Will 2010 be a Banner Year for Identity Thieves?

For the past six months or so, this blog was put on hold. I could come up with a lot of excuses why it was put on hold -- such as increased workload and job responsibilities -- but I probably just needed a break from writing.

Now that I am taking a look at getting back into blogging, it doesn't appear much has changed in the fraud arena or that the news is getting better. Of course, I probably already knew that. After all, I didn't get much of a break from all the fraud that is going on out there, I merely wasn't writing about it.

For instance, Jay Foley at the Identity Theft Resource Center did a recent interview with Tom Field at Bank Info Security and is predicting some scary trends for 2010. Two of the predictions are that medical identity theft and too good to be true scams will be on the rise.

I can attest to the too good to be true schemes being on the increase. They happen all over North America on a daily basis. Strangely enough, the scams seem to recycle themselves and use the same bogus financial instruments, over and over, again.

"Well, first and foremost we are going to see a lot more scams. Because of the tough economic times, we are seeing a lot of scammers come out of the woodwork and try to suck you into this quick job, that quick job, here make a little extra money, and invariably what happens is you find yourself on the hook for greater debt and greater problems because you went to work with these scammers," according to Jay Foley.

Besides this, Jay is predicting an increase in medical identity theft, which struck me as "interesting" given all the media attention on health care legislation. Apparently, he is seeing a lot of people, who are without insurance, use some else's name and social security number to piggyback on someone else's benefits. In the article (also a podcast), Jay aptly points out that the medical industry has been plastering social security numbers on just about every document they create for years.

It should be noted -- especially as move towards digital medical records -- that in the wrong hands these records can be used for more than medical identity theft. The same information can be used to commit a host of financial crimes, including scamming the government and the insurance companies. In case you missed it, the WSJ did a story on the subject, where an insider (employee) downloaded 1100 records, which were later used by his cousin to commit $2.8 million in fraud.

There is no doubt that medical records have been identified as an easy place to steal information by the criminal element. The "trillion" dollar question right now is if making these records digital is going to make the problem worse? Only time will tell.

Estimates on medicare fraud vary greatly, but some go as high as $80 billion a year. Please note this is an estimate on medical fraud in the public sector and doesn't account for the fraud directed at the private sector. The NHCAA (National Healthcare Anti-Fraud Association) is a good place to see all the different aspects of this growing problem. The end result is a monetary loss that we all end up paying for, whether as a taxpayer or a consumer.

It's pretty hard to get an accurate estimate of how much fraud occurs, we can only guess what it might be based on the known incidents. The reality is the more successful frauds are never discovered. After all, most of the people committing fraud go to great lengths to keep their activities anonymous. It is bad for business, otherwise.

So far as industries that will be targeted, Jay predicts the payment services industry and medical industry will be the most attractive to information thieves. Is this because the payment services industry is where there is instant access to money and the medical industry has an abundance of easily accesible information to steal?

Also predicted is that the scammers, hackers and identity thieves behind these schemes are going to be much younger. Citing the urban legend status given to Albert Gonzalez (28), who has now been identified as being a member of the Shadow Crew and behind the TJX, Heartland and Dave and Buster's breaches as a fueling factor. According to Jay, his group is seeing a trend where teenagers are putting up fake e-commerce sites etc. etc. to steal payment information and steal money.

Jay also points out that most information theft is being done by insiders, or people who are given access to it. I've always said that you can have the best security systems out there -- but if you give the wrong person access -- even the best systems can be redered useless. With information being worth money, people can be recruited or even planted in organizations to steal it. While the Albert Gonzalez types make good news stories, if an organized crime group (or lone crook) wants to get in a system, it's a lot easier if they have an inside connection.

Perhaps we need to take a step back and realize that the human being is the most important part of any security equation. Human beings are on both side of the equation, whether they are the victim or the victimizer. As long as we continue to maintain information in easily accesible places (to make money) and send it (electronically) all over the place, we are going to have a problem.

You can read more about Jay Foley and the Identity Theft Resource Center (highly recommended), here.

Data Theft Grows 68 Percent in 2008

Linda Foley at the Identity Theft Resource Center made an ominous announcement that data breaches were at an all time high. According to research conducted by the group, the number of data breaches has grown 68 percent in 2008 versus the same time period in 2007.

The current study acknowledges that some breaches are under reported and multiple breaches are sometimes reported as a single event. The breach at BNY Mellon and SunGard data were cited as an example of a single event affecting multiple businesses.

The report shows an increase in data breaches at businesses, financial institutions and health/medical institutions. Interestingly enough, breaches that involved the government/military and educational institutions showed a decrease.

Breaches are becoming more technology based, also. Electronic data breaches accounted for 80.7 percent of the total versus 19.3 percent, which were considered paper breaches.

I suspect that the increased activity at businesses and financial institutions is because the goal is to steal financial instruments that already have a cash value associated with them. As the general public has become more aware of the issues surrounding identity theft, opening fraudulent accounts with other people's information is becoming more difficult. More people are reviewing their credit and placing alerts/freezes on their individual reports, either by doing it themselves or paying a service to do it for them. When accounts are stolen that already have disposable spending power or (cash) on them, identity theft protection is unlikely to stop them from being compromised.

Because of the increased awareness, more fraudsters take over accounts instead of trying to open new ones. Most of the current identity theft protection methods being used will not stop this from happening.

So far as the statistic that electronic theft is becoming more prevalent than paper theft, perhaps shredding documents is making stealing paper harder? Of course, it might also mean that the methods to steal information electronically have become more advanced, also. Crimeware kits of the DIY (do-it-yourself) variety have spread this ability to people, who lack the technical skills to do it by themselves. There is a lot of evidence that these kits aren't too hard to purchase over the Internet and that sometimes they even come with technical support.

ID Analytics partnered with the study and added statistical information showing that 39 percent of data exposures were caused by missing or stolen devices in 2007. Their statistics also show that malicious intent in data breaches is a growing trend. Malicious intent categories include insider theft and access into account information by external methods (hacking).

A new trend, not specifically mentioned in the report, is large caches of stolen information being discovered that no one knew about before. Yesterday, Dark Reading announced that SecureWorks found one of these caches. Finjan has recently reported finding pretty much the same thing located on what they refer to as "crimeservers" on the Internet. The announcement by SecureWorks reported that hackers are using a trojan, called "Coreflood" also known as "AFCore."

SecureWorks reported that this trojan has gone undetected for a number of years and has compromised corporations, government agencies, healthcare agencies and "others." In this attack, one work station would be compromised and the hacker would wait for an administrator to log on. Once the administrator logged on to the infected work station, the hacker would then use the administrator's privileges to infect entire systems. This "hack" is being used to grab user names, passwords and even entire pages of information. Please note (my speculation) that this type of exploit is probably being used to steal more than financial information, also.

Given the fact that SecureWorks mentions government sites being hacked in this manner, there is no telling what the intent might be or who the information is being sold to (my speculation).

To the best of my knowledge, neither SecureWorks or Finjan have disclosed exactly who has been compromised or the exact details of the information to the general public.

This should lead the average person to believe that the problem of data breaches is far greater than anyone knows. The ITRC study explains why this is a problem when compiling any study on this subject.

Besides the ITRC, there are a lot of dedicated people gathering statistical information on data breaches. While they can only track information on the known occurrences, these people do a lot to educate the rest of us and raise the awareness level of what is becoming a growing problem.

The report gives credit to PogoWasRight, Attrition.org, breachblog.com, the Maryland and New Hampshire Attorney General breach notification lists and other sources that were used to compile this report.

The ITRC is a non profit organization designed to help businesses and people protect themselves from this clear and present danger to all of us. If you are interested in this problem, their site is a good place to educate yourself.

Identity theft, the crime that can follow a person for years!

I first started reading David Lazarus at the San Francisco Chronicle early in 2006, when he wrote about a huge data breach that was later tied to Office Max. Please note that Office Max never quite admitted to being the point of compromise.

That data breach was tied to payment card fraud that spread quickly across the entire country.

Since then it's become very apparent that hackers have been targeting merchants for the credit/debit (payment) card information they've been storing in not very safe places.

David has left his digs at the San Francisco Chronicle and now writes for the LA Times.

In what appears to be his first story for them, he wanted to let his readers know:

The honchos here at the paper say I should devote my first column to introducing myself. At the moment, there's only one thing I want anyone to know about me: I'm not Derrick Davis.

And I want this guy out of my life once and for all.

David understands the frustration a lot of people go through when someone takes over their financial life.

In David's case, the person who stole his identity wasn't even here legally. Apparently, he was also able to use a social security number that didn't match his name to run up lines of credit and open checking accounts. It's amazing that the credit was issued, when discrepancies like these existed.

Davis was eventually caught, but only because David worked the case himself and had a sympathetic soul (Postal Inspector), who took the information for action.

Even then since Davis was an illegal immigrant, the worst that happened to him was being deported to Jamaica.

Trust me, catching an identity thief is rare and hard to accomplish, unless you know the right people. The odds of not getting caught are 99 to 1, according to statistics.

All of this occurred in 2003 and David is still suffering from the episode.

When he moved to LA from San Francisco and tried to buy a new house, David discovered that the credit bureaus were still listing some of the bad debt Davis created. The mortgage company even suggested that David pay the debt Davis had incurred to allow their deal to go through on schedule.

Being well connected, David was able to get a couple of comments from Linda Foley at the Identity Theft Resource Center:

The question is not if you'll become a victim of identity theft. It's when. It's the crime that keeps on giving. It's the never-ending story.

You think you get everything solved, and then it's like a ghost that reappears.

I'll follow David's work to the LA Times. I've always found him to be an excellent read and very knowledgeable on this subject. He has educated a lot of people this growing problem, and even has helped enact laws that protect people from this crime.

When I first started reading his articles, I had just discovered my information had been stolen in the compromise that Office Max never admitted to.

I guess I'll have to keep wondering if that unfortunate episode will come back to haunt me sometime in the future.

David's introduction to his new readers at the LA Times, here.

Does anyone know - whether or not - check fraud is on the rise?

I sometimes wonder - whether or not - anyone really knows how much check fraud is out there?

Law enforcement jurisdictions often have dollar amounts (some fairly high), which must be met before a case is actively investigated - causing it to be recorded as a statistic. And in the private sector - a lot of NOT very "clear reasons" are used to return checks, which might or (might not) mean fraud.

My two favorites reasons the banks use to return checks are "refer to maker" and "stop payment." This might mean someone was unhappy with a service that was performed, or it could mean the item is counterfeit and the owner of the account placed "stop payments" on the checks. It's even possible that items returned as NSF (non-sufficient funds) are forgeries, or counterfeits because the owner of the account has yet to discover their account has been compromised.

The same holds true with "fraud accounts" that banks open for crooks (new account fraud). New account fraud occurs when fraudster(s) open an account (often with fake information), write a series of checks for a lot more than what is in the account, and disappear (literally).

Often they do this over a weekend, and withdraw the amount they initially deposited, also.

New account fraud items normally return as (NSF) non-sufficient items until the bank closes the account. Once this occurs, they are classified as "account closed." Non-sufficient fund and account closed items are normally not considered a fraud classification.

The only thing that is certain is that the loser is going to be the party, who accepted the check, and not the banks. In fact -- some believe the banks are the winners in this process -- because they make a lot of money from "bounced check" fees.

In a lot of the recent Internet scams, customers have even gone to a bank employee to ask if an item is good. After trusting the employee's expertise, the check was deposited and the funds were made "available." A few days later, the item was returned as fraud and the customer's account was "garnished."

And in all the cases, I've heard where this happened, the bank didn't accept any liability. Here's a post, I wrote about this:

Don't Trust a Bank to Tell You Whether a Check is Good, or Not

The other day, I came upon an article by SmartPros, indicating that a "possibility exists" that check fraud will rise in the coming year.

According to SmartPros:

Identity theft trends in the next year may include an increase in check fraud, check synthesizing and check counterfeiting, according to The Identity Theft Resource Center, a nonprofit victim assistance center.

SmartPros story, here.

In case no one has been watching - check fraud appears to have been growing rapidly over the past several years. It's true that all the bogus "financial paper" circulating aren't only checks, we are seeing a lot of counterfeit money orders, also.

Counterfeit cashier's checks and other bogus paper financial instruments (money orders, travelers and gift cheques) have been showing up in secret shopper, romance, lottery, work-at-home and auction scams at ever increasing rates. The situation seems to be getting worse - as more and more people - become Internet users.

In fact, eBay recently announced they will no longer offer any protection for paper financial instruments on their site.

And so far as the amount of them out there, there is evidence that bogus paper financial instruments are being produced on an industrial level:

Are Counterfeit Documents being Mass-Produced in Nigeria?

The Federal Deposit Insurance Corporation sends out alerts on all the counterfeit cashier's checks, which are pretty hard to keep up with. If you want to see what I mean, link here.

We read a lot about "DIY" (do-it-yourself) kits being sold to commit phishing and eBay fraud in shady Internet crime forums -- but in the case of checks -- DIY kits are openly sold in stores, and available on e-commerce sites.

In fact, there are a lot of "legitimate companies" selling all sorts of software, printers and even magnetic ink, which are capable of turning out some pretty convincing counterfeits. Throw in a computer, and it's not very difficult to start making checks.

To show all the "DIY check technology" for sale on the Internet, I ran a Google search, here. Of course, a lot of this (including the paper) can be bought at your local office supply store, also.

As with a lot of fraud, technology seems to be enabling the problem.

Although check fraud might continue to grow, there is little doubt that it's already a huge problem. BankersOnline did an article in 2002 stating:

About five years ago, U S NEWS and WORLD REPORT did the most in-depth study on this that we've had, and I've used their figures ever since. They probably are low by now. They said the financial institutions in the United States lose about $12 Billion a year in check fraud, and the retail industry loses a like amount. The total loss being $24 Billion as a result of check fraud. I think identity theft is getting a lot of publicity now - but it's been around for a long time. We just never gave it the designation of identity theft.

Since this report is now 5 years old and it is using figures that were 5 years old -- no one probably knows how much check fraud is really going on.

I guess until everyone comes up with some uniform standards, it's going to be impossible to determine how much check fraud is really out there.

BankersOnline article by Barbara Hurst, here.

A great resource on check fraud is the National Check Fraud Center. Their site provides a lot of expert information on check fraud and how to protect yourself from it.

Is check fraud on the rise? Despite the lack of statistics - my best guess is that it is!