Masquerading occurs when the name or location of an executable, legitimate or malicious, is manipulated or abused for the sake of evading defenses and observation. Several different variations of this technique have been observed.
One variant is for an executable to be placed in a commonly trusted directory or given the name of a legitimate, trusted program. Alternatively, the filename given may be a close approximation of legitimate programs. This is done to bypass tools that trust executables by relying on file name or path, as well as to deceive defenders and system administrators into thinking a file is benign by associating the name with something that is thought to be legitimate.
In another variation of this technique, an adversary may use a renamed copy of a legitimate utility, such as rundll32.exe.  An alternative case occurs when a legitimate utility is moved to a different directory and also renamed to avoid detections based on system utilities executing from non-standard paths. 
An example of abuse of trusted locations in Windows would be the
C:\Windows\System32 directory. Examples of trusted binary names that can be given to malicious binares include "explorer.exe" and "svchost.exe".
Another variation of this technique includes malicious binaries changing the name of their running process to that of a trusted or benign process, after they have been launched as opposed to before. 
The CozyCar dropper has masqueraded a copy of the infected system's rundll32.exe executable that was moved to the malware's install directory and renamed according to a predefined configuration file.
OwaAuth uses the filename owaauth.dll, which is a legitimate file that normally resides in
New services created by RawPOS are made to appear like legitimate Windows services, with names such as "Windows Management Help Service", "Microsoft Support", and "Windows Advanced Task Manager".
The Remsec loader implements itself with the name Security Support Provider, a legitimate Windows function. Various Remsec .exe files mimic legitimate file names used by Microsoft, Symantec, Kaspersky, Hewlett-Packard, and VMWare. Remsec also disguised malicious modules using similar filenames as custom network encryption software on victims.
Shamoon creates a new service named "ntssrv" that attempts to appear legitimate; the service's display name is "Microsoft Network Realtime Inspection Service" and its description is "Helps guard against time change attempts targeting known and newly discovered vulnerabilities in network time protocols."
To establish persistence, SslMM identifies the Start Menu Startup directory and drops a link to its own executable disguised as an "Office Start," "Yahoo Talk," "MSN Gaming Z0ne," or "MSN Talk" shortcut.
Some Volgmer variants add new services with display names generated by a list of hard-coded strings such as Application, Background, Security, and Windows, presumably as a way to masquerade as a legitimate service.
When creating security rules, avoid exclusions based on file name or file path. Require signed binaries. Use file system access controls to protect folders such as C:\Windows\System32. Use tools that restrict program execution via whitelisting by attributes other than file name.
Identify potentially malicious software that may look like a legitimate program based on name and location, and audit and/or block it by using whitelisting  tools like AppLocker   or Software Restriction Policies  where appropriate. 
Collect file hashes; file names that do not match their expected hash are suspect. Perform file monitoring; files with known names but in unusual locations are suspect. Likewise, files that are modified outside of an update or patch are suspect.
If file names are mismatched between the binary name on disk and the binary's resource section, this is a likely indicator that a binary was renamed after it was compiled. Collecting and comparing disk and resource filenames for binaries could provide useful leads, but may not always be indicative of malicious activity. 
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