In a March 12, 2026 Public Service Announcement (PSA), the FBI warned that residential proxy networks can route criminal internet traffic through compromised devices in homes and small businesses, making the activity appear to come from an ordinary user instead of the real attacker (FBI IC3 PSA).
That matters more than it may seem at first glance. For many organizations, the line between “home” and “business” technology is thin. Employees work remotely, owners manage operations from smartphones and tablets, and small offices often rely on consumer-grade routers, streaming devices, and other Internet of Things (IoT) equipment that may not be monitored closely.
The result is a practical business risk. If an attacker abuses a compromised device on a home or small business network, it can create security, operational, and reputational problems. Understanding how these proxy networks work is the first step toward reducing the exposure.
What Is a Residential Proxy Network?
A residential proxy uses a legitimate internet address assigned by an Internet Service Provider (ISP) to make traffic look like it is coming from a normal household or small business connection. On its own, proxy technology is not always malicious. The concern comes when criminals route traffic through devices without the owner fully understanding or approving what is happening.
According to the FBI, threat actors use residential proxies to hide their identities and locations by routing traffic through internet-connected devices such as routers, TV streaming devices, digital picture frames, smartphones, and tablets. When that happens, the victim’s device or network can appear to be the source of suspicious activity.
For business leaders, the key takeaway is simple: a normal-looking internet connection can be used as cover for fraud, phishing, account abuse, malware operations, and other criminal activity.
Why This Matters to Businesses
Many companies think of proxy abuse as a consumer problem. In practice, it affects business operations too, especially for small and midsize organizations with remote staff, branch offices, shared Wi-Fi, or lightly managed connected devices.
Here is why this deserves attention:
- It blurs the line between home and business risk. A compromised router or streaming device on a home office network can still affect a work-from-home employee.
- It makes investigations harder. Residential proxies help attackers blend in with normal traffic, which can delay detection and response.
- It can increase fraud exposure. The FBI notes that proxy networks can be used to support phishing, account takeovers, fake account creation, and illicit purchases.
- It creates avoidable operational risk. Infected or misused devices may signal weak patching, poor device hygiene, or unmanaged software on the network.
This is especially important for organizations that handle sensitive customer data, support online transactions, or depend on uninterrupted connectivity for daily operations.
How Devices End Up in These Networks
One of the more useful parts of the FBI alert is that it explains how ordinary devices can become part of a residential proxy network. In many cases, the user does not realize what they agreed to or that the device has been compromised.
The PSA highlights several common paths:
- Free apps with hidden software development kits (SDKs): Some app developers include background components that route proxy traffic through user devices.
- Free virtual private network (VPN) services with unclear terms: A free VPN may quietly enroll a device into a proxy network through terms most users never read.
- Compromised IoT devices: Some devices may ship with malicious software or become infected through insecure software downloads.
- Pirated or unofficial content: Free movies, software, sports streams, games, and torrents can carry malware.
- Passive income schemes: Some services offer payment for internet bandwidth without clearly explaining how that connection may be used.
This is one reason basic device hygiene matters so much. The risk is not limited to traditional workstations. A streaming box, smart display, or old tablet on the same network may create a path for abuse.
Practical Steps to Reduce the Risk
The FBI’s recommendations are practical, and most organizations can act on them right away. The goal is not to eliminate every internet-connected device. It is to reduce the chance that a poorly managed device becomes someone else’s tool.
Start with these priorities:
Secure the devices people forget about
Routers, smart TVs, streaming sticks, tablets, picture frames, and similar devices are often added to a network and then ignored.
Create a simple inventory of:
- Home office routers
- Streaming devices
- Tablets used for work apps
- Smart displays or picture frames on office Wi-Fi
- Any internet-connected device that cannot be centrally managed
If a device is on the network, it should be there intentionally.
Avoid risky software sources
The FBI specifically warns against unofficial app stores, free VPN apps from untrusted publishers, pirated software, and “free content” devices that promise access to movies or sports without legitimate subscriptions.
A good policy is straightforward:
- Use official app stores only
- Download software from reputable publishers
- Prohibit pirated software and sideloaded apps on business-connected devices
- Treat “free” streaming or utility tools with skepticism
These choices are often framed as convenience decisions, but they are really risk decisions.
Patch aggressively
Timely updates remain one of the most effective and cost-efficient security controls.
Make sure to:
- Keep router firmware current
- Apply operating system and application updates promptly
- Replace unsupported devices that no longer receive patches
- Prioritize internet-facing systems and firewall updates
For many small businesses, inconsistent patching is not a technical failure. It is a process failure. Assign ownership so updates are not left to chance.
Segment the network where possible
The FBI recommends network segmentation for businesses, and that advice is well worth following.
At a minimum, separate:
- Core business systems
- Guest Wi-Fi
- IoT and entertainment devices
- Personal devices used by staff
If a low-trust device is compromised, segmentation helps prevent it from becoming a bridge to more sensitive systems.
Watch for unusual behavior
Not every organization needs enterprise-grade monitoring to improve visibility. Even basic awareness can help.
Look for signs such as:
- Unexpected network slowdowns
- Devices communicating at odd hours
- Unknown apps or background services
- Repeated login alerts or suspicious account activity
- Devices that continue behaving strangely after an app is removed
If you suspect a device is compromised, isolating it from the network is often the right first move while you investigate.
What to Do If You Think a Device Has Been Compromised
The FBI notes that some malicious devices or infections may persist even after a factory reset or app removal. In some cases, antivirus tools may help. In others, the operating system may need to be reinstalled, or the device may need to be replaced entirely.
If you suspect abuse:
- Disconnect the affected device from the network.
- Change passwords for accounts used on that device.
- Review account alerts and login history for suspicious activity.
- Scan the device if appropriate and supported.
- Reinstall the operating system or replace the device if trust cannot be restored.
- Report the incident through the FBI’s Internet Crime Complaint Center when warranted.
This is also a good time to check whether the issue points to a broader gap in policy, device management, or user training.
Consumer Devices Can Create Business Risk
The FBI’s PSA is a good reminder that modern security is not only about laptops and servers. Everyday connected devices can introduce real business risk when they are unmanaged, poorly patched, or loaded with untrusted software.
For business owners and operations leaders, the practical takeaway is clear: review the devices connected to your networks, tighten software and download policies, and make sure home office and small office setups are not overlooked in your security planning.
If you want help reviewing network segmentation, home office security, or device management practices, start with our contact page. You can also explore how resilience planning supports security and recovery in our backup and disaster recovery overview.