Fraud

Small Businesses Also Get Hacked

October 23, 2014 By Twila Van Leer

Scott Schrober, CEO of Varitronic Systems,

Everyone has heard, read about or seen the multi analyses of the disastrous computer breaches at JP Morgan Chase, Target and Home Depot, but what about the small businesses that have suffered similar (possibly greater when you consider scale) crises?

About 44 percent of the small companies in the country have been affected by cyber crime, according to a 2013 survey by the National Small Business Association. The average cost of dealing with the damage was $8,700, the association reported.

The small businesses often become part of the damage inflicted on the larger businesses. When JPMorgan Chase data was breached, for instance, 7 million small businesses shared in the fallout, along with 76 million households. Target Corp., Michael’s Stores, Home Depot and Neiman Marcus, who also reported compromised information in the past year, also have small contracting companies as customers.

Businesses lose revenue when they have to shut down their systems to allow the experts to ferret out the harmful viruses that caused the damage. Additional costs are racked up as the affected companies have to notify each company or individual who was affected by the breach. Most states require a compromised business to notify customers. If lawsuits are brought by injured customers, the costs go up again.

Small businesses sometimes become vulnerable to attack because the owners believe they can’t afford the software programs and consulting services that might protect them, or the time to deal with potential attacks. Some small businessmen and women simply are not aware of the risks. They don’t know that they can be attacked by what they believe is a relatively harmless source. An innocent-seeming email from a friend whose computer has been attacked may mean trouble. Not knowing how sophisticated the enemy has become can be fatal.

Scott Schrober, CEO of Varitronic Systems, took steps to protect his company after a hacker weaseled $50,000 from his company’s bank account recently, an Associated Press story related. Schrober took steps to prevent any further intrusion by investing $50,000 in security and plans and intends to spend another $20,000. He believes his company was targeted because computer security is his business. The thieves were sending a message.

While there is no security system that will absolutely guarantee immunity from hackers, experts suggests that small business owners take these precautions:

Pay a computer security consultant to evaluate your system and make recommendations.
Purchase insurance to cover potential losses. Premiums can be as low as $1,000 for a million dollars in coverage.
Install free anti-virus and anti-malware software that you can find online. Add firewalls that block attempts to access.
Make certain that your email provider has effective security.
Use a separate company to process orders to avoid having customer credit card information stolen. Be certain that the company you collaborate with has a secure system.
Look into a service that specializes in spotting fraudulent credit card transactions.

Identity Fraud Victim List Going Up and Up

May 9, 2014 By Twila Van Leer

Identity fraud can be devastating. Don't let this happen to you. — Identity fraud can be devastating. Don’t let this happen to you.

In case you want to be scared before Halloween, just take a look at the latest statistics on identity fraud. That’s the unauthorized use of your personal information by someone who wants financial gain at your expense. According to the Javelin Strategy and Research organization, there’s a new victim every two seconds. The 2013 data included in the update issued in February 2014 include these disquieting items:

The number of identity fraud victims rose to 13.1 million, an increase of more than 500,000 over the previous year.

A dramatic increase in account takeover was reported.

Data breaches became even more damaging. Information has been stolen from eBay, PayPal, Amazon and other Internet accounts. One in three people who received a data breach notification during the year was added to the growing list of victims.

About the only good news in the 2013 report is that the amount of money taken in identity fraud incidents was down to $18 billion, a $3 billion decrease over the previous year-end well below the high of $48 billion that occurred before counter-measures were begun. That’s small consolation to the millions who have suffered losses.

Fraud can range from simple unauthorized use of another person’s information to make purchases to elaborate schemes of taking control of existing accounts or opening new accounts. Javelin Strategy and Research contacted 5,634 U.S. consumers to compile its data.

The decrease in the total money impact of fraud in 2013 was attributed to education and other steps that are fighting the problem, said Al Pascual, senior analysts of Security, Risk and Fraud for the researchers. In response, criminals appear to be adapting their approach to focus on account takeover, which becomes easier when there are major breaches in huge accounts. There is no room for letting down defenses, he said. “Any complacency will provide fraudsters renewed opportunities.”

Data breaches have become by far the greatest risk factor for identity fraud, allowing criminals more latitude for their ever-more-sophisticated schemes.

Javelin offers these safety tips for consumers, who are advised to work with established institutions to fight the problem:

Keep your personal data private. Use and frequently change passwords and keep personal information locked in a storage device at home, at work and on your mobile device. Don’t mail checks to pay bills unless they are printed on high security paper. Shred documents that contain information. Monitor accounts and use updated security software. Use a trusted and secure Internet connection rather than a public Wi-Fi site when transmitting personal or financial information. Have regular income checks direct-deposited.

Use two-factor authentication when possible. Some institutions offer this added layer of security, beyond username and password. You will then be notified each time someone tries to access your account. You can deal with suspicious incidences in real time.

Resist any requests for your Social Security Number. The great majority of banks and credit card issuers will allow access to your account to someone using your SSN. The numbers can’t be changed so they’re valuable to fraudsters. Ask your financial institution to put a note on your account that you will never provide your SSN when identification is requested. Then if someone attempts to get access to your account with this information he or she will automatically be identified as a fraudster.

Be proactive and enlist others in the effort to stem fraud. Sharing alerts issued by banks can reduce the risks for more people. An array of services are offered to consumers who want extra protection, including payment transaction alerts, credit monitoring, credit report fraud alerts, credit freezes and database scanning.

Take any perceived data breach seriously. If your financial institution or retailer provides free monitoring after a breach, take advantage of the offer, closely monitor your accounts and ask that a fraud alert be attached to your credit report.

Report problems immediately, even if your only suspect fraud. Contact your financial institution to see what resolution services they offer, including loss protections and methods to secure your accounts. Quick action can reduce the likelihood of losses and help law enforcement agencies to pursue fraudsters.

Do everything you can to avoid becoming an addition to the fraud statistics for the next reporting period.

Protect Yourself Against Check Fraud

August 6, 2012 By Sherry Tingley

Check fraud is such a hot topic that Hollywood made a movie about it. The 2002 film, “Catch Me If You Can,” starred Leonardo DiCaprio as master fraud artist Frank Abagnale and Tom Hanks as the FBI agent who chased him all over the world. It was filmdom’s way of putting the spotlight on a problem that plagues real-life personal finances.

In the movie, DiCaprio’s character flitted across the United States and around the world using such cover as pediatrician, airline pilot, attorney and college professor to gouge a grand total of some $2.5 million out of unwary victims. He was caught, both in the movie and in real life, and spent five years in prison. Part of the agreement that set him free after such a relatively short term was that he would help the feds to combat the types of crimes he had himself so successfully perpetrated.

The switch from bad guy to good guy set him up as an authority and his crime prevention programs have been used by more than 14,000 companies, law enforcement agencies and financial institutions to protect their interests and those of the people they serve.

In an interview with U. S. News, Abagnale shared five tips for individuals to protect themselves against check fraud. Here they are:

1. Write as few checks as you can. The standard check provides such information as your name, address, often a phone number, sometimes your driver’s license number (In nine states such information is required by law, giving a fraudster near-direct access to your Social Security Number as well), the bank account number and routing number and a nice signature should he have a desire to replicate it. Use checks for making mortgage payments and paying bills, but be very chary of other uses. If someone wants to sell you a product at the door, use cash, don’t give him or her a tool to use against you.

2. Take special care at tax time. Ninety percent of those who owe Uncle Sam use a check to pay up and seasoned fraudsters are on the alert for such easily identifiable letters in your outgoing mail. They have only to modify the payee information and deposit. That benefits a criminal and puts you in hot water with the IRS.

3. Use secure mailboxes. Putting bill payments and other letters containing checks into the box at the curb or outside your door, then putting the flag up to alert the postman is an open invitation to anyone bent on fraud who happens to notice. Go to a post office or put the letters in a secured box for collection.

4. Treat checks and checkbooks like cash. Lock them in a safe place. Some people like the convenience of having some checks in the glove compartment of their car. It’s the first place people looking for money, credit cards, gas cards and/or receipts with your information on them will look. The smart ones will remove only the last check or two from a book, giving themselves time to use the checks before you notice you have any missing.

5. Balance your checkbook every month. It’s only common sense, but 51 percent of Americans don’t do it. Many fail even to open the statement and check the bottom lines. That gives banks an advantage in assigning responsibility — the criterion by which they decide if they will compensate you or let you eat the loss yourself. A federal law, Article 3, Section 406 of the Uniform Commercial Code requires that you notify your bank within 30 days of any discrepancies. If you don’t do it, the bank has no liability.

All good advice from someone who knows.

Check Fraud Is A Serious Matter in U.S.

August 4, 2012 By Sherry Tingley

Just how serious a problem is check fraud in this country? Well, put it just behind payment card fraud and ahead of phishing. The total losses are staggering, — $5 billion a year, according to the U.S, Secret Service.

The chief of the Secret Service’s financial crimes division calls it “the number one way criminals today are attacking our financial systems.” That means you need to know more about the problem and take steps to protect your checking account.

The statistics are chilling. The 2012 AFP Payments Fraud and Control survey of more than 5,000 corporations received 447 responses. Among the things they had to say:

Checks are the payment type most vulnerable to fraud.

The typical loss for the organizations that reported fraud was $19,200.

85 percent of those responding to the survey say check fraud is a problem.

More than 80 percent of the companies had “best practices” policies in place, but still lost money to fraud because they failed to follow their own policies. Sadly, according the American Banker’s figures, some 60 percent of the fraud incidents involve employees within the business.

American Banking Association’s Deposit Account Fraud survey in 2011 showed a loss totaling $893 million in 2010 among the institutions surveyed. In that year, attempted check fraud against bank deposit accounts amounted to some $11 billion. The figure reflects both actual losses and loss avoidance due to banks’ prevention efforts. Although slightly lower than the $11.4 billion posted in 2008, the figures are still appalling.

The steps banks must take to prevent fraud are costly as well, according to the ABA survey. Four “money center” sized banks said they spent more than $20 million each for fraud-related programs, not including actual losses that slipped through their prevention nets. Regional banks reported losses of a half million to a million, while mid-sized banks reported losses ranging from $R50,000 to $250,000. Community banks averaged $5,000.

It isn’t encouraging to know that the scope of the problem continues to expand. The ABA data show that the per-incidence cost of fraud have doubled in the past six years, even though more individuals and businesses are switching to electronic transfers to pay bills. The actual volume of check use had fallen by 26 percent, but the ill effects of fraud continued to climb. Even with the decline in check use, 80 percent of business-to-business transactions are consummated by check and financial experts say that trend will continue through the foreseeable future. The advantages simply make paying by check preferable.

Your bank is likely to have information about how you can protect your account. They can explain their polices regarding responsibility when fraud occurs. Many check printing companies are stepping up to make checks more fraud-proof. They incorporate such features as safety holograms, multi-dimensional foil seals hot-stamped to check stock. They can’t be photocopied. Chemically sensitive paper, micro-print borders, invisible fluorescent fibers, erasure protection, security screens and warning boxes are all innovative approaches available to businesses to help ensure check safety.

Don’t just look at the statistics and shudder. Take pro-active steps to make sure you don’t join the long lists of fraud victims.

Arm Yourself Against Fake Check Scams

May 30, 2012 By Twila Van Leer

Fake check scammers never rest. They actively look for ways to victimize people. And too many unsuspecting people fall for it, losing money to their multi-billion-dollar schemes. The only way to avoid becoming one of the victims is to learn to recognize and avoid such scams.

Fake checks look real, often real enough to fool bank personnel. Phony cashier’s checks or those designed to look like they are from real businesses often are actually “dummied up” copies of legitimate checks, created without the knowledge of the companies.

The National Consumers League Internet Fraud Watch offers these suggestions to help you in your effort to stay scam-free:

Beware of any transaction in which you are asked to pay by check with the guarantee that some of the money will be wired back to you. Chances are you’re walking into a scam.

There are many variations on the ploy. Someone may offer to buy something you have advertised for sale. They may offer to pay you to do work at home. They may hold out the promise of an “advance” on a sweepstakes you have purportedly won. They may offer to pay the first installment on promised millions that you’ll receive for allowing a party to transfer money from a foreign country to your bank “for safekeeping.” The pitches are many and they all sound feasible.

Scammers have methods of finding potential victims. They check newspaper and online advertisements for personal listings of items for sale. They look at online job sites to find people seeking employment. They place ads with phone numbers and/or email addresses so people can contact them. They may even send emails or faxes at random, expecting that some recipients will be gullible enough to swallow their bait. Claiming to be in a different country, a scammer may tell you that making a transaction internationally is too complicated. They promise that someone in the United States will send you a check. Don’t believe it.

Or they may try to involve a third party, saying this third person owes them money and they will have that individual pay you for what they have purchased. They dangle the promise that the check from this third person will exceed the sale price of the merchandise. They ask that you deposit this third party check, keep what is owed for the merchandise and wire the balance to them.

If you have agreed to work at home, the scammer may claim you’ll be processing checks from “clients.” They want you to deposit these checks and wire them the money after subtracting your pay. Another twist is for the scammer to “overpay” you “by mistake” and ask that you return the excess. Either way, you have lost. The sweepstakes and foreign money variations often include a request of money for taxes, customs charges, bonding fees or legal costs, which would seem feasible if the transaction were legitimate.

Under federal law, banks must make funds available to you shortly after deposit — one to five days in most instances — so you may be able to draw on fake checks very soon. But if it’s a fake check, the responsibility rests with you, just as if it were bona fide. You most likely will be informed that there is no substance behind the check you deposited and the amount will be subtracted from your balance. The process could take several weeks, but the result is inevitable. The financial institution relies on depositors to determine the risk of what they deposit. If a check is no good and the account does not contain enough to cover it, the institution my take money from your other accounts to make it good, or expect you to make up the difference.

It is not unheard of for law enforcement to bring charges against the victim because there is every appearance that they have defrauded the bank. This is the ultimate double-whammy.

The bottom line, according to the Consumer League’s guidelines, is that there is NEVER a legitimate reason for anyone with whom you are dealing to ask you to wire money back to them. If you are selling something or providing a service for someone you do not know, insist on a cashier’s check for the exact amount involved, preferably from a local bank or one that has a branch in your area.
Do not deposit a check if you believe it is fake. Report it to NCL’s Fraud Center, www.fraud.org. The information will be forwarded to the appropriate law enforcement agency.