While everyone sues TJX, the criminals are laughing all the way to the bank

Here is a great example of why there is so much identity theft. In Ontario, a man and his wife went right back committing identity theft, while on bail for running a payment card (debit/credit card) skimming operation. As you will see, they were by no means, small operators.

From newsregiondurham.com, Jeff Mitchell reports:

Hundreds of new charges have been laid against a fraud suspect and his wife after Durham cops busted the two as they allegedly broke his bail conditions.

Police say they found evidence of widespread fraud when they searched the King City home of the man, arrested here last fall in connection with a credit and debit card skimming operation at a north Oshawa gas bar.

One fraud investigator said lists of debit and credit card numbers found in the home amounted to "an encyclopedia" of apparently stolen data.

Here is what they got caught with, while on bail for victimizing (probably) thousands of people:

During the arrest both occupants of the car were found to have counterfeit credit cards in their possession, police said. A subsequent search of their home resulted in the seizure of credit card writing equipment, 200 phoney credit cards and hundreds of pages of credit and debit card data, police said.

Police also seized the BMW, claiming it's proceeds of crime.

I guess no one figured out the BMW was paid for by theft, the first time around?

And meanwhile, lawyers and the banking industry are organizing law suits against TJX for their recent data breach.

Unless, we start making it dangerous for the criminals to commit financial crimes, the problem will keep growing!

While a lot of people focus on civil remedies, the criminals are laughing all the way to the bank. After all, they aren't being sued. AND the sad truth is that not very many of them are being caught.

The costs of litigation and fraud are both normally passed on to the consumer. Simple economics dictates that if they were not, the business would cease to exist. The fact that the banking industry (which could also be criticized for enabling some of this problem) is behind some of this litigation, bothers me!

Someone once said, "it isn't wise to throw stones when you live in a glass house."

Maybe I should do a few posts about how the banking industry makes it too easy to commit some of these crimes? For starters, we could discuss how easy it has become to counterfeit their payment devices, which is how the information is being turned into cash (what the criminals are after). We could also discuss how little they do to verify information, when issuing a credit card and all the unsolicited offers for credit (which are routinely stolen) out of the mail.

Thinking of that, I did a post about how easily criminals can manipulate this:

Ever wonder how well you are protected from credit card fraud?

Another thing to consider is that merchants already bear a lot of the cost of fraud becaue of chargebacks. This is where the bank charges back the fraud to the merchant. Many merchants feel strongly that they are already bearing the brunt of paying for all the fraud because of this practice.

For more information on this subject, visit Merchant911.org, here.

There is no doubt that the true victims of identity theft deserve compensation, but to me some of this litigation is designed (my emphasis) to pass the buck. As I stated earlier, when the buck is passed, it gets charged to the consumer (in the end), anyway.

When is someone going to start addressing the real problem? The facts are that it's too easy to commit payment card fraud, not very many criminals are getting caught, and when they are -- the consequences are pretty minimal.

Full story from newregiondurham.com (about the crooks out committing crime on bail), here.

Is tracking fraudulent refund information effective and could it be putting people at risk of becoming an identity theft victim?

The retail industry loses billions of dollars a year to fraudulent refunds.

Fraudulent refunds occur when retail crooks (shoplifters, bad check writers and credit card fraudsters) bring in stolen merchandise to convert into cash. To protect themselves, merchants have developed refund policies, which require that personal information be maintained in a database to identify retail crooks.

I believe the merchants, who came up with this idea, did so with honorable intentions. But is it possible that these systems are easily defeated and themselves might be attacked (hacked) for information they are storing?

The retail security industry has a new buzz word (organized retail crime). If these crooks are organized, my guess is that they are already using fake identification and other people's identities to return merchandise.

Refund data-bases might be full of information from some of the other data-breaches. Other people's information is used to commit a lot of credit/debit card and check fraud. In the case of fraudulent transactions at retailers - the criminals often refund the merchandise they purchase (with bogus financial instruments) to get what they really want, or cash.

And it wouldn't be very hard for them to get bogus information - personal and financial information is for sale in carder forums and fake identification is getting better and easier to obtain all the time.

Another thing to consider is that besides organized retail criminals, another huge loss factor for retailers happens when insiders (dishonest employees) steal from them. Like the external element, a lot of dishonest employees seek to steal cash, and one of the easiest means to do so is to do fraudulent refunds, themselves.

Given the new refund systems, they will have to come up with an identity to accomplish this. The easiest way to do this is to use a customer already in one of their data-bases, or even make up a name.

TJX (a merchant operating under many different names) recently enabled what a lot of experts believe will be the largest data breach to date. One of the databases compromised was their information on all the people, who had refunded merchandise at their stores.

Unfortunately for TJX and the retail industry - it now appears they were storing financial information that they shouldn't have been.

According to reports, TJX was storing payment card (credit/debit card) information they weren't supposed to be in violation of already established PCI data-protection standards. These standards are established by the payment card industry, themselves.

It seems odd to me that in light of all the data breaches, the industry is being allowed to police themselves. I wonder if an unbiased third-party (with no financial incentive) should be taking a look at the problem?

And even if the merchants bring their data protection standards up-to-par for payment cards - will the data being mined in the refund systems receive similar protection?

Guard My Credit File.org recently published a story about Federated requiring SSNs for refunds (courtesy of a blog post and later conversation with George at Fat Pitch Financials).

Apparently George's wife bought some merchandise off one of their websites with a gift card. She decided to return the jeans (for credit back to her gift-card) and when she went into a Federated store (Macys), she was asked for her driver's license and SSN to complete the transaction.

Please note, she had her gift-card and the receipt for her purchase. George eventually complained loudly enough that a manager relented and allowed the return without a SSN.

My guess is that criminals are furnishing fake SSNs (which are hard to verify) and only the honest customers are providing real ones.

Story, here.

As I stated earlier, tracking refund data was probably a good idea when it was first conceived, but I wonder how effective it is today? The data itself could be posing risks to anyone honest enough to give their real information, and criminals are likely using other people's information.

Sadly enough, recent data- breaches indicate that this (personal information) probably isn't very well protected. It's also sad that after spending millions of dollars to protect themselves with refund databases, the retailers have a product that might not be very effective and could become a customer trust issue.

There needs to be a better way to protect merchants and their customers from theft. Customers and retailers are both being victimized by what seems to be a growing problem.

Here is another post, I wrote on this same issue:

Are Retail Refunds Violating Customer Privacy