At a media conference held on the afternoon of Aug. 15, city manager Jeff Jorgenson said a fraudster electronically impersonated the chief financial officer (CFO) of a prominent local construction company and asked for a change in banking information.
“The city complied and as a result, the next (contract) payment intended to go to that company, approximately $1.04 million, was transferred to the fraudster’s bank account,” Jorgenson said.
“We have no reason to believe that the (construction) company, that this is propagated past the city, we believe that the name used is targeted at the city … what this was about was effectively identity theft of a real person from an outside agency, the fraudster, so their impersonation of a CFO led to this,” Jorgenson said.
The fraudulent activity started a handful of weeks ago, according to Jorgenson.
The city said it notified its internal auditor, Saskatoon Police Service (SPS) and other authorities including banking institutions, after discovering the fraudulent activity on Aug. 12.
SPS’s economic crime unit issued a public advisory on Aug. 13 about scammers targeting human resources (HR) and finance departments via email.
This scam had tricked employees into changing the bank account and routing information so that people’s paycheques are deposited into accounts controlled by fraudsters.
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“It’s very similar, an identity theft type of fraud scheme. In this case, it was involving the company’s financial information and I think, in addition to that concern, police have also issued statements on … people impersonating employees and electronically asking for the banking information change and the employees’ paycheque goes to the wrong account,” Jorgenson said.
“A number of companies and municipalities are getting targeted, for sure.”
Jorgenson said the city’s focus at this time is on the recovery of the taxpayer money.
“Through the last few days, we’ve talked to a number of experts who we’ve engaged to help us with the fund recovery. Definitely, it’s a challenge. There’s no guarantee that any of the funds can be recovered or if portions of the funds can be recovered or what portion,” he said.
“We’re doing everything we can to recover as much funding as we possibly can … we’re chasing down every lead, cautiously optimistic that we will be able to recover a significant portion of the funds but it’s early days.”
According to Jorgenson, the city has external and internal experts pouring over financial processes to do everything reasonably possible to protect the city from further attacks.
“The city did have controls in place, it’s not a case where this was an uncontrolled situation, this was a case where there was an identity theft … and our controls missed that — the imposter,” he said.
“Internal and external staff who are experts in this area are reviewing all financial processes and controls in this area to hunker down and make sure that the city is as fortified as we possibly can against future attacks. Because the attacks are always there, they’re always changing. The fraudsters are becoming more and more sophisticated and our controls and systems have to become more and more sophisticated as well.”
“A public agency like the city, all of our contracts are public information, a lot of information is available on our website, people know a lot about the city so, therefore, our controls have to be very very tight in order to protect against these types of attacks.”
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The construction company still has to be paid, city officials said.
The fraud investigation is ongoing. Jorgenson said there will be an HR internal investigation as well.