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Finance glossary

What is a masquerade attack? Real-life attacks & how to protect yourself

Bristol James
6 Min

A masquerade attack is a harmful and deceptive tactic where malicious actors gain access to a network, system, or device by using stolen credentials or login information. By sidestepping the digital infrastructure that’s in place and convincing authorization checks that they are an authorized system user, hackers can manipulate business transactions, commit financial crimes, and halt business operations.

Unlike many other cyberattacks, masquerade attacks don’t focus on vulnerabilities within the system itself, but rather, focus on vulnerabilities regarding the people who use the system. Getting their hands on stolen login information or using a phishing email to gather enough information to enter a network under another person’s login is just the beginning of a masquerade attack; once the target systems are compromised, the potential for damage is nearly limitless.

How do masquerade attacks happen?

Having an organization that understands different cybersecurity attacks and works proactively to prevent them is one of the best security tools available to businesses. With that in mind, breaking down the events that lead to harmful cyberattacks is crucial. When it comes to masquerade attacks and the malicious activities that go with them, here’s what an attack might look like:

  1. The malicious actors (AKA hackers) identify a target system or network that they’d like to break into. Then, they figure out the best way to break into the system. It could be a falsified certificate, login credentials from a user, spoofed device, or other method. Let’s say they decide to go with using stolen credentials from an authorized user.
  2. The hacker will likely send a phishing email or use some other deceptive tactics to gather usernames and passwords, specific IP addresses, and other information that they may need to get into the target system.
  3. A malicious actor will carefully use digital tools and manual strategies to evade detection once they’ve entered the network device. The longer they are able to stay in the network without detection, the more damage they can do.
  4. Once they’re in, the possibilities are extensive. They may change payment channels to direct business payments to their own bank accounts, install ransomware in the network to later hold the organization hostage, or they might even download sensitive data to further exploit.
  5. Generally, once they’ve done what they came to do, they’ll slip out of the system, undetected if possible. However, before they leave, they will probably set up an easier way to gain entry to the system in the future, opening your organization up to ongoing threats.

It’s important to note that masquerade attacks can be perpetrated by external malicious actors or internal hackers who are looking to exploit your organization’s network for some reason.

Downstream implications of a masquerade attack

Masquerade attacks, when successful, are sure to have long-lasting impacts on a business. The downstream implications of these types of attacks are extensive, often resulting in one or more of the following:

  • Financial loss due to system recovery, ransom payments, legal fees, and more.
  • Reputational damage is almost always a given; if your customers can’t trust you to keep their sensitive data safe, they won’t want to work with you moving forward. This can also impact your relationship with vendors and suppliers.
  • Sensitive data can be collected and used down the line to perpetuate fraud, identity theft, and the exploitation of individuals and businesses within your ecosystem.
  • Intellectual property or trade secrets can be stolen and used by these malicious actors.
  • Organizations can experience days, weeks, and even months of downtime due to masquerade attacks. Production machines can be shut down, SaaS business tools can be crippled in an instant, and extensive downtime can even result in bankruptcy.
  • The government or regulatory bodies in an industry may find this breach as a compliance issue, putting any licensure or certifications at risk.

Notable masquerade attacks

Target Attack

The large retailer that we all know and love experienced a data breach in 2013 that resulted in 70 million compromised records and a leak of more than 40 million customers’ sensitive data. The malicious actors actually used employee credentials from Target’s HVAC contractor to log into the store’s vendor and supplier services portal. With that access point, the hackers got into the Active Directory administrator and created a new domain administrator account, giving themselves untethered access to Target’s IT infrastructure and business systems.

Equifax Data Breach

In 2017, Equifax — the consumer credit reporting agency that has key financial records and sensitive information for millions of Americans – was hacked through its online complaint portal. Although a masquerade attack wasn’t the initial type of cyberattack used, the method was employed down the line when the hackers saved user passwords in plaintext format and used those to perpetrate crimes.

Protecting Against Masquerade Attacks

The outcome of masquerade attacks, or any cyberattacks, is never good. As hard as organizations and their disaster response teams work to stop an attack once it starts, the best methods to mitigate cyber-related risks are preventative. All organizations should have:

AI-Based Intrusion Detection Systems

Organizations can deploy AI-based intrusion detection systems to continuously monitor network traffic and user behavior for signs of suspicious activity indicative of masquerade attacks.

Two-Factor Authentication (2FA)

Implementing 2FA adds an additional layer of security beyond just passwords by requiring users to provide a second form of verification, such as a temporary code sent to their mobile device or generated by an authenticator app. This mitigates the risk of masquerade attacks by making it significantly more difficult for attackers to gain unauthorized access, even if they have compromised a user’s password.

Strict Password Rules

Enforcing strict password rules, such as requiring complex passwords that are regularly updated, can help prevent masquerade attacks. Diligent password rules make it harder for a malicious actor to get their hands on authorized credentials.

Digital Code-Signing

Digital code-signing ensures that the authenticity and integrity of a code script are intact prior to execution. When applications or system updates are digitally signed, business leaders can feel confident that only trusted and authorized software is running in their network.

Cybersecurity Training for Employees

By educating staff about the importance of verifying the identity of individuals and being vigilant against social engineering tactics, organizations can empower employees to play an active role in preventing masquerade attacks and maintaining overall security posture.

Reliable Business Systems

There are many third-party applications designed to protect organizations from cyberattacks and fraud. Secure payment systems like Eftsure that have the right protective measures in place can play a big role in preventing cyberattacks. Remember, every system on your network is a potential vulnerability, so be sure to conduct due diligence into the security of any third-party application that’s in use.


  • A masquerade attack involves malicious actors gaining access to systems by using stolen credentials and bypassing security measures to manipulate transactions and halt operations.
  • Successful masquerade attacks result in financial losses, reputational damage, data theft, downtime, and compliance issues, impacting businesses, customers, and business partners.
  • No organization is immune to masquerade attacks or cybersecurity attacks in general. There is no such thing as “too small” or “too big” when it comes to these attacks; there are vulnerable systems, hackers, and negative outcomes in every industry and business niche.
  • To prevent masquerade attacks, organizations should employ AI-based intrusion detection systems, implement two-factor authentication, enforce strict password rules, utilize digital code-signing, provide cybersecurity training for employees, and ensure the reliability of business systems and third-party applications.

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