Are Street Gangs using Check Fraud to Fund Themselves?

We keep hearing how white collar crime is becoming more organized. A recent story in Arizona shows how traditional gangsters are getting involved in white collar crime.

In 2006, Postal Investigators investigating checks being stolen from the mail tied the activity into one of the more violent street gangs operating in the Hermosa Park area of Phoenix. This led to one of the biggest street gang cases of the year.

Yesterday, Phoenix police and FBI agents began serving warrants on the gangsters involved in this activity. 102 were indicted in this operation. By the end of the day, they had 38 of them in custody. The arrests are being hailed as crippling the gang in the Hermosa Park area.

Of course, this doesn't mean that this gang wasn't involved in more traditional activity. Also confiscated in the arrests were "24 weapons, 18 cars and trucks, 43 pounds of marijuana and cocaine and Ecstasy," according to the story in the azcentral.com about this. In another story on this by ABC15.com, officials commented that several of the people arrested were connected to violent crimes in the area.

According to the authorities involved in this investigation, this gang is suspected of stealing more than $2 million dollars using stolen and counterfeit checks in the past couple of years.

Often legitimate checks stolen from the mail and other sources are counterfeited. Since the checks are copies of legitimate items, they often pass initial scrutiny at a financial institution.

In recent years, check fraud has exploded. Last year, an International task force monitored the mail in several countries and confiscated checks being produced overseas and mailed to several countries. Additionally, a wide array of check producing software and even the paper with anti-fraud security features can be bought in Office Supply stores and even on the Internet.

Another phenomenon that fuels check and many other types of fraud is the easy availability of counterfeit identification. The distribution and sale of counterfeit documents is also controlled by organized crime. I've written about this frequently and have spoken to Suad Leija and her husband, who have gone to considerable effort to educate the public (and the authorities) about how widespread and organized this activity is.

Suad's website, Paper Weapons has a lot of information on this subject.

Organized check fraud activity has been around for a few years. In 1996, Special Agent Keith Slotter of the FBI wrote a very telling paper on this subject. "The principal ethnic enterprises involved in illegal check fraud schemes include Nigerian, Asian (particularly Vietnamese), Russian, Armenian, and Mexican groups. The majority of the Vietnamese, Armenian, and Mexican organizations base their operations in California, especially in the Orange County, San Francisco, and Sacramento areas," according to the paper.

While the arrests in Phoenix represent a small part of the overall problem with check fraud -- it does point to the fact that organized criminals see check fraud as a lucrative income stream.

McAfee reports on worldwide identity theft trends

Although, identity theft has become a global issue, there are very few studies that put the trends together from a global perspective.

Since identity theft can travel thousands of miles with the click of a mouse (or with the use of automated software), we could learn a lot by studying the problem as a whole.

McAfee has just released a white paper, which does this.

From the McAfee site:

According to the report, the number of keyloggers - malicious software code that tracks typing activity to capture passwords and other private information - has increased by 250 percent between January 2004 and May 2006. Additional findings show that the number of phishing alerts tracked by the Anti-Phishing Working Group has multiplied 100-fold over the same period of time. The report also provides practical guidelines that minimize the risk of identity theft to help readers protect themselves and prevent this increasingly common crime.

The study shows that identity theft exacts a high toll on national economies around the world. According to the Federal Trade Commission, the annual cost for consumers and businesses in the United States alone reaches $50 billion annually(1). In the United Kingdom, the Home Office has calculated the cost of identity theft to the British economy at $3.2 billion during the last three years(2) and some estimates from the Australian Centre for Policing Research place the cost of identity theft at $3 billion each year(3).

The conclusion of their report is:

We must first admit that every one of us—individuals and businesses—are threatened and potentially vulnerable to identity theft; this is not something that happens only to others. Despite the seriousness of current incidents and the
increasing threat, some basic principles allow us to significantly reduce the risk. Awareness is the best defense. Through awareness, we develop our senses to spot identity theft and to protect personal and corporate information, while maintaining the benefits of information technology.

Not only covered in the report are technological means in which identities are stolen and used, but it also covers known cases, such as "dumpster diving, mail theft and employee theft."

It also shows how victims are denied credit, identification and even labeled as "terrorists" because their identity had been assumed, and used for "illicit" purposes.

The paper is substantiated by referencing a lot of (worldwide) government and private studies.

The paper also has a lot of relevant tips for both individuals and organizations on how to avoid becoming a victim.

All in all - a very "interesting" read.

McAfee White Paper, here.