Payroll fraud has become one of the fastest-growing cyber risks facing businesses today especially small and medium-sized organizations that rely heavily on email for day-to-day communication. One of the most common schemes we continue to see involves a fraudster emailing the payroll administrator while impersonating an employee, claiming they need to update their direct deposit or change their banking information. The request usually sounds urgent, polite, and completely believable. Without proper verification procedures in place, it can be surprisingly easy for a payroll team to unknowingly reroute an employee’s pay to a criminal’s account.
These attacks are not random. Fraudsters often study a company’s structure, employees, and communication style before making a move. Many obtain staff names from public websites, LinkedIn, or even past data leaks. They craft emails that closely resemble the writing tone of the employee they are pretending to be. In some cases, they even spoof the employee’s email address, making the message appear legitimate at first glance. The goal is simple: get just one payroll change approved.
What makes this type of fraud so dangerous is how ordinary it looks. Payroll change requests are common and rarely raise suspicion. A fraudster may write, “I recently switched banks and need my payroll updated before the next pay run,” or “Here is my new direct deposit information please confirm once updated.” Because these messages sound routine, many administrators process them quickly to keep payroll on schedule. It only takes one rushed decision for a company to lose several pay cycles’ worth of wages.
Once the funds leave your business account and land in the fraudster’s account, the money is typically withdrawn or transferred immediately. Most banks cannot reverse the transaction, leaving employers responsible for recovering the lost wages and issuing replacement pay to the affected employee. This turns a simple email mistake into a costly and time-consuming problem.
Fortunately, preventing payroll impersonation fraud is entirely possible with the right controls. The most effective safeguard is simple: never process a payroll change based solely on an email request. Every change to employee banking information should require independent verification. This can be done through a phone call to the employee using a number already on file not one provided in the email or through a secure payroll portal where staff must log in to submit changes. Even a short verification step can stop an attack instantly.
Employers should also train staff to recognize the warning signs of fraudulent requests. Poor grammar, unusual tone, unfamiliar urgency, or email addresses that look slightly “off” may all be indicators of a scam. Additionally, administrators should be wary of employees requesting major changes outside regular payroll times, or insisting that a change must be made “immediately.” Fraudsters often apply pressure to reduce the chance of careful review.
Organizations can further protect themselves by implementing clear internal policies around payroll updates. Establishing a documented approval process, restricting who can make changes, and using multi-factor authentication for payroll systems all help strengthen security. Regular reviews of payroll access rights and periodic audits can also help ensure that no unauthorized changes slip through unnoticed.
While cyber threats continue to evolve, the foundation of fraud prevention remains the same: awareness, verification, and strong internal controls. As these impersonation attacks become more sophisticated, businesses must stay proactive in protecting their payroll systems. A few extra minutes of verification can prevent thousands of dollars in losses and help maintain the trust and financial stability of your team.
At Seniuk and Marcato, Chartered Professional Accountants, we regularly assist clients in identifying risks, improving internal controls, and responding to potential payroll fraud incidents. If you have questions about strengthening your payroll processes or implementing safer verification procedures, our team is here to help.
