A new report from the Office of the Inspector General (OIG) reveals that a cyber-criminal posing as a vendor duped Baltimore city out of hundreds of thousands of dollars last year. In October 2021, the OIG initiated an investigation after obtaining information from Baltimore's Bureau of Accounting and Payroll Services (BAPS) about an alleged fraudulent Electronic Funds Transfer (EFT). The Mayor's Office of Children and Family Success (MOCFS) issued the Vendor with EFT payment funds.
BAPS and MOCFS were contacted by email on December 22, 2020 and January 7, 2021, from an email address linked with an employee of the Vendor firm, asking for a change to its EFT remittance details. On December 16, 2020, the email linked with the Vendor Employee sent BAPS a Vendor Payment & Electronic Funds Transfer Form.
The OIG later determined that the Vendor Employee's email account had been hacked by a malicious actor who had set up rules within the Vendor Employee's email account as a result of a phishing assault. As a result, the malicious actor was able to correspond with City workers without the Vendor's awareness.
On January 5, 2021, the fraudster contacted MOCFS and BAPS once more, this time requesting that the funds be transferred to a new account at a third financial institution. As verification, the fraudster sent a bank letter and a copy of a voided check with the same details as the third account. BAPS paid $376,213.10 into the third account on January 7, 2021, believing the fraudster's assertions.
The OIG discovered that BAPS employees do not have access to a list of authorized signatories for vendors and must rely on the information given by representatives from City agencies. Furthermore, instead of independently validating information and requests, BAPS relied on MOCFS to assist the request and accepted an incoming phone call from someone pretending to be the Vendor's Chief Financial Officer.
In his response to this report, Director of Finance Henry Raymond notified the OIG that new protocols had been implemented requiring Department of Finance (DOF) workers to independently verify bank changes with an executive-level employee. DOF has also devised processes to exclude City agencies from vendor accounting procedures.
