulent tax returns, or sell the data on to other criminals via underground criminal websites.

Although it’s possible for individuals to be targeted, it appears that more criminals are targeting businesses where there are opportunities to steal large amounts of data.

The IRS reported last month that it received reports of over 200 companies who received such attacks during 2017, impacting hundreds of thousands of employees who had their identities compromised.

For instance, last year we described how hackers had managed to breach the tax portal of US military contractor Northrop Grumman and gained access to workers’ W-2 paperwork for the 2016 tax year.

In that case it is believed that unauthorised users were able to access the portal, run on Northrop Grumman’s behalf by Equifax, after a legitimate user’s login details were stolen.

Clearly multifactor authentication or disabling access to the portal from outside the Stealth Bomber maker’s own network might have provided a higher level of protection.

Other high profile corporations who have fallen foul of W-2 tax information breaches include Snapchat and Seagate, after staff were targeted by business email compromise scams.

Business email compromise, also sometimes known as “whaling” or “CEO fraud,” is a growing problem. Until firms educate staff about the threats, and put measures in place to reduce the chances of criminals succeeding in spiriting away the sensitive information, you can expect to hear many more reports in the future.

Here are some of the FBI’s recommendations for companies concerned that their payroll and finance personnel could be targeted by W-2-related Business Email Compromise and phishing scams:

• Limit the number of employees within a business who have the authority to approve and/or conduct wire transfers and handle W-2 related requests or tasks
• Use out of band authentication to verify requests for W-2 related information or wire transfer requests that are seemingly coming from executives. This may include calling the executive to obtain verbal verification, establishing a phone Personal Identification Number (PIN) to verify the executive”s identity, or sending the executive via text message a one-time code and a phone number to call in order to confirm the wire transfer request
• Verify a change in payment instructions to a vendor or supplier by calling to verbally confirm the request. The phone number should not come from the electronic communication, but should instead be taken from a known contact list for that vendor
• Maintain a file, preferably in non-electronic form, of vendor contact information for those who are authorized to approve changes in payment instructions
• Delay the transaction until additional verifications can be performed such as having staff wait to be contacted by the bank to verify the wire transfer
• Require dual-approval for any wire transfer request involving one or more of the following:
  • A dollar amount over a specific threshold
  • Trading partners who have not been previously added to a “white list” of approved trading partners to receive wire payments
  • New trading partners
  • New bank and/or account numbers for current trading partners
  • Wire transfers to countries outside of the normal trading patterns

According to the FBI advisory, the IRS may be able to help protect your staff from tax-related identity theft if they are notified quickly after the data loss.