One of the most insidious forms of online crime is cyber extortion. Cyber extortionists use varied methods, but all involve coercing victims into paying for the return of their data or for attacks to stop.
Read on for a clearer understanding of what cyber extortion is, as well as what your business clients can do to defend against it.
What Is Cyber Extortion?
The simplest cyber extortion definition is like the definition of extortion in general: “the crime of obtaining something from someone, especially money, by using force or threats.” Cyber extortion is thus an old crime’s 21st-century guise.
It starts when threat actors gain unauthorized access to a system or network. They then demand payment in exchange for rectifying the situation.
Victims can face significant financial losses, recovery costs, and reputational damage. In 2024, the average cost of data exfiltration extortion, for example, reached $5.21 million per incident.
Three Common Cyber Extortion Methods
Cyber extortionists carry out several kinds of attacks. Here are three of the most common:
Ransomware Attacks
In a ransomware cyber extortion attack, threat actors deploy malicious software to encrypt data. This malware renders data inaccessible until victims pay a ransom demand, typically in cryptocurrency, for the decryption key.
Victims often face immense pressure to pay. Recovery costs can be exorbitant, and the longer their business interruption lasts, the more significant their financial losses.
Cyber criminals use sophisticated ransomware variants that are harder to detect and remove. And the ransomware-as-a-service (RaaS) model lets even those with limited technical skills launch ransomware attacks.
Data Breach Extortion
Data breach extortion occurs when criminals gain unauthorized access to sensitive information and threaten to publicly disclose or sell it unless victims pay.
Threat actors frequently threaten to release stolen data if victims don’t make additional payments, a crime known as double extortion. Further, triple extortion involves pressuring third parties associated with the victim, such as clients or partners.
DDoS Attacks
Cyber extortionists use Distributed Denial of Service (DDoS) attacks to overwhelm network resources. By flooding a server with a massive volume of traffic, these attacks can cripple an organization’s online presence.
Criminals may threaten continued disruption if their demands go unmet. Persistent DDoS attacks can lead to excessive downtime, significant financial losses, reputational damage, and legal ramifications for organizations unable to maintain service availability.
Types of Cyber Extortion Tactics
To execute their plans, cyber extortionists rely on a variety of specific techniques. Understanding these tactics is fundamental in defending against them.
Social Engineering
Social engineering exploits human psychology to gain sensitive information, access, or resources. Cyber extortionists will trick people into providing confidential information or performing actions that compromise their security.
Specific social engineering methods include:
- Phishing: Sending deceitful emails or messages seemingly from legitimate sources, prompting victims to click on malicious links or give up personal information or access credentials.
- Pretexting: Creating a fabricated scenario to get information from the target, such as impersonating a colleague or authority figure.
- Baiting: Offering something enticing (like free software or prize) to lure victims into providing information or downloading malware.
Business Email Compromise (BEC)
Business Email Compromise (BEC) involves hacking or spoofing corporate email accounts to trick employees into performing unauthorized transactions or divulging sensitive company data.
Distinguishing features of BEC include:
- Impersonation of Executives: Cyber criminals may impersonate high-ranking executives to instruct employees to execute wire transfers.
- Invoice Manipulation: Threat actors may alter legitimate invoices or fabricate invoices entirely, redirecting payments to other accounts.
- Data Breach Exploitation: Criminals may use compromised data from past breaches to establish credibility.
The Impact on Businesses
The often severe impacts businesses face from cyber extortion include:
- Financial Impact: These attacks often lead to direct financial losses in the form of ransom payments, which can reach hundreds of thousands or even millions of dollars. Furthermore, recovery costs can escalate, involving IT repairs, updated security measures, and potential legal fees.
- Reputational Damage: A cyber extortion incident can severely damage a company’s reputation, leading to loss of customer trust and potential downturns in market value.
- Operational Disruptions: Cyber criminals can paralyze business operations, affecting productivity and service delivery.
- Intellectual Property Theft: Businesses risk losing valuable intellectual property, potentially compromising sensitive research, proprietary information, and strategic plans.
Effective Prevention Strategies
Any organization with a digital footprint must implement effective strategies to minimize the risk and impact of cyber extortion. Here are some appropriate and effective strategies:
Conducting Employee Training and Awareness
Companies must regularly train employees to recognize phishing attempts, suspicious links, and other cyber threats. Hosting workshops and simulated attacks can help raise awareness and create a culture of vigilance.
Providing Regular Software Updates and Patching
Threat actors continually seek vulnerabilities in outdated software. By regularly—and, whenever possible, automatically—updating and patching systems, organizations can close security gaps and protect against unauthorized access.
Implementing Strong Security Protocols
Organizations should employ robust cyber security measures: multifactor authentication (MFA), firewalls, and intrusion detection systems, among others. Segmenting networks also limits the spread of malware if a breach occurs. Routine audits and risk assessments can identify potential vulnerabilities in security infrastructure.
Developing a Response Strategy
An incident response plan outlines steps to take if a breach occurs. These steps include using established internal and external communication protocols, isolating affected systems, assessing the threat, and notifying stakeholders. Regularly conducting drills ensures every team member knows their role, minimizing confusion during an actual attack.
The Role of Cyber Liability Insurance
One more proactive step organizations can take is carrying Cyber Insurance.
Certainly, Cyber Liability Insurance is more than “cyber extortion insurance.” It offers comprehensive protection encompassing various risks associated with many types of cyber incidents.
Yet these policies can be especially valuable in the event of cyber extortion. Cyber Insurance can cover recovery costs, legal fees, and potential financial losses associated with an attack.
Policies typically also offer access to cyber security experts to aid in rapid recovery and system reinforcement, as well as provide guidance on preventing future incidents.
When looking for cyber extortion coverage, businesses should assess their risk and need for coverage tailored to specific threats. They should take time to understand all terms and conditions, including coverage limits and exclusions.
At ProWriters, we give our registered brokers access to powerful technology that makes researching, quoting, and selling Cyber Liability Insurance simpler and faster. We also provide educational resources and ongoing, expert support to help you develop a strong and successful book of Cyber business.
