What is Impersonation Fraud?

Impersonation fraud has become a disruptive menace in today's digital age. This crafty form of deception revolves around the act of adopting false identities, pretending to be reliable entities, and exploiting unsuspecting victims for personal gain. It is a type of crime that thrives on abusing trust and exploiting weaknesses, causing financial losses and general trust issues.

Impersonation fraud can take many forms, from complex online schemes to traditional real-world impersonations through identity theft. Those behind it are often highly skilled at mimicking institutions, authorities, or even people close to the victim, making it a challenging problem. With the growth of technology, impersonation fraud has evolved into a multifaceted issue that affects not only individuals but also governments, businesses, and communities.

What Is Impersonation?

When an individual pretends to be someone else to steal sensitive information, gain unauthorised access, or exploit systems for financial or personal gain, it is called impersonation. This form of fraud can be conducted in various ways like identity theft, creating fake profiles, or account takeovers. Social engineering tactics are also used for impersonation to manipule victims into giving out information about themselves or giving access to accounts they otherwise wouldn’t. In this blog post, we’ll be exploring types of impersonation, and how to best protect yourselves against them.

What is an Impersonation Fraud?

Impersonation fraud is the act of convincing people to make payments or share personal and financial information with someone posing as a trustworthy source. These fraudulent schemes typically kick off with a phone call, text, email, or message that appears to be from a legitimate organization or person. The scammers might claim that the receiver’s bank account is in danger and insist on transferring their money to a 'secure' account.

Scammers deploy various tactics, including 'spoofing,' which makes their communication appear genuine. Such messages often lead to cloned websites that look nearly identical to a legitimate organization's site. They can even clone phone numbers and sender IDs to make their scam messages seem authentic. Social media is also a playground for these scams, with criminals sending messages or creating posts. When posing as a trusted person, scammers often fabricate situations that require urgent financial assistance, like being stranded in another country or having immediate debts or bills to pay.

To identify impersonation fraud, it is vital to watch for signs like urgent requests for personal or financial information, pressure to act immediately, social media content asking for urgent financial help, requests to transfer money to a 'safe' account, purchases of high-value goods or vouchers to cover fines or bills, and providing financial information for rebates. Being cautious and staying alert is the key, especially when email addresses have subtle differences from legitimate senders.

How Do Criminals Use Impersonation in Fraud Schemes?

Criminals use impersonation in many ways to trick individuals and companies into giving out personal details and money. One tactic that is common among fraudsters is CEO fraud or business email compromise (BEC). Fraudsters take over or imitate executive emails to plan out wire transfers or ask for changes in confidential payments. Spoofed phone calls and caller ID manipulation is also used to trick your employees into giving out one-time passwords. 

A more complex tactic, deepfake audio and video, can be used to mimic an executive’s voice or appearance. Using these resources, your employees can be forced into revealing sensitive information or making payments. Fake profiles are created by fraudsters to build trust over time, to then ask for money afterwards. Phishing and malware are heavily involved with impersonation tactics. Criminals use these by writing out deceptive messages to trick you into clicking links or opening attachments that will then install tools which can be used to get your sensitive information or take over your accounts. In 2024, 89% of phishing emails involved impersonation; Adobe was the most impersonated brand, followed by Microsoft. 

Common Types of Impersonating

Impersonation fraud encompasses various guises, each centered on exploiting trust and ensnaring unsuspecting victims. The fraudulent actors assume the roles of various entities, including authorities, banks, service providers, and even social media users. Familiarizing with the common impersonation types is pivotal for detecting and defending against this pervasive menace.

Most common types of impersonation attacks are executive impersonation, also known as CEO fraud, customer impersonation, synthetic identity fraud, and third-party impersonation. Our Sanction Scanner experts say that scams in which criminals impersonate businesses and government offices in the U.S. are consistently one of the top frauds reported to the FTC, leading to $2.95 billion in consumer losses in 2024.  We’ll now explore these impersonation attacks further to better inform our readers against them.

Authorities and Corporations

This type of impersonation involves scammers posing as both government officials and corporate members. In government circles, scammers may impersonate law enforcement officers or representatives from tax agencies, like HMRC, exploiting their supposed authority to manipulate people into revealing personal or financial data or making unauthorized payments. When it comes to corporations, these schemes encompass individuals falsely claiming to be high-ranking executives or employees of well-known companies. They exploit the trust associated with these organizations to manipulate unsuspecting individuals into handing over their money or sensitive information. Whether government or corporate, authority impersonation thrives on trust, making it crucial to exercise caution and verify the authenticity of any unexpected communication from such sources.

This type of fraud capitalizes on the perception of authority and can bring severe consequences to both individuals and institutions. Government officials and corporate members are attractive targets for impersonation, given the inherent trust they have in society.

Banks

Bank impersonation is a widespread type of deception that capitalizes on people's trust in financial institutions. In these cases, scammers skillfully pretend to be bank representatives, using this ruse to obtain sensitive personal and financial details or persuade victims into engaging in unauthorized financial transactions. These deceptive individuals typically make contact through various communication methods like phone calls, emails, or text messages, creating an appearance of legitimacy that fosters a sense of urgency. They may assert that the individual's bank account is at risk, requiring immediate action to safeguard their money. These manipulative tactics take advantage of the trust people place in their banks, emphasizing the need for individuals to carefully examine any unexpected communication and independently confirm its legitimacy to protect against potential financial losses.

Bank impersonation schemes can have serious consequences, potentially causing victims to lose significant sums of money and exposing them to the risk of identity theft. Fraudsters continually adapt their methods to stay ahead, underscoring the importance of individuals staying vigilant and using caution when facing unexpected requests for financial transactions or personal information coming from their bank.

Executive Impersonation (CEO Fraud)

Since it involves the impersonation of higher-ups in companies, this type of fraud is especially dangerous. Criminals will create fake email accounts or take over existing ones to act like your company’s executive. In 2024, 44% of phishing emails were sent from compromised accounts, helping them bypass authentication protocols.  They will then make requests which will send your employees into panic and benefit the criminals themselves. Approving wire transfers, sharing sensitive data, and overriding standard procedures using a false sense of urgency are among the most popular things these criminals will make employees complete. Since your employees will act according to the executive’s words, losses may be huge. 

Ozy Media co-founder Samir Rao testified in 2024 that he impersonated a YouTube executive using a voice modification software to try and secure an investment from Goldman Sachs in 2021, with the help of CEO and founder Carlos Watson. 

Deepfake Impersonation

Technology developments benefit criminals with their impersonation techniques as well. With the emergence of deepfake technology, which started as an innocent form of entartainment for the general public, criminals will create videos or audio files of influential people to mislead you. Your company executives’ voices can be replicated with these technologies, which is then used in video calls and urgent phone requests with your employees. Deepfakes are more convincing since It uses both sight and sound, different from emails or text messages.

Customer Impersonation

With this type, criminals are using stolen personal information like IDs, banks details, or login details to take over legitimate accounts. They can also create new accounts with these stolen details and apply for monetary help. Industries like banking, fintech, and e-commerce should be especially careful with customer impersonation to both ensure compliance against regulatory bodies and to not lose customers due to insufficient verification. 

Synthetic Identity Fraud

Synthetic identity fraud involves mixing real information stolen from someone else with fake details to create a new, unique but fake identity. Criminals may take your Social Security number but use fake names and addresses with it to ensure they pass verification checks. These identities can then be used to open accounts, and commit fraud in various ways.

Third-Party Impersonation

This category of fraud involves fraudsters posing as regulators, vendors, or other external parties. False invoices, fake compliance request, or counterfeit documents may come from these posers. This type uses the already established relationship your company has with external entities to get sensitive information or money from you.

Social Media

Social media impersonation is a widely used digital deceit strategy that capitalizes on the extensive reach and influence of online platforms to deceive people into disclosing personal data or participating in fraudulent actions. Scammers who utilize this type of fraud are skilled at using popular social media platforms such as Facebook, Twitter, and Instagram. It is crucial to grasp their tactics for safeguarding in the digital world.

Facebook

On Facebook, scammers create fake profiles that resemble those of friends or reputable sources. They frequently send urgent messages or seek personal data, often posing as familiar contacts to exploit the trust within social networks and deceive users.

Twitter 

Twitter impersonators replicate the profiles of celebrities, public figures, or credible accounts to trick users into taking actions that could lead to financial losses or security breaches. The fast-paced nature of this platform makes it a prime target for spreading false information or facilitating scams.

Instagram

Instagram is filled with deceitful accounts mimicking influencers and well-known brands. These impostors leverage the visual appeal of the content to persuade users to participate in fake promotions, fraudulent giveaways, or disclose personal information, potentially leading to financial and privacy risks. Remaining watchful is pivotal in thwarting these misleading tactics.

Which Industries Are Most Targeted by Impersonation Fraud?

Since these techniques we mentioned above can be widely used in several sectors, it is important to know how it can specifically impact your company and the sector you’re involved in. Banking suffers from impersonation because of the fake accounts opened for money laundering or the executive impersonation for wire transfers. When it comes to fintechs and telecom providers, they are mostly hit because of SIM swap scams and digital wallet takeovers where fraudsters use phone numbers to bypass 2FA controls. 

Healthcare is another sector affected by impersonation. Stolen medical identification details will enable criminals to take part in fake insurance claims and will give unauthorised access to sensitive records. Another sector is e-commerce platforms. Stolen payment cards can be used in these platforms, another way fraudsters try to benefit is by setting up fake deliveries where they then exploit return policies. 

What Are the Regulatory Requirements for Detecting Impersonation?

AML & KYC frameworks, GDPR and data privacy regulations, and FATF recommendations encourage your company with their regulations to prevent impersonation. These requirements are put in place to detect impersonation and ensure compliance; so, knowing more about them to later implement within your company’s systems is important.

AML & KYC Frameworks

Anti money laundering (AML) and Know Your Customer (KYC) frameworks encourage your company to have strong identity verification and risk assessment solutions. Customer Due Diligence (CDD) asks for the identification of every individual during onboarding, and Enhanced Due Diligence (EDD) is reserved for higher-risk customers and politically exposed persons (PEPs) who need extra controls. As a last step, ongoing monitoring ensures that your company flags every suspicious activity before actual financial crimes occur.  

GDPR and Data Privacy Regulations

Data privacy laws like GDPR in Europe demand compliance, and impersonation detection is an important part of reaching it. Strong protections for personal information can be achieved within your company by using encryption, secure storage, and controlled access. It is important to keep a balance of respecting privacy rights while also making sure you’re compliant and adhering to regulatory body requirements.

FATF Recommendations

The Financial Action Task Force (FATF) recommendations encourage companies to implement risk-based ID verification systems, use biometrics, secure digital onboarding, and ongoing monitoring. These are recommended in order to use them all to detect fraud within your company and prevent financial crimes overall. 

Why Is Impersonation So Hard to Detect?

Since the tools and techniques fraudsters use are getting more complex, detecting impersonation is getting harder. For example, deepfakes and AI-generated voices are newer techniques these criminals use, which make differentiating fake voices and videos from real ones more difficult. Forged and/or tampered documents are able to move through your company’s verification tools if the said tools are weak. Stolen credentials which mostly come from data breaches or phishing are used to create accounts and since these are stolen, it’s harder to detect by companies. Since firms are using legacy systems, it is easier for fraud to slip through. Similarly, weak identity verification processes are another reason why impersonation is difficult to detect and prevent.

What Are the Warning Signs of an Impersonation Attack?

There are some clues you can catch to be able to tell if you are getting scammed by impersonation techniques. The first one is urgent payment requests made mostly by seemingly executive people. This way, fraudsters may force your employees into agreeing to rushed transactions or sending out sensitive information. Another thing to watch out for is logins from unknown devices or unusual geographic locations. This shows that someone may have your customer’s login details. Repeated ID verification failures also may indicate that a criminal is repeatedly trying to login using stolen credentials.

How Can Businesses Protect Themselves Against Impersonation?

You can start by giving trainings about phishing scams to your employees. CEO frauds are widely popular, therefore, educating your employees about the red flags to watch out for will be for the benefit of your company. Another advice for your company is implementing multi-factor authentication (MFA). It adds an extra layer of protection where criminals will have trouble logging in even if they have your login details. Real time fraud analytics are also helpful for detecting unusual patterns in user behaviour, it then helps alert teams about impersonation attempts before fraud actually takes place. The final advice from our team to you is implementing strong KYC procedures. Steps like identity verification, document checks, and ongoing monitoring help you double check whether your customers are legitimate, and are stopping fraudsters from engaging with your systems.

What Happens If You Fail to Prevent Impersonation?

The first consequence for failing to prevent impersonation scams will be financial losses. These criminals are after your money, and not protecting your company well enough will result in losses. Since AML, KYC, and data privacy laws also regulate you to prevent impersonation, failings will come with financial penalties. Fines can go up to millions, especially if your due diligence and monitoring processes are weak. Reputational damage for both companies and individuals is a devastating result of impersonation. Your company may get hurt by losing inverstors’ trust.

Ways to Prevent Impersonation

Preventing impersonation fraud necessitates a blend of awareness, cautiousness, and practical measures. It is crucial to validate the source's legitimacy using official contact information. Educating oneself about the common impersonation types and their methods aids in recognizing warning signs. Moreover, implementing two-factor authentication, employing strong, unique passwords, and updating them regularly adds an extra security layer.

To safeguard themselves and their clients, organizations should incorporate robust identity verification procedures like customer due diligence (CDD), train staff to identify impersonation attempts and invest in fraud prevention solutions.

KYC Solutions

Sanction Scanner, a lead software designer in anti-money laundering (AML) compliance, delivers innovative Know Your Customer (KYC) solutions to help combat impersonation fraud for businesses and individuals alike. With a comprehensive database encompassing sanctions, PEPs (Politically Exposed Persons), and adverse media, Sanction Scanner's streamlined screening process empowers organizations to confirm the authenticity of their customers while staying within the bounds of regulations.

Sanction Scanner's KYC solutions are designed for flexibility and can be tailored to various industries. By leveraging its state-of-the-art technology, individuals and organizations can efficiently reduce the risks associated with impersonation fraud, either by contacting or requesting a demo today.