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.

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Fraudsters mutate counterfeit MoneyGram money order scam to fool victims/financial institutions

Counterfeit MoneyGram Money Orders seem to be surfacing all over the place, again! Here is what I wrote about them the last time I posted on them:

Recently, MoneyGram removed the Travelers Express name from their money order product. The new version is branded simply as MoneyGram, printed in Spanish (Espanol) in addition to English.

The old version with the Travelers Express name have been counterfeited and circulated via Internet scams for a couple of years. A lot of them had Walmart's logo printed on them. We've seen similar counterfeit American Express Gift Cheques and Postal Money Orders in recent years, also. Some of these items are still in circulation, including the older Travelers Express version.

For a long time, the counterfeiters seemed to prefer using a Walmart logo. Some of them even came with a letter from Walmart Financial Services.

The newer version, I saw on Friday bear a CVS Pharmacy logo and they are being distributed in lower dollar amounts. Presumably, the high dollar amounts $700.00 and over were being looked at too closely by financial institutions.

Not sure, but they could be starting to use a variety of logos to make them look legitimate. If anyone reading this has seen different, please add a comment to let everyone know.

The newer items seem to be in denominations of $500.00 or less.

These items normally are obtained when a person gets involved in a too good to be true financial scheme, or is solicited by a beautiful woman (or man) needing to be rescued from a foreign locale. This normally occurs on the Internet.

Here are some examples of the lures used to pass these items, along with links to old posts:

Some of these lures include, but aren't limited to (new lures surface frequently), secret shopper, romance, lottery, work-at-home and auction scams.

Sadly enough, the lowering of the dollar amount seems to have had limited success because I am getting reports that some of these items have been cashed at financial institutions.

The saddest part of all of this is (from an earlier post):

A common denominator in most of the scams is that there will be a request to send the proceeds, minus your paltry cut (normally via wire transfer) back to the person sending you the instruments. That is (unless) they are buying goods from you. In this case, your property is what they want you to send to them.

In other words, if the item is cashed at a financial instiution, when it comes back as a counterfeit -- they will hold you and YOU ALONE liable.

Even sadder, people are also getting arrested for passing them. When counterfeit instruments started getting passed in Internet scams, the financial institutions were a lot more forgiving. This isn't necessarily the case anymore with the amount of losses being taken out there.

More and more often, criminals pretend to be victims and pass the items. I call these people, "reverse scammers" because they have no intention of wiring any money back to the original scammer.

If you are a true victim, I recommend taking to the good folks at FraudAid, who advocate for the people that are really victims. The key is being able to show all the correspondence, along with proof that money was actually wired. If you kept the money from the transaction, it is going to be hard claiming "victim status."

The best way to avoid getting scammed is to call and verify the item at MoneyGram, itself. This can be done by calling 1-800-542-3590. In almost (although not always in theory) all cases, this call will reveal the item as a counterfeit.

MoneyGram money orders aren't the only instruments being counterfeited. Counterfeit cashier's checks, money orders, gift and travelers cheques are also being counterfeited and used in these types of scams.

If you want to learn more about these scams, I recommend going to fakechecks.org, who has some great videos illustrating the scams used to pass these items.

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Bank of Mellon reports a second data breach

Last week, the Bank of Mellon disclosed they had lost unencrypted tapes containing the personal and financial information of several million people about three months ago.

Now it is being revealed that about a month ago, another incident involving a missing (unecrypted) tape occurred. This time, scanned images of checks, along with other assorted sensitive information disappeared. The Check 21 Act, passed in 2004 allows financial institutions to electronically deposit images of checks instead of using the actual paper check, itself.

According to press release on the matter, they are now going to start using encryption. I wonder how many other institutions out there are still not encrypting all of their confidential information?

Ironically, if you read the privacy and security pages on Bank of Mellon's site, they seem to be very pretty savvy about both identity theft and privacy issues.

The first incident occurred on February 27th and the now revealed second incident occurred April 29th. If they knew it happened on April 29th, why wasn't this one reported with the other one? The February 27th incident was reported last week, which was well after April 29th.

Of course, I'm sure that the "official explanation" will be that they didn't know if it was really missing and no one is really sure if the information is being used to commit identity theft.

Here is the low down as reported in Pittsburgh Tribune Review on the April 29th occurrence.:

The most recent incident occurred on April 29 when a backup data-storage tape containing images of scanned checks and other payment documents was lost while being moved from Philadelphia to Pittsburgh, spokesmen for the bank said Friday. It involved data of 47 institutional clients and a yet to be determined number of individual customers.

A ComputerWorld article by Brian Fonseca highlighted concerns that are being investigated by Connecticut Attorney General Richard Blumenthal, who is working with his peers in other States to determine why it took so long to report the matter. AG Blumenthal is also asking some hard questions as to why some tapes disappeared and other ones arrived at the storage facility.

The obvious reason, he might ask this question is that it probably points to an insider being involved (my speculation). If this is the case, it is very likely they had somewhere to get rid of the information, or more specifically, sell it.

His press release on the matter listed a lot of institutions, who may have had customers compromised in these incidents.

One thing I wanted to add is that in the most recent occurrence, they are stating scanned checks were contained on the tape. This would make it pretty easy for criminals to use the information to produce counterfeit checks. In recent years, we've seen checks counterfeited on a massive scale, and sent all over the world via snail mail, or even Federal Express and UPS. A recent joint investigation conducted in several nations revealed that these items were being produced on an industrial scale in certain countries.

Many of these counterfeit checks are passed via "too good to be true scams" on the Internet. There are also organized criminal gangs that pass counterfeit checks, also.

Interestingly enough, the way laws governing counterfeit checks are written, the banks have almost zero liability and pass off the loss to the entity who accepted them.

Since counterfeit checks are normally exact copies of actual checks, this made me wonder if sometimes the source of the information to produce them is coming from all the scanned checks being electronically transferred between businesses and financial institutions? Payment (credit/debit) card is transmitted and stored pretty much the same way, and there is certainly a history of these transactions being targeted for criminal purposes, frequently.

According to their most recent press release, the Bank of Mellon is offering free credit monitoring and identity theft insurance through Experian. This has become standard in the wake of most data breaches, but it doesn't necessarily protect a person from all forms of identity theft.

Some examples of where free credit monitoring doesn't catch identity theft right away are medical benefit fraud, employment fraud, government benefit fraud, some forms of check fraud and last, but not least, when it is used to commit crimes of other than a financial nature.

Additionally, the ComputerWorld article mentions that at least one class action law suit has been filed as a result of this:

This week, a lawyer representing 40 affected individuals filed a class-action lawsuit against the New York bank in Connecticut Superior Court. Attorney Michael Stratton, who represents the plaintiffs, said he is seeking up to seven years of free credit monitoring and credit insurance for customers, along with unspecified damages.

I found a list of companies that might have had their customers compromised in these data breaches on the Connecticut AG site:

People's United Financial Inc., John Hancock Financial Services, Inc. (acquired by Manulife Financial Corporation), The Walt Disney Company, TD Bank Financial Group, The Bank of New York Mellon Corporation, Hudson United Bancorp (acquired by TD Bank Financial Group), United Parcel Service, Inc., Wachovia Corporation, MetLife, Hudson City Bancorp, Eastman Kodak Company, Burlington Resources (acquired by ConocoPhillips Inc.), Providian Financial (acquired by Washington Mutual, Inc.), Penn Fed Financial (acquired by New York Community Bancorp), ADESA, Inc., Alcatel-Lucent, Odyssey America Reinsurance Corporation, Seacoast Financials Services Corp. (acquired by Sovereign Bancorp), Viewpoint Bank, Diamond Shamrock (acquired by ConocoPhillips Inc.), Sound Federal Bancorp (acquired by Hudson City Bancorp), Big Lots, Inc., Guidant Corporation (acquired by Boston Scientific Corp), New York Community Bancorp and ACE Limited.

Bank of Mellon press release on this matter, which contains information for potential victims, here.

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80 year old man loses over $700,000 to advance fee (419) scammers

With spam e-mails offering too good to be true come-ons filling up our mailboxes, we often forget that there are some very real people who get victimized after falling for one of them.

Of course with the availability of botnets -- which command legions of spam spewing zombies (compromised computers)-- even if only a few people fall for the scheme, the scammers still make a tidy sum off of other people's misfortunes.

An example of this can be found on the Newport Beach Police website, where an elderly gentlemen lost a lot of money (probably his life savings) to one of these schemes:

Recently, an 80 year old resident of the city learned he was a victim of an international lottery scam. He originally received an email claiming he had won an overseas lottery which required him to pay a processing fee to have the funds released. This scam continued for a two year period and ended with the victim losing over $700,000.00.

Scam operators (often based in Canada) are using email, telephone and direct mail to entice U.S. consumers to buy chances in high-stakes foreign lotteries from as far away as Australia and Europe. These lottery solicitations violate U.S. law, which prohibits the cross-border sale or purchase of lottery tickets by phone or mail.

This type of scam is often referred to as an Advance Fee (419) scam.

Of course, the lottery scam isn't the only one out there. There are work-at-home (job) scams, secret shopper, romance, lottery and auction scams being sent out in millions (billions ?) of e-mails, also. And if you don't have your own financial resources, the scammers will gladly provide you with a wide array of counterfeit financial instruments to negotiate. They could care less if you get arrested and expect that you will wire them any proceeds if you successfully pass the bogus instrument.

Please note, that just because you initially are able to pass the instrument doesn't mean that someone won't come after you, later.

The news release from Newport Beach Police Department offers the following advice on how to report scams like this:

The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.

They also point to a page on the FTC website about cross border scams, which can be seen here.

If you are a more "visual type," I recommend going to fakechecks.org, which has a series of video presentations on this subject.

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Symantec releases Internet Threat Security Report

Symantec recently issued it's Internet Security Report, which covers the second half of 2007. The key findings in the report are that malicious activity has become web based, attackers are going after end users rather than computers, the underground community is maturing and consolidating and the bad guys are getting better at improvising and adapting.

The report confirms that hacker tool kits are increasingly making it easier for less sophisticated types to effective commit technical crimes. Symantec also believes that these tool kits are being professionally developed, which supports the deduction that the underground community is maturing and consolidating.

Perhaps the availability of tool kits is the reason that a 559 percent increase in phishing websites has been noted?

The report also shows that the bad guys are going after "trusted" sites, such as social networking sites.

The underground economy in stolen financial details is also on the increase. These details, which are sold in Internet forums are getting cheaper. With all the phishing going on coupled with a record amount of data breaches an over abundant supply of stolen information is likely the reason for this. The report found a wide variety of pricing on payment card numbers, ranging from .40 cents to $20 per card.

The easy availability of encoders and other portable payment card technology makes it "too easy" to counterfeit the numbers into realistic looking plastic. In addition to this, there is a thriving market in counterfeit documents, which provides a wide-array of realistic counterfeit identification to vet the counterfeit financial instruments.

Besides identities and payment card details, stolen bank accounts are becoming increasingly available. Symantec attributes the increase in bank account information to a mirror increase in banking trojans over the second half of 2007.

Besides being used to clean out an account, bank account details are useful to criminals when they commit check fraud. Anyone, who follows scams on the Internet, knows that counterfeit checks are being delivered to unsuspecting mules to cash in a variety of advance fee (419) type scams. Please note there are organized gangs, who move from area to area committing check fraud using mules, who know exactly what they are doing, also.

Recently, an International task force monitored the mail and discovered large amounts of counterfeit checks being shipped throughout North America and the European Union.

All in all this report is a very interesting read. If you are a more visual type, Symantec also did a very nice flash presentation on this, which can be seen on the page linked to in the previous sentence.

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Word of mouth is fraud's worst enemy!

FraudAid, a website dedicated to helping fraud victims has a saying, "Silence is fraud's best friend. Word of mouth is fraud's worst enemy. Pass the word!"

In a world, where fraud victims have a hard time getting anyone to even talk to them this saying makes a lot of sense.

FraudAid was conceived by a woman by the name of Annie McGuire, who fell victim to a fraud scheme, herself. Her personal story, which is told in great detail on the site proves that just about ANYONE can become a fraud victim.

In my personal dealings with victims, you would be surprised who has been scammed.

The problem is that most people -- especially those who think they should have known better -- rarely report that they have become a victim of fraud. FraudAid strives to educate all of us that the lack of communication enables fraudsters to victimize people (who if they have been made AWARE) might not be have been taken in by a fraud scheme.

Thus, the reason there seems to be so much fraud and the experts compiling all the statistics disagree on how much fraud exists. After all, "Silence is fraud's best friend."

The FTC just released their estimate of identity theft victims, which has raised a lot of speculation about how accurate their number is.

I have no doubt that the FTC did the best they could, but if fraud isn't reported, it's hard to quantify.

The FraudAid site is a wealth of information for someone, who is trying to seek help after becoming a victim. Of the greatest importance (in my opinion) is how to deal with the authorities.

One page on the site shows the average person how to write a narrative that will get the Police interested in going after your case.

It also goes into great detail on what law enforcement agency specializes in what type of fraud. This can be confusing for someone dealing with being victimized for the first time.

The site also addresses a growing phenomenon, which is how to avoid getting arrested after becoming a victim. With all the auction fraud and stolen financial information being sold wholesale, fraudsters have developed a need to launder the proceeds of their illicit transactions.

The way they do this is by tricking people to do it for them. This is accomplished by hiring them under "false pretenses" to negotiate all their illicit transactions and wire the money to them. This scam is often referred to as a work-at-home, job, or check-cashing scam.

Another variation, known as a reshipping-scam, tricks people into reshipping stolen merchandise.

In reality the victim is taking all the risk for the scammer -- and more and more often -- the rap for them when they get caught. Sadly enough, the end result is almost certain financial ruin and possibly being charged with a host of crimes including, check fraud, money laundering and receiving stolen goods.

Some of detailed information on the different scams that can be found on FraudAid include investment, Nigerian (419), sweetheart/romance, lottery sweepstakes, lottery, work-at-home, visa/green card, counterfeit check/money order and reshipping/package processing scams.

Also covered on the site is how to protect yourself and recover from identity theft. Many fraud victims later become a victim of identity theft when a fraudster sells all the information they've data-mined off them.

The site even contains information on child safety and human trafficking.

Backing all this up are a host of research tools for fraud, where to report it and how to take political action.

Annie is now backed up by a group of volunteers, one of whom, Karrie Brothers, assisted me with a lot of information on the current going-ons at FraudAid.

To grow this effort, Karrie and Annie are actively seeking volunteers to assist them. Being one of the few resources where a victim can turn to, they are getting a lot of business!

FraudAid gives a good explanation of why volunteers are needed and they are trying to grow their organization:

Fraud, by every measure, is one of biggest and fastest growing industries in the world.

One study values worldwide corporate fraud at over two trillion dollars. This is not counting consumer and Internet frauds for which there is no reliable assessment. Another study estimates that 6% of global product is laundered money.

The fraud industry is run by many, many skilled professionals. The anti-fraud industry is small and, by comparison, run by very few skilled professionals.

That's why if you have the skills you can make a real difference!

Fraud Aid, Inc. is a volunteer anti-fraud organization. We, as all other anti-fraud organizations, are out-numbered and need your help.

We have the frauds. Do you have the time?

To grow the organization, they are recruiting a wide range of volunteers with law enforcement, legal, IT and education experience. There are also opportunities for people with no experience, also.

Even if you think you are aware of all the fraud schemes out there, FraudAid is a great place to learn more about them. After all, if people weren't being taken in by the schemes, fraud would probably disappear pretty quickly!

If you want to learn more about FraudAid, the site can be seen, here.

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Too good to be true employment opportunities

Patrick Jordan (Sunbelt blog) did a nice post about a huge problem that frequently occurs on the dark-side of the Internet.

The problem, I'm referring to is people being recruited (some might say duped) to assume the risk involved in collecting the proceeds of Internet crime.

With all the fraud occuring on auction and e-commerce sites -- criminals need a way to move they money they are stealing. This activity is often referred to as money laundering.

They accomplish this with money transfer scams, which are sometimes referred to as job scams.

These scams are nothing more than a way to trick people into negotiating bogus financial instruments, or launder the proceeds of auction fraud!

We've all probably seen a spam e-mail, or two (I get several daily) with job offers that seem a little too good to be true. Most of these jobs seek a financial representative to handle payments for a foreign company. In reality -- the person is moving stolen money overseas -- where it disappears into thin air.

Besides being offered in spam e-mails, people are also recruited off job sites and sometimes even from the classifed sections of newspapers and magazines.

A sister scam to money transfer scams is referred to as a reshipping scam. The difference is in this job a person reships hot merchandise (normally from auction sites) to their bosses.

In most of these scams, they prefer you use Western Union or MoneyGram to send them their money. Once the money is picked any efforts to recover it will most likely be useless. Please note that there are many e-cash venues that are used, also.

While these jobs might have fancy titles, a lot of people refer to someone doing this as a "mule."


(courtesy of mattcoz at Flickr)

In Patrick's post, he reveals another twist to this activity, which are websites set-up to make these jobs appear to be legitimate.

Here is a screen shot (courtesy of the Sunbelt blog) of the site Patrick discovered:



He also lists some other sites to avoid from the same IP in his post, which can be seen, here.

Most of these scams are pretty easy to discover because they are offering too much money for too little work.

These job offers are nothing more than a way for criminals to get other people to take all the risk, while they reap the rewards of their illegal efforts!

Besides facing almost certain financial ruin, some of these employees are ending up living in new digs:

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International task force led by U.S. Postal Inspectors stops $2.1 billion in counterfeit checks bound for the United States

(Picture courtesy of FakeChecks.org)

On September 7th, I did a post based off a story that circulated out of Nigeria about an International investigation that might lead to arrests, worldwide.

Apparently, it did and the U.S. Postal Inspection Service is now giving more details, including some arrest statistics.

Please note that a lot of other agencies were involved in this, including the Nigerian Economic and Financial Crimes Commission, and the United Kingdom Serious Organized Crimes Agency.

From the press release:

Investigators led by the U.S. Postal Inspection Service have arrested 77 people as part of a global fraud crackdown which has since January intercepted more than $2.1 billion in counterfeit checks bound for the United States.

The eight-month investigation involved schemes in Nigeria, the Netherlands, England and Canada, and has stopped more than half a million fake checks from being mailed to American victims.

At a press conference at the National Press Club, Postmaster General John Potter announced a consumer-awareness campaign to educate the American public. International scammers have found U.S. consumers easy prey and are increasingly targeting them, Potter said.

“All fake check scams have the same common pattern: Scammers contact victims online or through the mail and send them checks or money orders. They then ask that some portion of the money be wired back to them,” said Potter.

“The best thing our citizens can do to protect themselves is learn how to avoid these scams. The old adage still holds true: If someone offers you a deal that sounds too good to be true, it probably is.”

The press release is launching a new awareness campaign, which includes a website run by the National Consumers League (NCL) to protect people from this billion dollar problem.

Consumers can learn more and report fraudulent activity at the Alliance website, FakeChecks.org.

If consumers believe they have been defrauded by a scam, the Postal Inspection Service wants to hear from them. These crimes can be reported by calling 1-800-372-8347.

I've spent a little time taking a look at the site. The information on it is easy to understand, highly visual and is a definite asset in protecting the average person from becoming the victim of an Internet scam.

In fact, I liked it so much, I've put it on my links list.

The entire press release, which contains a lot of helpful information, can be viewed, here.

I recently did a pretty detailed post on how to verify if these items coming in the mail are fake, here.

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TJX class action settlement only addresses about one percent of the total people compromised

Friday evening, MarketWatch announced that TJX -- who suffered a data breach compromising over 45 million of their customers --has agreed to settle the class action lawsuits that were filed against them after the data breach was disclosed.

The class action lawsuits referred to were filed in both the United States and Canada.

Since most of the financial losses have been incurred by financial institutions -- who had to reissue the compromised cards and settle the fraud claims -- this settlement appears to primarily address the customers compromised by the breach of TJX's refund database.

This would amount to about 455,000 people, or one percent of the total number of people compromised.

Another issue that is still pending is how information is stored, and who will be responsible for paying for the administrative costs arising from data breaches in the future. Consumers Union is pushing that one of these bills, already passed in California, be signed into law. Minnesota has already passed legislation that addresses this.

MarketWatch reports:

Under the settlement, which is subject to court approval, TJX will offer three years of credit monitoring and identity theft insurance to customers who returned merchandise without a receipt and to whom the company sent letters reporting that their driver's licenses or other identifying information may have been compromised.

TJX will also reimburse the customers for documented costs of certain license replacements and certain losses from identity theft if identification numbers compromised were the same as their Social Security numbers.

The company will hold a one-time three-day customer appreciation event, in 2008 or later, at which prices will be reduced by 15%.

One thing that concerns me is that the settlement offer states that one of the requirements to receive compensation will be that the identification number compromised has to match their Social Security number.

I guess that TJX and their affiliates don't want to address the rising phenomenon of synthetic identity theft? When synthetic identity theft is committed different parts of a persons identity are crafted to create a new one.

Stephen Coggeshell of ID Analytics was recently quoted as saying:

Five years ago, this crime was hardly seen. Eighty-five to 90 percent of identity fraud is really this synthetic ID fraud, as opposed to the true name identity theft.

Just because the identity and the Social Security number were not compromised together doesn't assure that that the person involved will not become a victim.

This led me to wonder how many Social Security numbers could have been compromised? The answer was right on a FAQ sheet on the TJX site:

We do not receive or store customer social security numbers per se. However, the drivers' license or military ID numbers customers provide us in unreceipted merchandise return transactions are, in some cases and in some states, the same numbers as their social security numbers. We are writing directly to customers we were able to specifically identify whose drivers' license, military or state ID numbers, together with their names and addresses, were found in the information believed compromised and identifying where we believe those numbers may be social security numbers.

Laws have been passed that prohibit the practice of placing Social Security numbers on identification documents.

In the identity theft world -- which is what the concern about this data breach is all about, when a SSN or SIN (in Canada) is compromised -- the criminal compromising the information has all the information necessary to complete a full identity assumption.

In the dark world of Internet forums that sell this information, a complete identity (SSN, or SIN included) is often referred to as a "full." The complete information on a person is simply worth a little more money to the criminals purchasing it.

Retail criminals, who causes billions in losses a year, often refund the merchandise to launder the proceeds of their efforts into cash. This was the very reason -- most retailers implemented databases to track the information of people, who show up at refund desks -- a little too frequently.

With the increasing availability of fake identification and bogus financial instruments -- already being used at retailers to steal merchandise, with a focus on high-value items that are locked up -- it's likely that a lot of the information in these databases isn't completely accurate.

I would guess that the same people, using the bogus financial instruments, purchase the merchandise with them and then head to the refund counter.

So far as the TJX offer to settle this portion of their liability, it still has to be accepted by the court. Of even greater importance is that retailers need to take a hard look at how these refund databases are protected -- and -- whether or not, they are as effective in stopping refund fraud as they used to be.

For more information on the issue of using Social Security numbers on identification documents, the Privacy Rights Clearinghouse has a document, here.

The University of California submitted an interesting document to the Federal Trade Commission on the subject of synthetic identity theft, which can be seen, here.

Last, but not least, Tom Fragala at Truston put together a pretty neat blog post with a lot of references about synthetic identity theft, here.

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Sophisticated Russian check fraudsters arrested in Fresno

Eastern European organized crime, particularly that of the Russian variety, has become a huge problem, worldwide.

On September 18th, six people of Russian origin got caught in what appears to be a pretty large check scam. The press and Fresno PD can only speculate, whether or not, the people arrested were organized criminals. I'll let the reader come to their own conclusion.

Nonetheless, the story reflects what many consider a growing trend in criminal activity becoming more organized.

CBS 47 in Fresno is reporting:

Fresno Police said ten people were involved in this very complex case involving multiple schemes. In one of the scams they would allow someone else to write check on their account.

They would then go back to the originating bank and claim someone had stolen their checks and was writing illegitimate checks. The bank would then refund their money and the suspects would essentially double their funds. They would even file police reports to make it look legitimate.

The case took Fresno Police more than a year to sort out. It appears the group was involved in hundreds of cons and scams.

The reason only six of the ten were arrested is that four of them fled the country.

CBS 47 story, here.

Organized criminal activity has become a huge problem in recent years. In California, where this occurred, the Attorney General issued a pretty extensive report detailing the problem, here.

The amount of known groups in the activity (not only Eastern Europeans) is getting out of control (my opinion).

I've also written a few things about organized crime, primarily from a financial crimes perspective, which anyone can read (if they're interested), here.

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Celebrities, including Paris Hilton become identity theft victims

(Courtesy of Flickr) Only the photographer knows who is behind the mask.

No one's identity is safe these days. It's just been reported that a lot of celebrity types, including Paris Hilton have had their identities jacked (stolen).

Tampa Bay's 10.com reports:

Investigators busted a massive identity theft ring allegedly operating out of a row home in Northeast Philadelphia Friday.

Police said the list of targeted victims includes celebrity names like Donovan McNabb, his mother Wilma, Jennifer Lopez, Paris Hilton, Whitney Houston, Patti LaBelle, Michael Vick and Microsoft founder Paul Allen.

Allegedly, a couple of fraudsters used change of address forms and had mail diverted to a Philadelphia address. They then used the information from the stolen mail to order checks and credit cards.

The article also states that one of the fraudsters was a former IRS employee, and that some of the information might have been stolen from their computers.

Considering the names they were using, one might wonder why no one noticed at the banks, credit card companies, or the post office when this scheme was first hatched?

In case any of these famous people are wondering why it was so easy to use such recognizable names, it might be because issuing credit cards, checks and (I'm guessing) address changes are approved by computers.

To demonstrate this, they might want to read a previous post I wrote:

Ever Wonder How Well the Credit Card Companies Protect Your Personal Information?

I did another post, where a cat was issued a credit card, also:

Should cats be issued credit cards?

According to the article, this case is still being investigated and the list of people compromised is likely to grow.

It will be interesting to see, if it is ever disclosed, how long this went on and how much money was stolen as a result of this!

10.com article, here.

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Certegy reveals their data breach is a lot larger than originally reported

Earlier this month, I blogged about the Certegy data breach, where a not very HONEST employee got caught selling information to an unidentified data-broker. Certegy was quick to assure the public that none of this information would be used to commit fraud because it was being used by "legitimate marketing firms."

Now the number of records (people compromised) has risen significantly after Certegy filed a report with the Securities and Exchange Commission.

The Tampa Bay Business Journal Reports:

An ongoing investigation has determined that about 8.5 million consumer records were stolen, according to a July 25 Securities and Exchange Commission filing by Fidelity National Information Services Inc. (NYSE: FIS), the Jacksonville-based parent company of St. Petersburg-based Certegy.

According to Fidelity, Certegy's parent company the investigation is continuing and this number could grow.

Florida Attorney General Bill McCollom listed some useful information for victims in a press release, which said:

For more information, consumers may call Certegy at 866-498-9916 or may visit their website at http://www.certegy.com. Affected consumers are encouraged to take the precautionary steps outlined in the Certegy letter, including obtaining a free fraud alert from one of the credit reporting agencies. Furthermore, if consumers believe at any time they are victims of identity theft, they should report this to the police and request that the national credit bureaus place a fraud alert on their credit reports. Consumers should also notify banks and creditors involved of questionable charges or accounts, keep records of all telephone calls and follow up in writing with credit bureaus, banks and creditors.

If you received a letter from Certegy and you continue to receive marketing calls that you suspect result from this data breach, please report this activity to the Attorney General’s Citizens Services Hotline at 1-866-9-No SCAM (1-866-966-7226). Additional information about protecting yourself from identity theft is available online at http://www.myfloridalegal.com/identitytheft.

I've received a lot of comments on my original post, including some (anonymous) claiming their information was used for fraud. Unfortunately, I cannot verify this information, but someone with the e-mail address LPLong@Yahoo.com claims to be collecting victims to file a class action law suit.

My original post with comments, here.

Press release from Florida Attorney General (Bill McCollom), here.

Note this is probably the right place to verify information, if you receive a letter. If you believe you are fraud victim based on the Certegy breach, I would let them know about it, also.

Tampa Bay Business Journal article, here.

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Not to worry, check processing company (Certegy) believes the 2.3 million stolen records will not be used for fraud!

Large data breaches are becoming a VERY frequent news event! This time only 2.3 million records were stolen, a mere fraction of the amount (45 million plus) TJX lost. In this instance, we are told we have nothing to fear because the information was sold to a data broker.

Ron Word of the AP (courtesy of the Washington Post) reports:

Fidelity National Information Services, a financial processing company, said yesterday that a worker at one of its subsidiaries stole 2.3 million consumer records containing credit card, bank account and other personal information.

This occurred at one of their subsidiaries, Certegy Check Services.

According to the article:

About 2.2 million records stolen from Certegy contained bank account information and 99,000 contained credit card information, company officials said.

Since Certegy verifies check transactions, this probably means a lot of checking account information in addition to some credit and personal information. From a financial crimes perspective, this information could be used to commit a lot of identity theft, check and credit card fraud.

The company claims the information was sold to data brokers, who sold it to direct marketers. Their president, Renz Nichols, "believes" this is the extent of the damage.

Not sure, if I can "believe" that no one is at risk. The last time I checked, identity thieves normally shy away from revealing exactly, who they intend to compromise next. It's bad for business. Besides that, is this based on the word of someone, who stole the information and sold it in the first place?

Interestingly enough, the data broker is unnamed at this point. The AP article does say they are claiming they didn't know the information was stolen. I wonder how this data broker verifies the information they get, and who they are getting it from?

Data brokers and credit bureaus sell information all the time. Recently, a data broker (InfoUSA) was caught selling direct marketing information to spammers, who commit lottery fraud schemes.

The sad thing is that once the information starts getting sold, it becomes available to more and more insiders, who might sell it to the wrong person, assuming it hasn't been already.

And there is so much information to be sold, no one is ever sure exactly where it came from. Criminals are even selling it via the Internet to other criminals.

AP Story (courtesy of the Washington Post), here.

Attrition.org is tracking data breaches, here. The amount of them that happen is pretty scary!

I've written a lot of about how data brokers make billions buying and selling our information, which can later used against us, here.

They don't believe they are enabling a worldwide problem, either.

At least that's what I keep hearing, whenever a new data breach is announced.

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Will counterfeit Visa Traveler Cheques be the latest bogus financial instrument spread in Internet Scams?

(Photo courtesy of Flickr)

Counterfeit Visa Travelers Cheques -- so far seen in $500.00 denominations -- are starting to appear in different parts of the United States.

In the past few years, counterfeit U.S. Postal Money Orders, MoneyGram Money Orders, and American Express Gift Cheques have all been circulated by Internet fraud activity.

If history repeats itself, we will see counterfeit Visa Travelers Cheques show up outside the United States, also.

These instruments have been passed in a lot of work-at-home (job) scams. They are also passed in secret shopper, romance, lottery and auction scams.

These advance fee (419) type scams all have a common theme. A lure (scam) -- which plays on greed is offered to entice someone into cashing these items -- and wiring the money back to the fraudster behind the scheme.

The lure (scam) is always too good to be true and makes no sense.

Since it is against the law to pass a counterfeit financial instrument, people are sometimes arrested when they present these items. Even if they aren't arrested, they are held liable, when the fraud is discovered.

Unfortunately, banks often give credit to their customers on these items. Tellers have even told their customers the items are legitimate, which doesn't make any difference (for the customer) when they return. Of course, the bank isn't liable for any of this.

These items are also being presented to merchants. Retail criminals use them to purchase items, get the balance in cash, then refund the merchandise. Of course, if they are unable to refund the items, they will probably try to get gift cards or fence the merchandise. There is a lot of stolen merchandise being fenced (pretty easily) on Internet auction sites.

Intelligence indicates these many of these items are being printed overseas, then distributed in bulk, worldwide. Once received in bulk, they are broken down and distributed to the criminals, who then use them in the manners listed above.

Visa recommends that you do the following to verify if one of the Travelers Cheques are real:

Can you see a watermark in the cheque?

Can you see the holographic thread embedded in the cheque?

Is the customer present?

Have the cheques been countersigned in your presence?

Does the original signature match the countersignature?

Has valid identification been presented and the details recorded along with the customer name on the back of the cheques?

If you are suspicious, you can call them at 1-800-227-6811 to verify an item. This can also be done on-line, here.Visa also has a good interactive tool to identify the security features of the Visa Travelers Cheque, here.

Here are some of my previous posts on counterfeit instruments circulating via the Internet:

Counterfeit MoneyGram Money Orders being passed via Internet Scams

Counterfeit Cashier's Checks Fuel Internet Crime

American Express Gift Cheques Being Circulated in Internet Scams

Counterfeit Postal Money Orders Showing Up in IScams Again

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Secret shopping jobs are liable to cost you a lot of money!

The Secret (Mystery) Shopper scam is running full steam and victimizing people, daily. The last time, I addressed this problem was in a post, where I noticed I was getting a lot of hits from Google on this subject. Recently, a lot of people have been reading my previous posts about this scam.

Here is a basic description of the scam from my last post:

In the Secret Shopper scam, people are solicited to become "Secret Shoppers" sometimes known as "Mystery Shoppers," and go into (normally) Walmart to negotiate a bogus check. Walmart recently got into the business of cashing checks. They are then asked to wire the money using WalMart’s Money Gram services to Canada and report on the "customer service" aspects of their visits.

Once the money is wired and picked up (sometimes within minutes), there is very little that can be done to get your money back.

The letters soliciting victims (mystery shoppers) often are set up with fake telephone numbers that have fraudsters answering them.

The cardinal rule in Internet dealings is to independently verify any numbers provided, no matter how real they seem.

Please note that 800 type numbers are used, also. Sometimes the numbers are set up in the United States, but the shopper is normally instructed to wire the money to somewhere outside the country.

In several of the newer letters, which all contained high dollar counterfeit checks, the shopper is being instructed to cash the item, go and buy a nominal (low dollar) amount of merchandise, then (of course) wire most of the money back to the so-called service.

So far as what bank’s checks are being counterfeited, this seems to change daily.

Sometimes going to your own bank to verify an item isn't a good idea, either. Banks often give a customer credit for these items, and then hold their customer responsible when the item returns. Also, it's not unknown for people to get arrested when attempting to cash these items.

Numerous businesses are listed as places to shop on the recent letters I saw, but they all have one thing in common, which is they offer Money Gram or Western Union wire transfer services.

The most recent versions of the letter state to keep the nominal amount of merchandise they instruct you to purchase.

If you get one of these letters and checks, never cash it, or wire the money before making 100 percent sure the item is good. Of course, I’ve never seen one that did turn out to be good. Who would send a legitimate check worth thousands of dollars to someone they don’t know? Scams never make sense and prey on people looking to make a quick buck.

A good place to search for counterfeit cashier’s or official checks is the FDIC alerts on them, here.

If there is no alert, independently find the banking institution’s number and ask to speak with someone in their security department. Counterfeit checks often use legitimate account numbers and customer service people sometimes verify fraudulent items as legitimate.

This type of scam can be reported the Federal Trade Commission (U.S.) and to Phonebusters in Canada, although it is rare that any action will be taken to investigate an individual case.

I’m not saying not to report them, but the truth is that there is so much of this going on, no one has the resources to go after individual cases. The value in reporting them lies in providing intelligence to law enforcement, which does sometimes build cases, and goes after the culprits.

The best protection for the individual is to recognize these offers for what they are, or too good to be true.

All my previous posts mentioning this scam can be seen, here.

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Eurasian organized crime loots public coffers

Well placed government sources claim that the government loses $300 billion a year in healthcare fraud - with about half of this figure being stolen from immigrant gangs - many of whom hail from the former Soviet Union.

Troy Anderson of the LA Daily News reports on one small part of the overall problem:

Lana Michael and her husband collected welfare benefits in 2003, claiming they earned less than $24,000.

But authorities say Michael, the former office manager of a job-training center for immigrant welfare recipients, also owned a liquor store and recycling business.

And, authorities say, she drove a $76,000 luxury car, shopped at Neiman Marcus and Saks Fifth Avenue and had $147,980 stashed in her bedroom dresser.

Lana Michael is also known as Svetlana Djangarian was part of an elaborate scheme, where welfare to work checks were issued from the inside and cashed using fake ID. Fraudulent tax returns were also filed.

Daily news story, here.

No wonder programs designed to help the less fortunate are in trouble!

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President's Identity Theft Task Force issues recommendations

The Identity Theft Task Force has issued the formal recommendations they've been putting together since May, 2006. The recommendations include feedback solicited from the general public.

The final report is comprehensive -- identifying all the issues that have made identity theft and the financial crimes that result from it -- a major concern in the public eye.

The report does (slightly) downplay the problem of data-breaches, noting no significant increase in financial crimes and identity theft from them. I'm not sure, I completely agree with this, but other's could probably argue this point with me. Despite this, it does make a lot of great recommendations on how to limit our exposure to the problem.

In all fairness, it's very difficult, if not impossible, to identify the original point of compromise in an identity theft case. In most cases, the best guess rule applies. With information being sold over the Internet, the criminal using the information probably isn't sure where it came from originally, either. And even if they were to tell us, most of them can't be considered 100 percent credible.

Underground carder forums seem to be selling personal and financial information, too inexpensively. This phenomenon ties the less sophisticated identity thieves with those of a more sophisticated (organized) nature. Given this, the problem has the ability to expand, rapidly.

As there is more demand, we might see more information being used in all sorts of crimes and Internet access is growing, rapidly.

Congress considered several bills on data breaches in their last session, but failed to pass any of them. Protecting against data breaches is going to be an expensive proposition and my guess is that there is a lot of lobbying going on by the organizations that will ultimately pay for protecting the information better.

The report calls for stricter laws and more aggressive enforcement, which is something that should be taken seriously. In my opinion, a large part of the problem is that identity theft is too easy to commit, extremely profitable, and consequences are minimal, if caught.

Also called for is more cooperation of an International nature, which is going to be a key part of any resolution to what is rapidly becoming a global problem.

The full report can be seen, here.

The Task Force's homepage, which has more good information, can be seen, here.

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Oprah's name spoofed in sweepstakes scam

At about the same time, Oprah did a show on Internet scams, the Illinois Attorney General (Lisa Madigan) issued (another) alert about scammers using Oprah's name to instill (trust) in the garbage they send.

Although, Oprah has run some sweepstakes recently, this one is a scam!

From Attorney General Madigan's press release:

According to Harpo Productions, Inc., which produces The Oprah Winfrey Show, several legitimate sweepstakes were held in the summer of 2006 through Oprah.com but all winners were previously notified. Harpo Productions, Inc. has not sent any letters in 2007 announcing additional winners for this sweepstakes. The sweepstakes letters being mailed to consumers have a check enclosed that is made payable to the letter recipient. The checks look real but are actually counterfeit. Consumers should disregard these letters and should not attempt to cash the checks.

The letters and checks are props in an especially devastating form of consumer fraud—conning check recipients into believing the checks are real, convincing recipients to deposit the checks into their banks, and even persuading the recipients to wire their own money to the con artists.

Full release, here.

Oprah covered this (and a lot of other scams) on her show yesterday, which can be seen on her site, here.

She also mentions this and another scam involving tickets to see her show on her site, here.

Tom Fragala (MyTruston) and I collaborated on a post about counterfeit checks being used in a variety of I-Scams a few months ago:

Counterfeit Cashier's Checks Fuel Internet Crime

Oprah's name is being used because of her immense popularity, which is a common theme in a lot of this activity. Popular brands, disasters and even government agencies are used in same manner, also!

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Retailers and the FBI band together to fight organized crime

Communication is probably the most effective tool in fighting financial crimes, especially those of the organized sort. Financial crooks (scam artists) thrive on a lack of communication and knowledge.

The retail industry realizes this and in partnership with the FBI is launching a secure tool that businesses and law enforcement can use to communicate criminal activity with each other. A simple, but powerful principle.

Here is the information on this new tool from the NRF site:

In response to an alarming rise in organized retail crime, the National Retail Federation and the Retail Industry Leaders Association, in collaboration with the Federal Bureau of Investigation, have teamed up to launch the Law Enforcement Retail Partnership Network (LERPnet), a secure national database that will allow retailers to share information through its unique web-based design. With LERPnet, retailers and law enforcement will be able to fight back against illegal activity including organized retail crime, burglaries, robberies, counterfeiting, and online auction fraud. The database will launch on April 9, 2007.

Full NRF press release, here.

More information on this tool can be seen by linking, here.

The Washington Post also did a good story covering this.

A lot of other industries and law enforcement agencies should follow this example. Developing better tools to communicate could help resolve the current epidemic, currently being seen in all types of financial crimes.

There is some evidence that the bad guys communicate with each other, regularly (carder forums). The good guys should do no less!

To close, Joe LaRocca, NRF vice president of loss prevention is saying:

“With this system, retailers are banding together with law enforcement to send a clear message to criminals: We will not tolerate your behavior and we will stop you.”

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Counterfeit Check (Cheque) Scams are all over the Internet

The amount of counterfeit checks (cheques) being circulated via various Internet scams, and even the classifieds (paper media) is on the rise.

A new trend is also being seen, where people are getting these counterfeits items in the mail (unsolicited). Some of us, who watch this closely, suspect they are data mining information off job sites, like Monster.com and Craigs List.

Last April, I did a post about a Better Business Bureau (BBB) employee, who got a lot of negative attention after she accepted a job to cash bogus intruments and send the money overseas.

Common scams in which these checks are sent for someone to cash and wire the money back to fraudsters are the check cashing (job), lottery, auction, secret shopper, romance and Nigerian letter varieties.

According to the National Consumers League, counterfeit checks schemes rank near the top of the scams reported to them by victims.

High quality counterfeit money orders and travelers/gift cheques are making the Internet fraud scene, also. In the recent past, these have included Postal Money Orders, Travelers Express (MoneyGram) Money Orders and most recently, American Express Gift Cheques.

The NCL has an interesting page on their site about the most prevalent scams reported to them in 2007, here.

And don't expect the bank to tell you (whether or not) a check is good. Since they have no liability in the matter, they will often say the item is good, give you provisional (temporary) credit, then take the money away from you when it is determined to be a fraud.

Here is a previous post about how this occurs:

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

Some of these scams direct you to places like Walmart to cash the item, and wire the money back to them, also. I've had readers leave comments and send me e-mails about getting arrested after attempting to pass one of these items at Walmart.

Before we smear Walmart, consider that with the amount of these items in circulation, its getting harder and harder to determine, who is and who is not, really a victim.

Check fraudsters are now posing as victims, and are scamming the scammers by cashing the items. If they are caught, they claim to be innocent victims.

I've personally spoken to a few of these alleged victims, and for some reason; they never seem to have wired (or sent) any of the money back?

Interestingly enough, the scammers love to direct people to Walmart (probably because they cash checks and wire money), but they could care less if you get arrested.

The bottom line is that even if the check is initially considered good, it can easily return, and the person passing it is held responsible.

Deb Radcliff (cybercrime author) did an interesting blog post about how law enforcement, and the companies having their brands used on these checks aren't going after the cuplrits, here.

Unfortunately, they normally don't have much to go on, and the crime is normally initiated from a foreign country.

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