Sunday, July 31, 2005

Growing Fraud in the Mortgage Industry

In major metropolitan areas, housing prices have almost tripled. In the great rush to buy a home before it is priced beyond affordability, sharks (fraudsters) are victimizing many a person.

The FBI's Financial Crimes Report, indicates that the primary cause is an increased reliance by both financial institutions and non-financial institution lenders on third party brokers. Because of this, they have consolidated all mortgage fraud programs within their Financial Institution Fraud Unit.

A large part of the mortgage industry isn't required to report fraud, which is the reason that the true cost of mortgage fraud is hard to determine. Here are the two areas, the FBI investigates:

Fraud for Profit

"Fraud for Profit is sometimes referred to as "Industry Insider Fraud" and the motive is to revolve equity, falsely inflate the value of the property, or issue loans based on fictitious properties. Based on existing investigations and mortgage fraud reporting, 80 percent of all reported fraud losses involve collaboration or collusion by industry insiders."

Fraud for Housing

"Fraud for Housing represents illegal actions perpetrated solely by the borrower. The simple motive behind this fraud is to acquire and maintain ownership of a house under false pretenses. This type of fraud is typified by a borrower who makes misrepresentations regarding his income or employment history to qualify for a loan."

These two types of fraud are not the same as predatory lending practices, which normally affect the borrower, often a senior citizen. "Predatory lending typically effects senior citizens, lower income and challenged credit borrowers. Predatory lending forces borrowers to pay exorbitant loan origination/settlement fees, sub-prime or higher interest rates, and in some cases, unreasonable service fees. These practices often result in the borrower defaulting on his mortgage payment and undergoing foreclosure or forced refinancing."

There are a lot of other mortgage fraud schemes. The FBI primarily focuses on the above listed types, but also is trying to educate the public. "Other fraud trends include "equity skimming, property flipping, and mortgage related identity theft. Equity skimming is a tried and true method of committing mortgage fraud. Today's common equity skimming schemes involve the use of corporate shell companies, corporate identity theft, and the use or threat of bankruptcy/foreclosure to dupe homeowners and investors. Property flipping is nothing new; however, once again law enforcement is faced with an educated criminal element that is using identity theft, straw borrowers and shell companies, along with industry insiders to conceal their methods and override lender controls."

Property flipping is best described as purchasing properties and artificially inflating their value through false appraisals. The artificially valued properties are then repurchased several times for a higher price by associates of the "flipper." After three or four sham sales, the properties are foreclosed on by victim lenders. Often flipped properties are ultimately repurchased for 50 - 100 percent of their original value."

Predatory lending is primarily left to the States to investigate.

Here are some indicators and tips from the FBI on how to spot this activity and avoid becoming a victim.


Inflated Appraisals

• Exclusive use of one appraiser

Increased Commissions/Bonuses - Brokers and Appraisers

• Bonuses paid (outside or at settlement) for fee-based services

• Higher than customary fees

Falsifications on Loan Applications

• Buyers told/explained how to falsify the mortgage application

• Requested to sign blank application

Fake Supporting Loan Documentation

• Requested to sign blank employee or bank forms

• Requested to sign other types of blank forms

Purchase Loans Disguised as Refinance

• Purchase loans that are disguised as refinances requires less documentation/lender scrutiny

Investors-Short Term Investments with Guaranteed Re-Purchase

• Investors used to flip property prices for fixed percentage

• Multiple "Holding Companies" utilized to increase property values


Property Flipping - Property is purchased, falsely appraised at a higher value, and then quickly sold. What makes this illegal is that the appraisal information is fraudulent. The schemes typically involve one or more of the following: fraudulent appraisals, doctored loan documentation, inflating buyer income, etc. Kickbacks to buyers, investors, property/loan brokers, appraisers, title company employees are common in this scheme. A home worth $20,000 may be appraised for $80,000 or higher in this type of scheme.

Silent Second - The buyer of a property borrows the down payment from the seller through the issuance of a non-disclosed second mortgage. The primary lender believes the borrower has invested his own money in the down payment, when in fact, it is borrowed. The second mortgage may not be recorded to further conceal its status from the primary lender.

Nominee Loans/Straw Buyers - The identity of the borrower is concealed through the use of a nominee who allows the borrower to use the nominee's name and credit history to apply for a loan.

Fictitious/Stolen Identity - A fictitious/stolen identity may be used on the loan application. The applicant may be involved in an identity theft scheme: the applicant's name, personal identifying information and credit history are used without the true person's knowledge.

Inflated Appraisals - An appraiser acts in collusion with a borrower and provides a misleading appraisal report to the lender. The report inaccurately states an inflated property value.

Foreclosure Schemes - The perpetrator identifies homeowners, who are at risk of defaulting on loans or whose houses are already in foreclosure. Perpetrators mislead the homeowners into believing that they can save their homes in exchange for a transfer of the deed and up-front fees. The perpetrator profits from these schemes by remortgaging the property or pocketing fees paid by the homeowner.

Equity Skimming - An investor may use a straw buyer, false income documents, and false credit reports, to obtain a mortgage loan in the straw buyer's name. Subsequent to closing, the straw buyer signs the property over to the investor in a quit claim deed which relinquishes all rights to the property and provides no guaranty to title. The investor does not make any mortgage payments and rents the property until foreclosure takes place several months later.

Air Loans - This is a non-existent property loan where there is usually no collateral. An example of an air loan would be where a broker invents borrowers and properties, establishes accounts for payments, and maintains custodial accounts for escrows. They may set up an office with a bank of telephones, each one used as the employer, appraiser, credit agency, etc., for verification purposes.

Mortgage Fraud Prevention Measures

General Fraud Tips

Mortgage Fraud is a growing problem throughout the United States. People want to believe their homes are worth more than they are, and with housing booms going on throughout the U.S., there are people who try to capitalize on the situation and make an easy profit.

Tips to protect you from becoming a victim of Mortgage Fraud

• Get referrals for real estate and mortgage professionals. Check the licenses of the industry professionals with state, county, or city regulatory agencies.

• If it sounds too good to be true, it probably is. An outrageous promise of extraordinary profit in a short period of time signals a problem.

• Be wary of strangers and unsolicited contacts, as well as high-pressure sales techniques.

• Look at written information to include recent comparable sales in the area and other documents such as tax assessments to verify the value of the property.

• Understand what you are signing and agreeing to--If you do not understand, re-read the documents, or seek assistance from an attorney.

• Make sure the name on your application matches the name on your identification.

• Review the title history to determine if the property has been sold multiple times within a short period--It could mean that this property has been "flipped" and the value falsely inflated.

• Know and understand the terms of your mortgage--Check your information against the information in the loan documents to ensure they are accurate and complete.

• Never sign any loan documents that contain blanks--This leaves you vulnerable to fraud.•

Mortgage Debt Elimination Schemes

• Be aware of e-mails or web-based advertisements that promote the elimination of mortgage loans, credit card and other debts while requesting an up-front fee to prepare documents to satisfy the debt. The documents are typically entitled Declaration of Voidance, Bond for Discharge of Debt, Bill of Exchange, Due Bill, Redemption Certificate, or other similar variations. These documents do not achieve what they purport.

• There is no magic cure-all to relieve you of debts you incurred.

• Borrowers may end up paying thousands of dollars in fees without the elimination or reduction of any debt.

Foreclosure Fraud Schemes

Perpetrators mislead the homeowners into believing that they can save their homes in exchange for a transfer of the deed, usually in the form of a Quit-Claim Deed, and up-front fees. The perpetrator profits from these schemes by remortgaging the property or pocketing fees paid by the homeowner without preventing the foreclosure. The victim suffers the loss of the property as well as the up-front fees.

• Be aware of offers to "save" homeowners who are at risk of defaulting on loans or whose houses are already in foreclosure.

• Seek a qualified Credit Counselor or attorney to assist.

Predatory Lending Schemes

• Before purchasing a home, research information about prices of homes in the neighborhood.• Shop for a lender and compare costs. Beware of lenders who tell you that they are your only chance of getting a loan or owning your own home.

• Beware of "No Money Down" loans--This is a gimmick used to entice consumers to purchase property that they likely cannot afford or are not qualified to purchase. Be wary of mortgage professional, who falsely alter information to qualify the consumer for the loan.

• Do not let anyone convince you to borrow more money than you can afford to repay.

• Do not let anyone persuade you into making a false statement such as overstating your income, the source of your down payment, or the nature and length of your employment.• Never sign a blank document or a document containing blanks.

• Read and carefully review all loan documents signed at closing or prior to closing for accuracy, completeness and omissions.

• Be aware of cost or loan terms at closing that are not what you have agreed to.

• Do not sign anything you do not understand.

• Be suspicious if the cost of a home improvement goes up if you accept the contractor's financing.

• If it sounds too good to be true--it probably is.

An interesting blog with a wealth of information is done by Rachel Dollar, of the Dollar Law Firm. Her blog is:

For the full Financial Crimes Report from the FBI, which is a great resource on fraud, click on the title of this post.

Buying a home is the American dream. If you spot one of these scams, report it to your appropriate local (State) agency, or directly to the FBI at:

Friday, July 29, 2005

Free Credit Reports Might Not be Free

Do an internet search for free credit reports and it will be hard to find a site that isn't trying to sell you something besides a free credit report. Imposter Web domains are out there, where the specific intent is to use free credit reporting as a lure to sell you something and or obtain your information.

The official website for a free credit report is

The World Privacy Forum found that at least 233 imposter domains have been registered using variations of this domain name. They identified 122 of them as active and on-line. The imposter websites will change their domain name, ever so slightly, in order to misdirect people. Several of these sites were identified as selling personal information to businesses, such as mortgage lenders, or car dealers.

I would imagine, the most extreme danger is being misdirected to a site where information is being pharmed. Pharming entails using fake websites, designed to look legitimate, where personal information is stolen and used in identity theft.

The World Privacy Forum has published some Updated Consumer Tips:

"-When phoning the toll free number (877-322-8228) for a free credit report, ask that only the last four digits of your SSN be displayed when it is sent to you.
-If you use the toll free number above to access your free credit report, be aware that if you have a strong accent or a complex last name, the automated phone system may not work.
-If you call for your report or have it mailed to you, ensure that your credit report is mailed to a secure mailbox.
-Know that you are not required to give out your email address in order to obtain a federally mandated free credit report.
-If you order a free annual credit report online, take basic computer safety precautions. For example, ensure that your computer is virus-free and don't order your reports from a public computer or from work.
-If you do choose to go online to to access your free credit report, be absolutely certain that you have not mistyped in the address. If you see pop-up ads, or if you notice that the site is not a secure site, close your browser and start over. (Secure sites will have a padlock logo in the corner, and the address will read https:// instead of just http://). Please note, though, that some clever imposter sites are providing https:// secure site access, so just a padlock alone is not a guarantee that you are on the right site."

For more information from the World Privacy Forum, click on the title.

Sunday, July 24, 2005

Internet Resume Posting and Fraud

Identity thieves are turning to job sites to steal personal information. Criminals are also recruiting people into getting involved in scams on these sites. Recently, I did a post on criminals who recruit people to ship merchandise and set up accounts to transfer funds (normally overseas). When this happens -- the person who is involved in this can be financially liable and even worse -- they might face criminal prosecution.

Besides the recruitment of people to do scams, resumes often provide the right information to steal identities. If they do not have quite enough information to do this -- they merely obtain the rest in the fake hiring process by getting the applicant to submit pertinent information -- such as their social security number.

Here is the recent post on work at home scams.

Besides shipping scams, people are also solicited on job sites to work in various financial type jobs. In this variation of the scam, they are tricked into transferring (laundering) funds obtained through fraudulent means. Since this is normally done through one of their own accounts they expose their personal financial resources, which are often promptly stolen, also.

According to the World Privacy Forum, this activity has been increasing recently:

Saturday, July 23, 2005

Data Theft Breaches and Identity Theft Products

I saw an interesting article in the San Francisco Chronicle about Wells Fargo's latest product, Wells Fargo Select Identity Theft. For $12.99 a month, they provide monitoring of your credit file and will assist you if you become a victim. There are many of these products floating around these days. Wells is offering this in partnership with Trilegiant, a large marketing firm, which offers it's own identity theft service.

According to the article, Wells Fargo has had it's own woes with security breaches in the past two years. Wells Fargo has consistently refused to disclose how many people were put at risk, citing that it might jeopardize criminal investigations underway.

In April, they told former customers of Strong Financial, a recent Wells Fargo acquisition, that their personal information was sent to others due to an envelope stuffing error. Shortly, after the acquisition, they revealed that a binder full of Strong's customer information was stolen from a bank employee's car.

In March 2004, they lost 35,000 customer's information from computer theft at a bank office.

In February 2004, more computer theft occurred when 38,000 loan files were stolen from another rental vehicle driven by employees of Wells Fargo.

In November 2003, 201,500 customer's data was stolen from a bank consultant.

In October 2003, they hired a convicted felon as a temp worker, who they later fired, but was able to access the bank's website via a shared password and used customer's information for identity theft.

In an internal memo, Wells Fargo's CEO, Dick Kovacevich estimated that 70 percent of their remote data has some exposure to theft. Not sure, how they came up with that, if they give the wrong person access, I would imagine the percentage could be much higher.

This article made the interesting correlation that this amounts to exposing about 700,000 customers, which probably need this service. $12.99 x 12 x 700,000 equals $109,116,000 a year in additional revenue. They do claim they offer it free to their victims, but aren't clear as to if the free service is as good as the paid one they are now offering.

It's probably not fair to single Wells Fargo out. There are a lot of products appearing to protect people from identity theft. There have also been numerous data breaches in the recent past. With the increased sophisitication of the criminals out there, we need to invest more resources protecting the points of compromise and punishing those who are guilty of committing these crimes.

To link to the artice in the San Francisco Chronicle, click on the title.

Identity Theft Protection is starting to become a growing business. If you choose to purchase some, I would recommend that you shop around and compare services. It's a sad commentary that again, the cost of it is being put on the people, who are potentially victims.

There are free services, including laws mandating that the credit bureaus have to provide free reporting. Here is a link to a non profit organization (Identity Theft Resource Center) that has a lot of resources.

Tuesday, July 19, 2005

QChex Alert by the FDIC

Awhile back, I wrote a post on QChex, who is owned by Neovi Data Corporation, San Diego, California. QChex is a service that enables users to print checks, or send checks via an e-mail. On 7/12/05 the FDIC issued a warning on items issued by QChex.

Checks from QChex are being used in auction scams on sites, such as E-Bay and Craigslist. Criminals approach people selling items on these sites and offer a Qchex check as payment. Normally, the check is for over the amount of the purchase and the seller is asked to wire the excess amount back to the scam artist, who is in most instances, overseas. There are also instances of them being used to purchase high end items, such as electronics and jewelry. Again, the shipping destination for these items is normally overseas and the result is the same (worthless form of payment).

The QChex site has all sorts of legal disclaimers, including that they won't investigate anything.

The fraudulent items normally have valid account and routing numbers and could, in concept, verify through normal telephone (computerized) verification systems. If you insist on honoring, or attempt to negotiate one of these instruments, I would strongly recommend verifying the item with a live person at the bank and the owner (maker) of the account to ensure it is legititmate.

Comments from my original post indicate that people are also being arrested when presenting these items. I would recommend extreme caution when dealing with any item from Qchex. Quite frankly, they should be put out of business and an investigation should be conducted into this type of service to protect all of us.

For my earlier post and some interesting comments by readers go to:

Last, but not least, click on the title for the Alert from the FDIC.

Sunday, July 17, 2005

The Road to Justice is Slow for Aunt Millie

Aunt Millie was a rallying cause in 2000-2001, when Enron was illegally manipulating energy costs by faking plant failures etc. California suffered the brunt of it with outrageous bills and blackouts. In taped conversations between the traders at Enron, poor old Aunt Millie (a grandmother from San Diego on a fixed income) was brought up and it was (jokingly) suggested that she use candles. At the time, for some in California, electrical bills were closing in on the $1000.00 a month range.

For many of us, Aunt Millie became a rallying point to seek justice against Enron for their misdeeds. This statement clearly showed their lack of caring in their quest for profit by defrauding the common citizen, as well as, government entities.

On Friday, the now bankrupt company said it would pay 1.5 billion. The exact amount might be a lot less due to bankruptcy proceedings and has yet to be approved by the courts. California is seeking 9 billion in damages and about 65 billion in claims are being made in the Enron bankruptcy case. According to experts, many will never see the full amount of their loss. Even with this promise to pay by Enron, the majority of it will be in unsecured debt, which is currently valued at between 22 and 25 cents on the dollar.

So far as how the money will be used, the Public Utilities Commission has said the money will be used to offset future rate increases.

I find it odd that since the price gouging directly affected the people of California that no refunds will be forthcoming to the people that paid the bills. Additionally, thousands of workers lost their jobs and investors lost billions when Enron filed for bankruptcy. I wonder if any of them will be made financially whole from this?

In the end, I see little justice in this for the victims of this debacle.

For a story from the AP on this, click on the title.

Saturday, July 16, 2005

Fraud Allegations on Weapon Purchases in Iraq

There are a lot of stories about fraud coming out of Iraq these days. The latest is that the Iraqi military has been sold about 300 million dollars worth of substandard military equipment at inflated prices. It is being alleged that buyers for the Iraqi Defense Ministry were receiving kickbacks from vendors and have since been fired. There are also sources that say that the 300 million dollar amount is only what has been uncovered so far.

Allegations are that this flourished under American supervision prior to the elections in Iraq. Several former members of the Defense Ministry are under investigation. Iraqi Defense Minister, Saadoun al Duleimi, who isn't implicated in this scandal and is part of the new government stated that he sees this as an "incubator for terrorist activity." He also said that this defective equipment has jeopardized the lives of the Iraqi military, who face combat on a daily basis.

A lot of these deals were brokered by Ziad Tareq Cattan, a former Iraq exile, who after being hired as a district councilman was promoted rapidly to chief weapons buyer. In one allegation, he brokered a helicopter deal where 100 million was paid up front and when the helicopters were inspected, they were found to be old and deemed unusable. The 100 million was never returned. In another deal cited, Cattan bought a shipment of Heckler and Koch MP5 submachineguns for $3500.00 apeice that turned out to be Egyptian copies worth about $200.00 apeice. There are allegations that Cattan was routinely charging a 10 percent finder's fee for any deal he brokered. Whether these charges are true, or not remains to be proven.

Our young men and women in Iraq are being put in constant danger by a enemy that is often hard to identify. This war of terror is also claiming many innocent victims. Allegations, such as these, do nothing but inspire the terrorists, who are coming from all over to wage war against us. In the end, if we tolerate this behavior, we are only helping fuel the flames of terrorisim.

If you are interested in other stories regarding fraud in Iraq, go to the search box at the top and put in keyword: Iraq.

For the full story in the Miami Herald click on the title.

Friday, July 15, 2005

Walmart Reports Executives Committed Fraud

Walmart has reported that Thomas Coughlin, one of their former vice presidents took as much as $500,000 for his own benefit by performing unauthorized gift card transactions and falsifying expense reports. This is now the subject of a federal grand jury investigation. Jared Bowen, another former vice president, is also being accused by Walmart of being involved in the scheme and helping Coughlin cover it up.

Bowen contends that he reported this misconduct and was in fact terminated in violation of federal whistle blower laws. According to Walmart, they conducted a professional investigation, that proves otherwise.

This is yet another sad commentary on the reason fraud is becoming so prevalent and growing in scope. Daily, we are confronted with people, who are considered leaders being accused of criminal activity. It is refreshing to see that actions are being taken against it, but in the end, it bespeaks a lack of moral fortitude becoming commonplace in the higher echelons of society today.

Click on the title for an article on this by the San Francisco Chronicle.

Wednesday, July 13, 2005

Farewell Mr. Ebbers (Former WorldCom CEO)

Farewell Mr. Ebbers,

Justice has spoken and you face 25 years in prison. Your lawyers were very eloquent in citing your charitable causes and how dismayed you have become at the damage to people's personal lives you caused.

Seeing you cry broke my heart, but what about all the people you caused to lose 180 billion dollars worth of their hard earned money? What about the 20,000 employees, who trusted you only to lose their jobs due to your greed?

In this venue, we try to help the victims of the world. These are real people, who work hard and hope to someday have a modest retirement. How many people have you caused to have less than a modest retirement in their future?

Hopefully, this is a sign of change and illustrates that the common person is sick and tired of becoming a victim of those who ruin lives for the sake of their personal wealth.

Fraud is increasing at a record rate. All too often, we see where large corporations put the bottom line over the personal well-being of those they call their customers. Someone needs to remember that it was the customer, who built many of these corporate giants. It is my sincere hope that the corporate world will take this as a signal that it is time to protect the very people, who have made their existence possible.

Until then, we must all continue to communicate and make people aware of this growing problem, which destroys people's lives.

For more information on this from the AP, please click on the title of this post.

Tuesday, July 12, 2005

Work at Home Scams

The Postal Inspection Service is warning us about a scam, where people are hired to work at home and reship merchandise. In these scams, people are tricked into receiving stolen goods and shipping them to destinations, primarily overseas. The activity has become so organized that ads are being placed on web sites for jobs, such as Monster.Com. Other people are recruited on dating sites and in chat rooms.

The end shipping destinations have been Eastern Europe, Nigeria, Brazil and the Phillipines. These groups are the same ones involved in the growing problem of identity and information theft. They use the stolen information to purchase expensive items, which are sent to the people recruited into these (work at home) scams. Many of these people are also tricked into setting up accounts where stolen funds are deposited via fraudulent electronic transfers. They are then instructed to wire the money to their so-called employers overseas. Guess who is left holding the proverbial bag when any fraud is discovered and the money is gone in a faraway land?

The Postal Inspection Service recommends checking any of these offers out through the Better Business Bureau, the Federal Trade Commission, or your State Attorney General. You can click on the title of this post to the Postal Inspector's warning on these scams with links to these organizations.

Please remember that if you run into one of these scams you are only helping the criminals by remaining silent.

Please report any and all activity to the appropriate authority. There is a link for reporting internet crime in the links section of this site.

Sunday, July 10, 2005

Let the Buyer Beware (Summer Travel)

With the Summer holidays in full swing, many unsuspecting tourists are swindled out of their hard earned vacation money. Remember that fraudsters all over the world rely on one thing- the element of greed to induce someone into falling for one of their scams. If it seems too good to be true, it probably is. Here are some of the more common scams found when traveling.

Black Market Money exchangers, who offer you a higher rate and then short you on the amount and or give you counterfeit currency.

Counterfeit tickets, particularly train, being sold at bargain rates.

Hidden charges on rental vehicles. Make sure you determine the total cost and the hidden charges before renting.

Credit Card and Check fraud. Protect your personal information and be careful what you throw away, especially in hotels. It's a good idea to use safes that are normally provided free of charge, either in the room, or at the front desk.

In some countries, be careful of your credit card being taken out of your view. The information is sometimes being copied to use in making counterfeit credit cards.

Skimming of ATM cards is on the rise. This is when the information is skimmed off your ATM/Debit card and a hidden camera records your actions on the pin pad. Always conceal your actions when putting in your pin number. The result of this is a counterfeit card being produced and your account emptied.

Being offered gems, antique items, or other great deals. Make sure what you are buying isn't counterfeit, or even worse illegal to import.

Although, Traveler's Cheques are considered replaceable, you still have to prove they weren't lost due to your own negligence in many instances.

Most important of all, plan your trip carefully. Scams on travel are all over the place and increasing with the use of the internet.

Here are some tips from the National Fraud Information Center.

"Be skeptical if you receive a call or postcard offering you a free or bargain travel package, especially if the price seems completely unreasonable. Do not give out your credit card number, checking account number or agree to send money up front until you get the full offer in writing with all costs and conditions and have time to check it out."

"Do not be pressured into buying "NOW!" This should be your first warning sign. A good offer today will remain a good offer tomorrow."

"Refuse the offer if you're told that you have 18 months or more to take the trip. By the time you try to make reservations, the company could be out of business. Many illegitimate firms will use stall tactics so your offer will expire before you can take a trip. Besides, promising that bargain prices to a desirable location are available at any time are usually false. Prices and availability vary wildly between peak and off-season. No company can guarantee below normal off-season rates at the peak of the tourist season."

"Get everything in writing. Make sure the written information includes the price of the package plus any additional charges. Find out exactly what is included in the package price and what isn't. Get the names of specific hotels, airports, airlines and restaurants that are a part of the package. Contact these establishments to double check the arrangements (Find the phone numbers yourself. Do not use a number provided by the company). If they've never heard of the firm offering you the trip, don't sign up."

"If the package doesn't include certain parts of your trip, such as air travel to and from the port of embarkation for a cruise, find out if you have to purchase that through the company or if you can arrange your own travel. Some companies offer you the cruise and hotel accommodations at cost, but then make a profit by selling air travel at a ridiculous mark-up."

"Check prices with local travel agencies. Unscrupulous companies often have hidden charges that can end up making a trip cost more than if you'd bought it through a reputable agent. You may not even find out about these charges until you are already in the middle of the trip and are unable to refuse payment. After you get all the information in writing, shop around to see who has the best deal. You may find out that the travel agent down the street can get you a cheaper trip with less hassle."

"If you need advice about a telephone solicitation or you want to report a possible scam, call the NFIC hotline at 1-800-876-7060. You can also ask questions or report fraud using our online forms."

You can go to the NFIC directly by clicking on the title of this post.

Saturday, July 09, 2005

Tax Fraud from Prison Update

Last week, the IRS reported in hearings before the House Ways and Means Oversight Subcommittee that they had confirmed large amounts of tax fraud being committed from state and federal prisons. They stated that last year, they detected 18,000 fraudulent returns.

Tax Fraud occurs when someone steals an identity and files a false return. Because of this, it contributes to the growing identity fraud problem.

Here is a previous post on a prisoner, involved in this activity, who told all.

Link, here.

Here is another article where more tax fraud was being committed and the money obtained was intended to be used in the overthrow of a government.

Link, here.

The IRS claims that they identified 78 percent of the fraud last year and estimated their losses at $15,000,000 to this activity. I wonder how the IRS can identify at they detected 78 percent of the total? It would seem to me that there has to be a portion of this that remains unidentified, which would skew any statistics made on this.

If you suspect any type of tax fraud, you're asked to call IRS investigators at (800) 829-0433.

Click on the title to link to an article on this.

Wednesday, July 06, 2005

McAfee Study on Organized Crime and the Internet

McAfee just released a study on the impact organized crime is having on internet fraud. The report states that cybercriminals now use the internet for extortion, fraud, money laundering and theft. The report states that only 5 percent of the cybercriminals ever get caught. The very nature of the internet (borderless reaches) makes detection, investigation and prosecution difficult.

Besides information and identity theft, companies or government platforms could be sabotaged and some of the criminals are even extorting money for not shutting systems down.

Although these crimes require a level of technical knowledge, once the technical part is done, the crimes can be easily maintained through social engineering. Social engineering takes little technical knowledge and entails tricking people to install hidden programs on their computers and or give out personal information. A single criminal with little technical knowledge has the ability to launch a million e-mails and the law of statistics is that they will find hundreds of computers that aren't properly protected from their misdeeds.

This report indicates that the goal of many of the cybercriminals is to infect thousands of computers and turn them into a network of devices that attack in unison, which is known as a bot-net. Quite simply a bot-net is a collection of computers, already compromised by worms, or viruses. Some of them even have their own server and are being rented out to cybercriminals for as little as $200.00 to $300.00 an hour. Bot-nets are allegedly becoming the tool of choice in all sorts of internet (cyber) scams.

Also covered, is increased involvement by organized crime and that more of the known groups are becoming involved.

One FBI report estimated the cost of cybercrime at 400 billion a year. If not dealt with this could have a severe impact on the way we live. Cybercrimes are borderless and can impact anywhere in the world.

The sources of information in putting this report together are international. Included are some of the most well known law enforcement and security experts in the world. We all need to be aware of this criminal activity and support their efforts to combat this growing menace.

The full report can be viewed by clicking on the title.

Sunday, July 03, 2005

Insurance Fraud and the Military

No matter where you stand on the Iraq War, this report (click on title) from the GAO (Government Accounting Office) is disgraceful. Service members are now returning to combat for the third time in a single enlistment and face death daily. To protect their families, they are taking out additional life insurance policies. There are allegations that they are being sold insurance that they do not need, or will do them little good by unethical agents.

The report states that base commanders need to be responsible for reporting violations and that a searchable database should be instituted to identify unethical agents/companies. It also states that implementation of reporting procedures must be made to notify state regulators and DOD officials of fraud.

Representative Marty Meehan, Democrat-Mass recently said "It is inexcusable for the Defense Department to be so remiss in dealing with the con artists prowling our nation's military installations. Countless soldiers have been left in financial distress because life insurance scams on military bases have gone unchecked."

Here is a copy of the letter sent to Secretary of Defense Donald Rumsfield by Congressman Meehan.

It is refreshing to see that the government is protecting those who are put in harm's way. I would like to see further disclosure (to the public) regarding the insurance companies involved so we can all send them a strong message (our business) that will hurt their bottom lines. It would also be nice to see criminal prosecution (when warranted) and possible some class action law suits to recover any of the money already lost by our service members.

Reporting Fraud

Frequently, while surfing the internet, I have noticed a that there are a lot of scam baiters out there. While this frustrates the fraudster on an individual basis, it does little more than waste their time unless reported to the proper authority.

If you were to talk to anyone involved in the investigation of scams, they would tell you that all too often, nothing is reported until someone is victimized and in most cases, the trail is cold and resolution is impossible.

Quite simply, the fraudsters method of operation is to change identities and even scams frequently to confuse anyone who might come after them. The best intelligence, we can pass on is fresh information that is useful to investigative agencies.

Scam baiters can be a very valuable resource to those who take legal action. Often they have the fresh information that could be valuable to a law enforcement agency.

There is a great (all inclusive website) from a Mr. Anthony Elsop, which lists where you can report just about anything related to internet crime.

Click on title of this post to view.

Laws are being considered all over to make this crime more dangerous and (hopefully) allocate more resources to prosecute those who commit it. Take the time to identify your political representatives and let them know how you feel.

Saturday, July 02, 2005

Investigating Fraud

Investigating computer crimes poses many problems for law enforcement. It isn't easy to investigate crimes that cross jurisdictions and borders, especially given how rapidly technology is advancing.

In the recent CardSystems case, it is still unknown whether the stolen information is being used, although there is a report out of Japan that about 1 million dollars in fraudulent credit card charges may be linked to it. Of course, CardSystems isn't commenting.

The point of compromise could very well be an insider, or an insider planted by organized crime. Recently, a case was solved at Teledata Communications Inc., where an insider at their help desk, who had access to banking information was responsible for causing 50-100 million in losses. Insider involvement in these scams is a common denominator. Here is a recent post, I did.

Congress is planning to look into this problem as the public becomes increasingly frustrated. Senator Bill Nelson (Democrat-Florida) and some of his peers have asked for a study about how terrorists could use information obtained in these data intrusions.

Choice Point, a data broker who was compromised, has recently stated they will not give out sensitive personal information unless it is requested by the person, or a government entity. Hopefully other data brokers will tighten restrictions also, but the fact remains that a lot of this information can be freely obtained through the internet and or via software programs that are marketed as a means of conducting your own personal investigations.

Laws must be enacted to protect the innocent, awareness raised and resources allocated to go after the criminals. You can take action by writing your political representative and reporting any potential crimes to the appropriate authority. All too often, we fail to do this when an obvious scam crosses our path.