The Real Cost of eSignature Fraud: Financial, Legal, and Brand Damage

Electronic signatures have made signing documents fast, remote, and paperless—but convenience can carry risk. In 2017, attackers stole a list of DocuSign user emails and used it to send phishing links disguised as legitimate signing requests. Clicking those links downloaded malware that harvested login credentials from Chrome, Outlook, and FileZilla, as detailed in a report from McAfee Labs. DocuSign quickly responded with security updates, but the incident highlighted how easily electronic signature fraud can begin—and how quickly trust can unravel.

Electronic signature fraud is no longer just a technical issue. It’s a serious financial and reputational threat. In this guide, we’ll explore how these attacks happen, the hidden costs they create, and how organizations can prevent them before real damage is done.

Understanding eSignature Fraud

At its core, electronic signature fraud occurs when someone signs a document using another person’s identity or credentials—without authorization. In the digital world, bad actors may exploit weak authentication, compromised logins, or insecure workflows to place a fraudulent eSignature on legally binding agreements.

Even though most eSignature platforms offer encryption and tamper-evident features, bad actors can still find gaps if organizations fail to adopt robust security measures.

Common scenarios of electronic signature fraud:

1. Ex-employees using still-active and valid login credentials to authorize transactions.

2. Hackers forging eSignatures after stealing login data via phishing.

3. Internal staff bypassing approval workflows by faking electronic signatures.

According to PwC’s Global Economic Crime and Fraud Survey 2024, procurement fraud and cybercrime remain major concerns for businesses globally. The survey reports that 55% of companies consider procurement fraud common, highlighting vulnerabilities in electronic signature workflows and how easily weak eSignature systems can be exploited. While 59% of companies assess fraud risks each year, many still lack strong protection against digital fraud. 

Weak digital signature controls can cause major financial and reputational damage, so strong security and fraud detection are essential.

Financial Consequences Go Beyond Immediate Losses

When electronic signature fraud occurs, the most obvious concern is direct monetary damage. A single forged signature might authorize a high-value transaction or initiate a binding contract—but the long-term costs often multiply:

1. Legal expenses: Defending against claims or proving the eSignature forgery and fraud in court can be costly.

2. Fines or judgments: If a court decides the organization is responsible for negligence, it may face penalties or sanctions.

3. Investigation costs: Forensic specialists and IT auditors are often needed to assess system compromise.

4. Suspended operations: Operations may need to pause while fraud is investigated, affecting revenue and customer confidence.

And when multiple fraudulent agreements surface, the cleanup process can become even more expensive—and time-consuming.

Reputational Damage and Loss of Trust

While financial losses may be recoverable, brand trust is harder to rebuild. News of eSignature fraud can create lasting doubts among clients, partners, and investors. Questions may arise: Is this company protecting sensitive data? Are its internal controls effective?

Worse still, if fraud becomes public, regulators may increase scrutiny—adding pressure, cost, and risk. Competitors may also use the incident to win over concerned partners or customers.

Once trust is lost, restoring it takes far more time—and effort—than preventing the electronic signature fraud in the first place.

How to Detect and Prevent Electronic Signature Fraud

Modern eSignatures don’t rely on handwriting—they rely on digital validation. While stroke analysis doesn’t apply, modern eSignature platforms rely on digital certificates, timestamps, and unique user credentials to validate authenticity. 

Here are key ways organizations can strengthen signature fraud detection:

1. Multi-factor authentication (MFA): Requiring biometrics, device-based codes, or one-time tokens can prevent unauthorized sign-ins.

2. Detailed audit trails: Systems that log the IP address, device info, and geolocation help confirm that the signer truly matches the user account.

3. Encryption and hashing: Use cryptographic tools that reveal if a document or signature has been altered.

4. AI fraud detection: Machine learning tools can flag anomalies that indicate suspicious behavior.

5. Regular access reviews: Remove access for ex-employees and periodically audit permissions to ensure only the right people can sign.

Legal Consequences of Forging an eSignature

In most jurisdictions, forged electronic signatures are treated as seriously as handwritten forgeries. The U.S. ESIGN Act and UETA confirm that electronic signatures are legally binding—and courts can impose civil or criminal penalties when they’re misused.

Punishments may include:

• Fines,

• Lawsuits,

• Termination of contracts,

• In severe cases, imprisonment.

You can learn more about legal risks of forgery and fraud from the U.S. Department of Justice.

Proactive Steps to Mitigate Risks and Protect Your Business

Reducing electronic signature fraud risks requires more than installing an eSignature platform. It demands a security-first culture, strong policies, and the right tools.

Here’s how to strengthen the defense:

1. Implement strict authentication: Require more than passwords. Use biometrics, smart cards, or one-time codes for high-risk transactions.

2. Support your team: Educate employees about phishing, account hygiene, and verifying the signers.

3. Engage leadership: Ensure top-level support for fraud prevention efforts and regular policy reviews.

4. Adopt reputable and secure eSignature solutions: Use a solution like SecureSign—with advanced audit logging, secure cryptography, and signer identity authentication.

5. Audit activity: Monitor alerts for irregular signing patterns and periodically review logs to see if any signature event stands out as suspicious.

6. Insure against cybercrime: Explore insurance policies that cover digital fraud and recovery costs.

Conclusion

Electronic signature fraud introduces hidden costs that extend beyond direct financial hits. It can trigger legal battles, customer churn, damaged partnerships, and long-term loss of trust. As the threat landscape evolves, businesses have to go beyond basic compliance and take a proactive approach to securing their electronic signature workflows. That means combining technology, policy, and awareness.

eSignatures should enable speed—not introduce risk. With the right protections in place, your business can benefit from digital transformation without compromising trust, legality, or security.

Don’t leave your business exposed

SecureSign helps organizations prevent eSignature fraud with built-in identity verification, tamper-proof audit trails, and proactive fraud detection—giving you confidence that every signature is secure, compliant, and verifiable.

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