Wiadomości
2009-07-02
Fraud Examiner Newsletter Articles
Fraud Examiner Newsletter Articles
Account Takeover Fraud on the Rise, Study Says
By Mark Scott, J.D.
A new report warns that the global economic crisis has prompted a disquieting surge in account (or facility) takeover fraud.
According to CIFAS, a fraud-prevention service in the United Kingdom, incidents of account takeover fraud registered a 207-percent increase in 2008 when comp(...)
Account Takeover Fraud on the Rise, Study Says
By Mark Scott, J.D.
A new report warns that the global economic crisis has prompted a disquieting surge in account (or facility) takeover fraud.
According to CIFAS, a fraud-prevention service in the United Kingdom, incidents of account takeover fraud registered a 207-percent increase in 2008 when comp(...)
Fraud Examiner Newsletter Articles
Account Takeover Fraud on the Rise, Study Says
By Mark Scott, J.D.
A new report warns that the global economic crisis has prompted a disquieting surge in account (or facility) takeover fraud.
According to CIFAS, a fraud-prevention service in the United Kingdom, incidents of account takeover fraud registered a 207-percent increase in 2008 when compared to the previous year.
Account takeover fraud is one of the two basic forms of financial identity theft (the other being application fraud), and it occurs when a fraudster obtains and uses a victim’s personal information to take control of existing bank or credit card accounts and carries out unauthorized transactions against them. Application fraud occurs when a perpetrator uses someone else’s personal information to establish new accounts.
According to CIFAS, the global economic crisis sparked the increase, which demonstrates how fraudsters are shifting their efforts and altering their modes of operation to quickly adapt to changing economic conditions. Essentially, fraudsters know that banks have become more cautious with their lending practices, which has led to tighter controls on lending. The tighter controls, in turn, have resulted in a decrease in new account applications, making it less likely that attempts at application fraud will succeed. As a result, fraudsters are redirecting their efforts to existing accounts.
Fraudsters employ a variety of techniques to obtain the personal and financial information typically needed to take control of existing accounts. Obtaining such information can be as simple as dumpster diving or cold calling. Alternatively, fraudsters may use more technology-reliant methods, such as phishing, smishing, or establishing fake websites to collect payment details. Accordingly, to prevent account takeover fraud, consumers should follow established precautions for guarding against identity theft (see the Appendix for a list of tips to protect against identity fraud).
Even though the study was conducted in the United Kingdom, it seems likely that the findings are relevant to the United States as well. The prevailing economic crisis, which seems to be the main contributor to the increase in account takeover fraud, has gravely affected both countries. The global economy has been hit by a major credit crunch, and both nations are experiencing unstable financial markets, weakened currencies, and foundering job markets.
Furthermore, identity theft related to financial fraud is a top concern for banking customers in all parts of the world. In fact, identity theft is the fastest growing type of fraud in the United States, the United Kingdom, and many other developed countries. According to the latest Global Unisys Security Index, a broad, multiyear global initiative that presents a social indicator regarding how safe consumers feel about key areas of security, payment card fraud (i.e., a term that describes a range of offenses involving theft and/or fraudulent use of payment card account data, including account takeover fraud) and identity theft are the two greatest areas of concern across all markets.
In addition, other reports suggest that account takeover fraud poses significant challenges to consumers and financial institutions in the United States. For instance, Bank Info Security, a website dedicated to educating the United States banking information security community, recently listed account takeovers of customer loans and corporate accounts among the 13 most prevalent schemes being perpetrated by fraudsters against financial institutions and their customers.
Moreover, a recent report published by Gartner Inc., a research and advisory firm, shows that fraudsters actively used payment card fraud to steal money, a scheme that claimed 36 percent more victims in 2008 than any other type of fraud.
The recent rise in account takeover fraud serves as a reminder that fraud is always evolving. As countries, organizations, and consumers continue to deal with the global financial crisis in an inconstant economic environment, it is clear that they all must remain alert to the continually evolving threats and risks of fraud.
Appendix
Methods to Protect Private Information
Often, the best and most cost-effective approach to preventing identity fraud is consumer education. The following list provides some useful methods to protect against identity fraud:
• Always check bank and credit card statements for inaccuracies.
• Order and check your credit report at least once a year.
• Before providing personal information, make sure the individual or business requesting it has a valid reason for requiring the information.
• Never write your credit card numbers or Social Security number on checks or on the outside of envelopes.
• Do not give account numbers over the telephone or to persons/companies you are not familiar with.
• Do not use cordless or cellular telephones or e-mail to transmit financial or private personal information.
• Keep all financial documents in a secure place.
• If you have your driver's license information pre-printed on your checks, shred canceled checks before discarding them.
• Check your financial information regularly, looking for what should and should not be there.
• Shred pre-approved credit applications, statements, or bills that contain personal information.
• Have yourself taken off "pre-screened lists."
• Mail bills from the post office or your business.
• Consider having your name, telephone number, and/or address removed from the telephone directory.
• Do not provide personal information over the telephone unless you initiated the call and know who you are speaking with.
• If telemarketing companies call, tell them: "Under the federal Telephone Consumer Protection Act, I want to be on your 'do not call' list."
• Keep your birth certificate in a safe place.
• Choose passwords that will be difficult to crack and use different passwords for all accounts.
• Change passwords and PIN codes often.
• Use different PIN numbers for all of your cards.
• Do not store your PIN numbers on mobile phones or laptops.
• Do not put your Social Security number on any document unless you are legally required to do so.
• Shred any papers with financial information and identifiers rather than simply throwing them in the trash.
Identity Theft Websites
The following list contains some good sources of identity theft information:
• http://www.consumer.gov/idtheft
• http://www.usdoj.gov/criminal/fraud/websites/idtheft.html
• http://www.ssa.gov/pubs/idtheft.htm
• http://www.usdoj.gov/criminal/cybercrime
• http://www.fdic.gov/consumers/consumer/alerts/theft.html
• http://www.bbbonline.org/IDtheft
• http://www.idtheft.gov
Will the Punishment Ever Really Fit the Crime?
By Peter Goldmann
For most, whenever the subject comes up of how harsh or lenient punishment should be for white collar criminals, a prolonged yawn is the prompt result. But the stunt pulled by Bernard Madoff's attorney, Ira Lee Sorkin, just prior to sentencing, in which he attempted to persuade the judge in the case to give his client a major break is anything but boring.
Certainly such advocacy in and of itself is not unusual. Indeed, getting the best deal for a client is what defense attorneys are paid for. And, U.S. Sentencing Guidelines notwithstanding, it is no doubt fair to suggest that the better (read: more expensive) the attorney, the better the chances of a fraudster getting off easy. But the fact that this guideline is often ignored -- as it was most dramatically with Judge Denny Chin sentencing of Madoff to the maximum allowable 150 years in jail -- is what got me thinking about the Sorkin ploy's significance in the broader debate about proper punishment for fraudsters.
Now I'm not a lawyer, but I am having difficulty comprehending the basic logic in Attorney Sorkin's argument: in his letter to Judge Chin, the reasons he offered for granting Madoff a light sentence (by which he meant, specifically, a jail term of no longer than 12 years -- one year shy of Madoff's life expectancy of 84, which Sorkin cleverly gleaned from Social Security Administration data) seem insulting to any reasonable person. Wrote Sorkin:
• "Mr. Madoff willingly submitted to FBI custody early the (morning after admitting his crimes to his sons), confessed, and thereafter cooperated fully with the bail conditions imposed through the date of his guilty plea."
• "(Madoff) indicated at a very early stage his desire to cooperate in asset recovery for the benefit of the victims of his acts..."
• "Mrs. Madoff entered into a voluntary restraint agreement with the (United States Attorney's Office) early in this case, restricting her from selling, transferring, or otherwise disposing of certain assets."
• "Mr. Madoff met recently for several hours with the Inspector General of the SEC to provide information and insight into Mr. Madoff's conduct and the role of the SEC in connection with its examination of Mr. Madoff's business. The information exchanged during the meeting will no doubt shape and fortify the future of Wall Street regulation and oversight. Mr. Madoff's participating at the meeting was entirely voluntary."
As if these flimsy pleas weren't offensive enough to the general public, let alone Madoff's thousands of financially and emotionally devastated victims, Sorkin went a step further by retaining the services of Herb Hoelter, CEO of the National Center on Institutions and Alternatives (NCIA), a non-profit outfit whose mission appears, based on its Web site, to be keeping all criminals out of jail. For example, in an interview with ESPN, Hoelter was visibly impressed with himself in describing his role as a "sentencing specialist" in the Michael Vick sentencing which resulted in a prison term of 23 months for the disgraced football star, 19 of which were served and six months of which were spent under "home confinement."
In the Madoff case, Hoelter stated in a sworn affidavit that, based on research his organization had done on data from the U.S. Sentencing Commission, the average prison term for 21,000 white-collar criminals who were sentenced to prison terms between 1999 ad 2008 was only 17.7 months.
Even if Mr. Hoelter's 17.7 month figure is accurate, Sorkin’s request for a 12-year sentence for his client would hardly have come close to establishing what Sorkin claimed would be a "just degree of proportionality," between Madoff's sentence and those of other fraudsters whose crimes involved more than 0 million, as Madoff's did.
Reason: 0 million is certainly a lot of money to steal, but Attorney Sorkin's inclusion of Madoff in the same category of other fraudsters responsible for outsized losses is difficult to accept given the immense gap between 0 million and the estimated billion that he is believed to have stolen. Indeed, when compared side-by-side, 0 million doesn’t seem like very much money at all!
Moreover, of the 21,000 federal fraud sentences studied by Mr. Hoelter, only 15 white-collar criminals were convicted of crimes involving losses in excess of 0 million and the average prison term for them was 96.6 months. One fraudster, however, who was held responsible for a mere million in fraud losses, received a 360-month sentence. Compared with that case (and there are others), it would have appeared grossly disproportionate to give Madoff only 12 years for stealing billion!
It is very reassuring that Madoff cooperated with the Feds after he was caught and even heart-warming that his wife has so magnanimously agreed to sacrifice her jewels for the benefit of the victims.
But no amount of umpteen-karat diamonds can ever make up for the thousands of lives that were destroyed by Madoff's unspeakable crimes. No amount of voluntary cooperation with the SEC can lessen the human damage done to so many individuals whose life savings are gone and who are now too old to even return to the workforce.
The post-sentencing relevance: The argument over fair punishment for white-collar criminals is ongoing and convoluted. The Federal Sentencing Guidelines have not created any continuity or neutral yardstick by which to establish "proper" punishment for confessed or convicted fraudsters.
It would appear that this chronic lack of objectivity in the meting out of penalties for fraudsters was perceived by Mr. Sorkin as a potential opportunity to seek leniency from Judge Chin. What, after all, did he or his client have to lose?
Even more disturbing, though, is how pernicious arrogance is able to so easily degrade the justice system. By comparison, the issue of whether Madoff was sentenced to 12 years in prison or 150 seems trivial, to say the least.
What we in the anti-fraud community must tackle now is the nagging issue of inconsistent, unpredictable and often laughably lenient punishment for white-collar criminals.
Take for example the recent case of John Quaid, a businessman who perpetrated a .3 million check kiting scheme against a bank, costing it nearly 0,000 in losses. At the opposite extreme of Madoff, Quaid was kind enough to repay the stolen money after getting caught, plus legal expenses. Remarkebly, however, the court sentenced him to no prison time and a fine of 0.00. Charming that John returned the money, but he still is a confessed felon. How does that entitle him to a free pass from punishment? Now that he has learned how not to get caught, wouldn't a judge consider the likelihood that he might try to steal again?
As long as fraudsters think that the imperfections of "the system" provide them with a good shot at a slap on the wrist (as the attorneys of even the most incorrigible fraudsters like Bernie Madoff have them believing), they will continue to take their chances -- at the honest public's increasingly heavy expense.
Żródło: ACFE Newsletter
Account Takeover Fraud on the Rise, Study Says
By Mark Scott, J.D.
A new report warns that the global economic crisis has prompted a disquieting surge in account (or facility) takeover fraud.
According to CIFAS, a fraud-prevention service in the United Kingdom, incidents of account takeover fraud registered a 207-percent increase in 2008 when compared to the previous year.
Account takeover fraud is one of the two basic forms of financial identity theft (the other being application fraud), and it occurs when a fraudster obtains and uses a victim’s personal information to take control of existing bank or credit card accounts and carries out unauthorized transactions against them. Application fraud occurs when a perpetrator uses someone else’s personal information to establish new accounts.
According to CIFAS, the global economic crisis sparked the increase, which demonstrates how fraudsters are shifting their efforts and altering their modes of operation to quickly adapt to changing economic conditions. Essentially, fraudsters know that banks have become more cautious with their lending practices, which has led to tighter controls on lending. The tighter controls, in turn, have resulted in a decrease in new account applications, making it less likely that attempts at application fraud will succeed. As a result, fraudsters are redirecting their efforts to existing accounts.
Fraudsters employ a variety of techniques to obtain the personal and financial information typically needed to take control of existing accounts. Obtaining such information can be as simple as dumpster diving or cold calling. Alternatively, fraudsters may use more technology-reliant methods, such as phishing, smishing, or establishing fake websites to collect payment details. Accordingly, to prevent account takeover fraud, consumers should follow established precautions for guarding against identity theft (see the Appendix for a list of tips to protect against identity fraud).
Even though the study was conducted in the United Kingdom, it seems likely that the findings are relevant to the United States as well. The prevailing economic crisis, which seems to be the main contributor to the increase in account takeover fraud, has gravely affected both countries. The global economy has been hit by a major credit crunch, and both nations are experiencing unstable financial markets, weakened currencies, and foundering job markets.
Furthermore, identity theft related to financial fraud is a top concern for banking customers in all parts of the world. In fact, identity theft is the fastest growing type of fraud in the United States, the United Kingdom, and many other developed countries. According to the latest Global Unisys Security Index, a broad, multiyear global initiative that presents a social indicator regarding how safe consumers feel about key areas of security, payment card fraud (i.e., a term that describes a range of offenses involving theft and/or fraudulent use of payment card account data, including account takeover fraud) and identity theft are the two greatest areas of concern across all markets.
In addition, other reports suggest that account takeover fraud poses significant challenges to consumers and financial institutions in the United States. For instance, Bank Info Security, a website dedicated to educating the United States banking information security community, recently listed account takeovers of customer loans and corporate accounts among the 13 most prevalent schemes being perpetrated by fraudsters against financial institutions and their customers.
Moreover, a recent report published by Gartner Inc., a research and advisory firm, shows that fraudsters actively used payment card fraud to steal money, a scheme that claimed 36 percent more victims in 2008 than any other type of fraud.
The recent rise in account takeover fraud serves as a reminder that fraud is always evolving. As countries, organizations, and consumers continue to deal with the global financial crisis in an inconstant economic environment, it is clear that they all must remain alert to the continually evolving threats and risks of fraud.
Appendix
Methods to Protect Private Information
Often, the best and most cost-effective approach to preventing identity fraud is consumer education. The following list provides some useful methods to protect against identity fraud:
• Always check bank and credit card statements for inaccuracies.
• Order and check your credit report at least once a year.
• Before providing personal information, make sure the individual or business requesting it has a valid reason for requiring the information.
• Never write your credit card numbers or Social Security number on checks or on the outside of envelopes.
• Do not give account numbers over the telephone or to persons/companies you are not familiar with.
• Do not use cordless or cellular telephones or e-mail to transmit financial or private personal information.
• Keep all financial documents in a secure place.
• If you have your driver's license information pre-printed on your checks, shred canceled checks before discarding them.
• Check your financial information regularly, looking for what should and should not be there.
• Shred pre-approved credit applications, statements, or bills that contain personal information.
• Have yourself taken off "pre-screened lists."
• Mail bills from the post office or your business.
• Consider having your name, telephone number, and/or address removed from the telephone directory.
• Do not provide personal information over the telephone unless you initiated the call and know who you are speaking with.
• If telemarketing companies call, tell them: "Under the federal Telephone Consumer Protection Act, I want to be on your 'do not call' list."
• Keep your birth certificate in a safe place.
• Choose passwords that will be difficult to crack and use different passwords for all accounts.
• Change passwords and PIN codes often.
• Use different PIN numbers for all of your cards.
• Do not store your PIN numbers on mobile phones or laptops.
• Do not put your Social Security number on any document unless you are legally required to do so.
• Shred any papers with financial information and identifiers rather than simply throwing them in the trash.
Identity Theft Websites
The following list contains some good sources of identity theft information:
• http://www.consumer.gov/idtheft
• http://www.usdoj.gov/criminal/fraud/websites/idtheft.html
• http://www.ssa.gov/pubs/idtheft.htm
• http://www.usdoj.gov/criminal/cybercrime
• http://www.fdic.gov/consumers/consumer/alerts/theft.html
• http://www.bbbonline.org/IDtheft
• http://www.idtheft.gov
Will the Punishment Ever Really Fit the Crime?
By Peter Goldmann
For most, whenever the subject comes up of how harsh or lenient punishment should be for white collar criminals, a prolonged yawn is the prompt result. But the stunt pulled by Bernard Madoff's attorney, Ira Lee Sorkin, just prior to sentencing, in which he attempted to persuade the judge in the case to give his client a major break is anything but boring.
Certainly such advocacy in and of itself is not unusual. Indeed, getting the best deal for a client is what defense attorneys are paid for. And, U.S. Sentencing Guidelines notwithstanding, it is no doubt fair to suggest that the better (read: more expensive) the attorney, the better the chances of a fraudster getting off easy. But the fact that this guideline is often ignored -- as it was most dramatically with Judge Denny Chin sentencing of Madoff to the maximum allowable 150 years in jail -- is what got me thinking about the Sorkin ploy's significance in the broader debate about proper punishment for fraudsters.
Now I'm not a lawyer, but I am having difficulty comprehending the basic logic in Attorney Sorkin's argument: in his letter to Judge Chin, the reasons he offered for granting Madoff a light sentence (by which he meant, specifically, a jail term of no longer than 12 years -- one year shy of Madoff's life expectancy of 84, which Sorkin cleverly gleaned from Social Security Administration data) seem insulting to any reasonable person. Wrote Sorkin:
• "Mr. Madoff willingly submitted to FBI custody early the (morning after admitting his crimes to his sons), confessed, and thereafter cooperated fully with the bail conditions imposed through the date of his guilty plea."
• "(Madoff) indicated at a very early stage his desire to cooperate in asset recovery for the benefit of the victims of his acts..."
• "Mrs. Madoff entered into a voluntary restraint agreement with the (United States Attorney's Office) early in this case, restricting her from selling, transferring, or otherwise disposing of certain assets."
• "Mr. Madoff met recently for several hours with the Inspector General of the SEC to provide information and insight into Mr. Madoff's conduct and the role of the SEC in connection with its examination of Mr. Madoff's business. The information exchanged during the meeting will no doubt shape and fortify the future of Wall Street regulation and oversight. Mr. Madoff's participating at the meeting was entirely voluntary."
As if these flimsy pleas weren't offensive enough to the general public, let alone Madoff's thousands of financially and emotionally devastated victims, Sorkin went a step further by retaining the services of Herb Hoelter, CEO of the National Center on Institutions and Alternatives (NCIA), a non-profit outfit whose mission appears, based on its Web site, to be keeping all criminals out of jail. For example, in an interview with ESPN, Hoelter was visibly impressed with himself in describing his role as a "sentencing specialist" in the Michael Vick sentencing which resulted in a prison term of 23 months for the disgraced football star, 19 of which were served and six months of which were spent under "home confinement."
In the Madoff case, Hoelter stated in a sworn affidavit that, based on research his organization had done on data from the U.S. Sentencing Commission, the average prison term for 21,000 white-collar criminals who were sentenced to prison terms between 1999 ad 2008 was only 17.7 months.
Even if Mr. Hoelter's 17.7 month figure is accurate, Sorkin’s request for a 12-year sentence for his client would hardly have come close to establishing what Sorkin claimed would be a "just degree of proportionality," between Madoff's sentence and those of other fraudsters whose crimes involved more than 0 million, as Madoff's did.
Reason: 0 million is certainly a lot of money to steal, but Attorney Sorkin's inclusion of Madoff in the same category of other fraudsters responsible for outsized losses is difficult to accept given the immense gap between 0 million and the estimated billion that he is believed to have stolen. Indeed, when compared side-by-side, 0 million doesn’t seem like very much money at all!
Moreover, of the 21,000 federal fraud sentences studied by Mr. Hoelter, only 15 white-collar criminals were convicted of crimes involving losses in excess of 0 million and the average prison term for them was 96.6 months. One fraudster, however, who was held responsible for a mere million in fraud losses, received a 360-month sentence. Compared with that case (and there are others), it would have appeared grossly disproportionate to give Madoff only 12 years for stealing billion!
It is very reassuring that Madoff cooperated with the Feds after he was caught and even heart-warming that his wife has so magnanimously agreed to sacrifice her jewels for the benefit of the victims.
But no amount of umpteen-karat diamonds can ever make up for the thousands of lives that were destroyed by Madoff's unspeakable crimes. No amount of voluntary cooperation with the SEC can lessen the human damage done to so many individuals whose life savings are gone and who are now too old to even return to the workforce.
The post-sentencing relevance: The argument over fair punishment for white-collar criminals is ongoing and convoluted. The Federal Sentencing Guidelines have not created any continuity or neutral yardstick by which to establish "proper" punishment for confessed or convicted fraudsters.
It would appear that this chronic lack of objectivity in the meting out of penalties for fraudsters was perceived by Mr. Sorkin as a potential opportunity to seek leniency from Judge Chin. What, after all, did he or his client have to lose?
Even more disturbing, though, is how pernicious arrogance is able to so easily degrade the justice system. By comparison, the issue of whether Madoff was sentenced to 12 years in prison or 150 seems trivial, to say the least.
What we in the anti-fraud community must tackle now is the nagging issue of inconsistent, unpredictable and often laughably lenient punishment for white-collar criminals.
Take for example the recent case of John Quaid, a businessman who perpetrated a .3 million check kiting scheme against a bank, costing it nearly 0,000 in losses. At the opposite extreme of Madoff, Quaid was kind enough to repay the stolen money after getting caught, plus legal expenses. Remarkebly, however, the court sentenced him to no prison time and a fine of 0.00. Charming that John returned the money, but he still is a confessed felon. How does that entitle him to a free pass from punishment? Now that he has learned how not to get caught, wouldn't a judge consider the likelihood that he might try to steal again?
As long as fraudsters think that the imperfections of "the system" provide them with a good shot at a slap on the wrist (as the attorneys of even the most incorrigible fraudsters like Bernie Madoff have them believing), they will continue to take their chances -- at the honest public's increasingly heavy expense.
Żródło: ACFE Newsletter