Thursday, June 30, 2005

IBM States Phishing Increases 300 Percent in April

IBM is saying that phishing attacks rose 300 percent in the month of May, which passed the most recent record in January. 9.1 million e-mails were detected in May, three times the 2.8 million discovered in April.

Most of these attacks are carried out by software robots, which as also known as bots. Fraud e-mails imbed a program on a computer, which is under the control of another site that attempts to steal personal information.

Phishing is a form of online fraud using e-mail. Fraudsters attempt to dupe people into providing personal information. The information can be used in identity theft, or sometimes financial information from people's accounts is phished to be used in fraud schemes.

Many of these schemes are suspected to be done by organized gangs. For more information on this please read a previous post.

For more information, click on the title of this post. Phishing can be researched further by using the keyword phishing in the search box at the top. Contained in some of these posts are direct links to resources to protect yourself from this growing menace.

Tuesday, June 28, 2005

Aftermath of the CardSystems Data Breach

A lot of people are saying that many of these large scale data intrustions are only now coming to light because of a law requiring disclosure that was passed in California last year. I've always said that awareness and action, both legal and political is what is needed to stop a crime that claims almost 9 million victims a year. There are some refreshing signs that this is beginning to happen.

Here is an article from the AP passed on by MSNBC about the attorneys general of 44 states demanding more information. This would include exactly how the intrusion occurred and whom on a personal level is at risk.

Here is another article via Yahoo news about a law firm based in San Rafael, California that is filing a class action law suit in behalf of California victims.

It is the individual, who has up until now been forced to bear the brunt of this criminal activity. All too often, I suspect that large corporations ignore the damage this does to the individual and pass their own costs of fraud on by charging higher prices for their goods and servives. The time is now for large corporations to become the solution by protecting their customers. Disclosure laws will help us (the consumer) make make intelligent choices on who to give our business.

Sunday, June 26, 2005

Organized Fraud Gangs

With the advent of the internet, fraud has become increasingly more global. There is evidence that there are major organized groups (gangs) running a lot of the frequently mutating financial scams. Recently, we have seen fairly high quality counterfeit money orders, cashier's checks and washed counterfeit bills indicating a fairly high level of sophisitication. We have also seen increased sophistication in phishing and pharming scams and repetitive large scale data intrusions, where both personal information and financial instruments (credit card numbers) were compromised.

The known players in these enterprises are the Russians, Nigerians, Asian, Armenian and Mexican organizations. As stated in my previous post, many of these groups plant people in organizations to skim financial and personal information. Although in some instances, these plants perform scams within the organization they infiltrate, more often than not, they merely skim information to be used in outside fraud scams that might even be committed in a different country.

Recently, there has been a tendency to see the various groups work in collusion with each other. For instance, counterfeit Postal Money Orders, have been traced to being produced in both Nigeria and Eastern Europe. Traditionally, counterfeiting was a primary function of the Asian gangs. 419 (Advance Fee) scams are now as likely to originate in Russia and Eastern Europe in what was traditionally a Nigerian scam.

Quite often, both personal information and counterfeit financial instruments are being produced by one organization and passed by another. Information and instruments are also often sold. When the Advance Fee scam mutated into the Auction Scam, it was difficult to prosecute because many of the people passing the counterfeit instruments were considered innocent victims. In a further mutation of this scam, people are merely pretending to be victims, obtaining the instruments and attempting to negotiate them. Recently, in the news, the Postal Inspection Service arrested numerous people for doing this.

Although not known, it makes one wonder if these groups could also be doing business with terrorist organizations.

Most of the groups are involved in a lot of activities, including drug trafficking, extortion, murder and white slavery. Interestingly enough, they consider the fraud schemes as the safest because they carry light penalties and there is less chance of getting caught.

Although, most of these groups work in collusion (network) with other groups, within their parent organizations, they maintain ethnic purity within their own ranks. This makes it extremely difficult to infiltrate these organizations.

In light of recent events and the ever growing bill that these people are causing, we can no longer afford ignore this activity. Proactive measures must be taken to combat this menace and we must realize that it is no longer contained within national boundaries. Should we fail to act, we might find that this menace will destroy the way we know society today.

Here is a link to a previous post on legislation to increase the penalties on these crimes. There are links to political representatives in both the US and UK. Write them and show support.

Saturday, June 25, 2005

Fraud Gangs Plant Insiders

Although, it is difficult to get specifics, organized gangs are now very much involved in the fraud business. Some of them are local, however others from Africa, Eastern Europe and Asia are operating in an international arena.

Many of these groups seek to recruit, or plant people in organizations to steal information and or commit large scale frauds themselves. The reason they put these plants in organizations is to skim identities (identity theft) and to carry out embezzlement schemes. Some of these gangs are known to be violent and use coercion and threats of violence to persuade their targets to assist them. In the case of illegal aliens, it is known that they sometimes hold relatives hostage to force the illegal to do their bidding. It is also not unknown for employees to be kidnapped, or black mailed and forced to provide information and or give access to financial assets.

Here are some generic guidelines to protect any business. Since personal safety can be at stake, these are also good guidelines for an employee to evaluate their own safety in their workplace.
  1. Protect your employee's personal information as diligently as you protect your customers. This includes having their full names displayed anywhere where someone use the information to find out where they live.
  2. Personnel information and home telephone numbers should be protected and never thrown away without being destroyed. This information should be secured and limited access maintained. Often plants are in contract agencies, such as those that provide janitorial/guard services.
  3. Train employees with access to sensitive information and or financial assets to vary their routes to work and be wary of anyone following them.
  4. If one of these employees fails to show up for work and there is no apparent reason find out the reason why. Ensure you have good emergency contact information on each employee.
  5. Avoid letting the public be able to distinguish, which employees are new.
  6. Make your employees aware of gang recruitment efforts and ask that they report any attempts to a responsible party. Ensure that the employees are comfortable by maintaining strict confidentiality standards.
  7. Develop law enforcement contacts (Federal/Local) to determine if plants are known in your area.
  8. Be wary of changes in an employees financial situation, such as coming into unexplained amounts of cash.
  9. When applicants are applying for sensitive/responsible positions ask why they want that position and watch their demeanor when they answer.
  10. When doing reference checks on applicants do a reverse directory to ensure who you are calling. This can be done for free on the internet.
  11. Do thorough background checks, inclusive of criminal and credit records. Ensure the data on all reports matches the application and that any presented identification documents are valid. Be wary of applicants where no credit history exists, or it doesn't match other documents that show their personal history.

With all of the recent data intrusions and large scale frauds, it is imperative that the business world become more diligent in protecting their people and assets. Awareness is key and more and more, every person out there is on the front line of protecting our society at large. Should you spot any of this activity in your workplace, report it through the proper channels at work and or to the authorities.

To view a memo from the OCC on this subject, click on the title of this post.

E-Commerce and Customer Confidence

The research firm Gartner conducted a survey of 5,000 people, which indicates that one out of three Internet users are buying less online. The reasons stated are the daily headlines reporting personal data being compromised, identity theft and the growing problem of phishing.

This survey indicates that 80 percent of the people surveyed have stopped opening e-mails from unknown sources. They are also using online banking services less frequently with 14 percent surveyed indicating that they no longer pay their bills online.

This lack of confidence could have a serious effect on the profitability of major corporations. Electronic bills cost about half of what a paper one does and a lot of marketing is conducted via e-mail campaigns. The time is now for the private sector to take notice and invest more in protecting the confidence of their customers. Quite often, as I have stated previously, the people doing these sort of crimes were not very sophisiticated and one might deduct that some of these corporations could have been more diligent in their security procedures.

This growing problem (if left unchecked) has the potential to create a negative effect on the economy. Daily, we hear calls for measures that will reduce civil liberties (such as national identity bills), but the reality is that the true problem is one of lax laws and not enough enforcement resources allocated to combat what has become an international problem.

Wednesday, June 22, 2005

Cardsystems Violated Mastercard/Visa Credit Card Rules

It has now come to light that in the recent breach of up to 40,000,000 credit accounts, Cardsystems was gathering information on people that they weren't allowed to. Allegedly, it was to determine why certain transactions wouldn't process.

There are also reports out of Australia that this fraud was spotted six months ago by banks over there, which again makes one wonder exactly who knew and when. The scope of this breach is far reaching, with cards in Europe, Asia and Australia being reported compromised.

In the end, many are saying that in previous years, this breach probably would have gone unreported and that these breaches are being reported now due to recent legislation in California, which requires disclosure.

It is apparent that more of this sort of legislation should be considered. There should also be outside auditing/investigations of these occurrences to protect the consumer and determine if laws were violated for profit incentives. Another thing to consider is that these types of intrusions are likely to erode consumer confidence, which can take a devastating toll on the financial well being of these organizations. The time for effective action is now.

Sunday, June 19, 2005

Identity Theft at Large Corporations

It is now being reported that CardSystems, the affiliate of Mastercard International, where 40,000,000 people's information was compromised, knew of the breach as early as May 22nd. They are saying that they were told by the FBI not to release the information, which presumably would give them (FBI) an edge in identifyng the criminal(s).

Interestingly enough, today there are official statements being made by Mastercard that a much smaller amount of accounts (68,000) are considered to be high risk. They are saying that the information exposed didn't include social security numbers and birthdates, which would be needed to assume someone's identity. Only 13.9 million of the credit card accounts were Mastercard. Estimates on the other's (American Express, Discover and Visa) are not yet clear.

At this point, there seems to be a lot of differing estimates and the information was kept quiet for a period of time. Unless, someone could see some facts backing up these estimates and what information was taken, it would be hard for anyone to have a level of comfort as to what has actually occurred.

There seems to be an alarming pattern of these large scale losses of personal information. Earlier this month, Citigroup reported that UPS lost loan information from 3.9 million customers of Citifinancial, who does personal and home loans. In February, Choicepoint Inc. disclosed that fraudsters using stolen identities created fifty fake businesses that pulled personal information on approximately 145,000 people. In March, LexisNexis Inc. disclosed that fraudsters had broken into a database giving them access to 32,000 people. In May, Merlin Information Services, which provides information to law enforcement, investigators and collections personnel had 9,000 people's information stolen when someone posing as a professional investment advisor was given access to their database. There were also large numbers of people's information stolen from Bank of America and DSW Shoe Warehouse.

Nexis Lexis has since increased their estimate to 310,000 from their initial estimate of 32,000. It's hard to say what estimates are 100 percent credible. Did these organizations discover the full scope of the breach and is it in their best interests to disclose the information?

There is legislation being considered to better protect our personal information. It is imperative that we fully examine these recent events and consider the costs to the individual and to the credibility of our financial systems.

Friday, June 17, 2005

40 Million Credit Files Placed at Risk

Mastercard International admitted yesterday that 40 million credit card accounts have been compromised via a security breach at a payment processing company. The company where this occurred at was CardSystems Solutions of Tuscon, Arizona.

Approximately 20 million Visa account holders and 13.9 million Mastercard account holders were compromised. The remainder were American Express and Discover accounts. This was done when a computer code or script was placed on the CardSystems network that made it possible to steal information.

The FBI has initiated an investigation. More details can be obtained by clicking on the title, which links the article from the New York Times.

Already, the press in Canada is alarmed that Canadian citizens could be at risk also. In fact, with that much information, the issue could be global.

In recent times, there have been an ongoing series of these data thefts. Recently, I have covered some of these in other posts. Here are a couple of them:

In these recent mass thefts of customer information, more often than not, the criminals were not very sophisiticated. Our laws are far too lenient on these types of crimes and the time is now for large corporations entrusted with people's personal data to be held accountable for their apparent lack of security.

There is pending legislation in both the United States and the United Kingdom to give the laws more bite.

Here is a previous post on that matter:

Contained in this article is a link where you can contact your political representatives and let them know how you feel!

Wednesday, June 15, 2005

Identity Theft (Fraud) Protection by Banks Rated

Daily, there are press releases about customers of financial institutions having their identities stolen. This has been happening for a number of reasons, including theft of people's personal information, pharming and phishing. A study was recently done by Javelin Strategy & Research.

The best institutions for protecting their customers were:

1. Discover Card
2. First National Bank of Omaha
3. Citibank
4. Bank of America
5. American Express

Javelin also offers a quiz anyone can take to determine if they are at risk: This quiz was done with assistance of the Better Business Bureau.

Javelin's website is at

You can e-mail Javelin directly for more information, email inquiry@javelinstrategy.

This is great information designed to protect the consumer. With the growing problem of identity theft/fraud, which is estimated to cost us 53 billion a year and claim 9 million victims, it is refreshing to see information being published to make us wiser consumers of financial products.

Sunday, June 12, 2005

iPods and Data Theft

iPods are devices that can be used to steal data and have become status symbols that have been known to attract more violent crimes, such as mugging. Essentially, the iPod is a hard drive and can hold a lot of information. This article (which can be viewed by clicking on the title) states that iPods have been used by identity thieves and even Apple employees to steal corporate secrets. This information came from the former head of information security at Apple, Derrick Donelly. Donelly is now working at a company (Black Bag Technologies) that creates forensic hardware and software to retrieve information from iPods and Macintosh Computers.

There are a lot of options out there to find data on Windows operating systems. Apparently, it is more difficult with Apple products. Macs automatically connect external disk drives to the operating system, which is known as mounting. When this occurs, evidence is often destroyed. Donelly is also in the business of training the authorities how to gather evidence from Macs without destroying it.

A primary reason for this is that the Mac OSX operating system allows built in data encryption. By simply dragging a file to a folder, it is scrambled so completely, that allegedly the CIA couldn't decipher it.

Apple products are well known for their superior features in preventing intrusion, which is why some criminals might find them desirable. On the other hand, this is a reason why many legitimate users would prefer them also.

Besides i-Pods, there are a lot of devices out there, such as cell phones, PDAs, digital cameras and others that can be used to steal information. A University of Michigan study last year revealed that 70 percent of identity thefts originated out of a workplace. Criminal gangs have been known to plant people in organizations for just this purpose.

Realistically, if most identity theft originates out of the workplace, it can be taken out in a number of ways, including documents. Effective personnel screening and resources to investigate and prosecute are the key to defeat wrongdoing. Computers only do what they are told and it is people, who commit these acts in order to profit. The mind figures out how to beat the system and only another mind will defeat those who choose to do so.

Sunday, June 05, 2005

Auction Fraud Update

Recently, a news report out of Louisiana announced that Subway was planning to discontinue it's current 6 inch sandwich promotion. The reason for it was counterfeit coupons being circulated on the internet via auctions. It's amazing that in the world today, a major marketing promotion is being shut-down, essentially through fraud and the internet. Here is the story:

Although from a magazine for Corporate Security Types, this article demonstrates the growing market in gift cards being sold on the internet. Fraud on E-Bay is considered to be growing. Besides fraudulent (hot) merchandise/financial instruments being sold, the latest trends are phishing and pharming identities off of look a like websites that appear to be E-Bay, or their sister organization PayPal. Please note that E-Bay and PayPal are not the only sites being duplicated in these scams.

Craig's List is a less commercial site (most of it free), where people sell items. Recently, there has been large increase in Counterfeit Cashier Check/Counterfeit Money Order/Wire Transfer Scams. These scams trick people into negotiating counterfeit financial instruments and then wiring a portion of the money overseas, only to be held responsible for the fraudulent instrument when it returns. Craig himself put together a very useful guide:

Please note that these scams could be found on all sites where auctions/selling occur.

It's an amazing cycle and everyone is being victimized from major corporations to the poor soul, who has their identity stolen and must bear the burden of restoring their very being. The only way to protect yourself is through awareness and supporting laws to protect us all from this growing menace.

If you want to research these subjects further, use the search box at the top of the page.

Saturday, June 04, 2005

Tax Fraud Proceeds Intended for Overthrow of Government

In my mind, there is no doubt that the proceeds from financial crimes tie into funding terrorism. In Long Beach, a California based organization called the Cambodian Freedom Fighters was formed to seize control of the Cambodian Government. Their leader (Yasith Chun) has been arrested and is being charged with attempting to overthrow the government of Cambodia by military force. Apparently, he was funding this endeavor by running a fraudulent tax business using Southeast Asian immigrants to file fraudulent tax returns by claiming to have done menial labor and then putting in for the earned income credit exemption. This would net several thousand dollars a return. Yasith Chuth is also being charged with tax fraud. More information on this can be had by (clicking) on the title.

Fraudulent tax refund schemes appear to be on the rise and are another symptom of the identity theft crisis looming over all of us. In a previous story, I spoke of a scam uncovered where prisoners were doing this very same activity right under the noses of their guards and administrators. Here is a link to that post:

This activity is a clear example of where our financial resources are being bilked not only by criminals from within, but in fact we are being targeted from abroad. Illegal immigration is literally breaking the backs of our social programs (which we pay for by taxes). Not only is it costing us all in benefits, but it also is a magnet for a wide range of other criminal activity. Some of the biggest victims are the illegal immigrants themselves, who are abused by the groups bringing them in the country. This is a clear problem and it is imperative in the post-911 era that we find viable and workable solutions to it.

In some respects, with the number of them (illegal immigrants) in country doing menial jobs, it might be deducted that businesses turns a blind eye to keep their labor costs low and that the average citizen is footing the bill for all of this when they pay their taxes.

Here are some earlier posts that relate to this: