August 31, 2017 3:32 pm
Updated: September 1, 2017 1:49 pm

MacEwan University defrauded of nearly $12M in phishing scam

WATCH ABOVE: MacEwan University spokesperson David Beharry said an $11.8-million phishing scam came down to "human error." He said three relatively low-level staff were involved.

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MacEwan University said its IT systems are secure after the institution was defrauded of nearly $12 million in a phishing scam compounded by human error.

The university learned it was the victim of an attack last Wednesday, Aug. 23 after a series of fraudulent emails “convinced university staff to change electronic banking information for one of the university’s major vendors.”

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On Friday, Clark Builders — an Edmonton construction and contracting company — confirmed it was the vendor fraudsters posed as in the online attack.

READ MORE: How to avoid email phishing scams

The fraud led university staff members to transfer $11.8 million to a bank account they believed belonged to the vendor, the university said.

MacEwan University spokesperson David Beharry said three relatively low-level staff members were involved in the transfer. He said there was no process in place which required staff members to phone the vendor to confirm the request to change banking information, but that will change.

“We are looking at the levels of staffing it must go through for authorization before somebody changes that,” he said. “There is going to be a secondary and tertiary level of approval before this goes on.

“This incident was a result of human error resulting from a phishing attack.”

Beharry said three separate payments, ranging from $22,000 to $9.9 million, were made to the vendor between Aug. 10 and Aug. 19.

“What we were able to find out is, there were approximately 14 construction firms in the Edmonton area that were targeted,” Beharry said.

“The fraudsters produced these fake domains about these 14 organizations. The organizations would not have any knowledge that somebody is phishing.”

Beharry said all personal and financial information, and all transactions made with the university, are secure.

“The university does not believe there has been any sort of collusion. We really believe this is simply a case of human error, but there is an ongoing investigation.”

READ MORE: Summertime temporary workers may be fooled by common business scams

More than $11.4 million of the money has been traced to accounts in Canada and Hong Kong. The university said the funds have been frozen while it works with lawyers in an attempt to recover the money.

Beharry said the university is confident it will get the money back.

“It’s a question of: how long will it take for the university to retrieve that money?”

The rest of the money is still missing. Beharry admitted this “shouldn’t have happened in the first place.”

“I think twice about this, too, and I go, ‘How?'” And that’s why we need to fully investigate, because we need to get to the bottom of this to make sure it doesn’t happen again,” he said.

“I think it’s safe to say that there was a lot of disappointment and frustration. Because this came down to human error.”

WATCH BELOW: Security expert David Papp weighs in on MacEwan University falling victim to $12M phishing scam

READ MORE: A Gmail phishing scam is tricking users into handing over their private info

The president of Kick Point, an Edmonton digital marketing and web design agency, said she was “flabbergasted” when she heard about what happened at MacEwan.

“I’m really shocked that an institution this large could be taken by a scam like this and in such a large amount,” Dana DiTomaso said.

“It’s still a huge amount of money for someone to almost get away with without a lot of oversight and controls.”

She said there’s a perception that phishing scams mainly target personal information, like credit card and password information, but they also affect businesses.

“I think it’s more common than people let on because it doesn’t necessarily get the same kind of attention,” she said. “If a business loses a bunch of money, they’re either a private business and they don’t want to talk about it because it’s embarrassing, or they’re a public business and they have to talk about it but they don’t really want to.

“You don’t hear about the volume of issues that come up on a day-to-day basis.”

The most important advice she can give to anyone in a situation like this is to think twice.

“Think twice before you transfer a bunch of money to somebody else. If it seems iffy, if someone is asking you to do something different than what you would normally do – which is the case here or what seems to be the case here – then check in with somebody else, check in with a bunch of people.”

WATCH BELOW: Serious questions are being raised after MacEwan University fell victim to a $12M phishing scam. Vinesh Pratap reports:

After the fraud was discovered, MacEwan conducted an audit of university business processes. Officials said “controls were put in place” to prevent similar incidents from happening.

Beharry said the university provides information to its staff, students and faculty about these types of scams and other cyber-security related issues. He said it’s important that the university reinforce its messaging.

External experts have been brought in to help the university in its investigation. The university said preliminary investigations reveal that controls in place around the process of changing vendor banking information were inadequate, and that a number of opportunities to identify the fraud were missed.

MacEwan University said final results of the review are expected within a few weeks.

The minister of advanced education and the officer of the auditor general have been made aware of the situation.

Advanced Education Minister Marlin Schmidt said he’s “very disappointed” the university fell victim to the crime, adding he’s instructed all university board chairs to review their financial controls.

“This is unacceptable and I’ve asked the board chair to report back to me by Sept. 15 with details on how this occurred,” Schmidt said in a statement.

“While I’m told that MacEwan has put improved internal financial controls to help prevent it from happening again, I expect post-secondary institutions to do better to protect public dollars against fraud.”

Beharry said it’s too early to say whether the staff members will be disciplined.

© 2017 Global News, a division of Corus Entertainment Inc.

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