REUTERS - ONLINE CRIME SURGE by Jason Szep

Online crime surging in recession, U.S. report says

By Jason Szep

BOSTON (Reuters) - Fraud on the Internet reported to U.S. authorities increased by 33 percent last year, rising for the first time in three years, and is surging this year as the recession deepens, federal authorities said on Monday.

Internet fraud losses reported in the United States reached a record high $264.6 million in 2008, according to a report released on Monday from the Internet Fraud Complaint Center, run by the FBI and the National White Collar Crime Center.

Online scams originating from across the globe -- mostly from the United States, Canada, Britain, Nigeria and China -- are gathering steam this year with a nearly 50 percent increase in complaints reported to U.S. authorities in March alone.

"2009 is shaping up to be a very busy year in terms of cyber-crime," the report's author, John Kane, told reporters in a telephone briefing.

Last year's losses compared with $239.1 million in 2007 and dwarfs the $18 million of losses of 2001.

The most common complaint of 2008 was non-delivery of promised merchandise, followed by auction fraud, credit card fraud and investment scams, according to the report.

Of 275,284 complaints received by the center in 2008, some 72,940 were referred to U.S. law enforcement agencies for prosecution. Those referrals spiked this year with 40,000 in the first quarter alone, said Kane.

"It is our belief that these numbers, both the complaints filed and the dollars, represent just a small tip of the iceberg," said Kane, managing director of the National White Collar Crime Center in Richmond, Virginia.

UNDERREPORTED CRIME

"Our own research suggests that as few as 15 percent of cases of cyber-fraud are being reported to crime control agencies," he said.

Scammers in the United States comprised 66 percent of complaints referred to authorities, followed by Britain at 11 percent, Nigeria 7.5 percent, Canada 3 percent and China 1.6 percent. Within the United States, the bulk originated in California (16 percent), followed by New York and Florida.

Fraudulent sales on online auction sites like eBay Inc and classified sites like craigslist.com contributed to a 32 percent rise in the hottest area of online fraud -- non-delivery of promised merchandise, the report said.

That area alone made up about 33 percent of all complaints serious enough to be referred to law enforcement.

Other important areas included investment scams such as mini-versions of the $65 billion Ponzi scheme committed by New York financier Bernard Madoff in which money from new investors is used to pay existing investors.

About 74 percent of the scams were through e-mail messages last year, especially spam, while about 29 percent used websites. But criminals were increasingly tapping new technologies such as social networking sites and instant messenger services, said Kane.

The report highlights one new "significant' identity-theft scam involving e-mail messages that give the appearance of originating from the FBI but seek bank account information to help in investigations of money being transferred to Nigeria. Recipients of the e-mails are told they could be richly rewarded by cooperating.

The report said almost 80 percent of known perpetrators of online scams are male. Of those bringing complaints, nearly half are between the ages of 30 and 50. The median dollar loss was $931 per complaint, although the median losses for check fraud reached $3,000 and that for investment scams was $2,000.

SBA RIFE WITH FRAUD

The Small Business Administration is rife with fraud, according to a report by the General Accountability Office. The SBA, which is supposed to be helping small businesses across the country secure federal contracts is so inundated with fraud that it makes you wonder, who's supposed to be overseeing this?

A GAO investigation of 36 companies in four metropolitan areas discovered that 19 ... that's one more than half of those companies ... were using fake addresses, or subcontracting to larger firms, or the majority of their employees were located in a non-qualifying locations.

Apparently, the GAO warned the SBA of these frauds months before the report was issued. But when the GAO went back to check, it found that most of the fraudulent companies were still running their scams inside the SBA.

With the Treasury Department about to make available as much as $15 billion for small-business lending, heads need to roll inside the SBA.

Madoff's London Connection

Look for the Serious Fraud Office (SFO) in Great Britain to level multiple charges against Bernard Madoff before the end of the year. Madoff's London connections are known to have played a significant role in his global Ponzi scam. Under pressure to act, insiders at the SFO say that around $1 billion was transferred from Madoff in the States to Madoff Securities International in London. The SFO opened their file on that transfer in Januray. It is known that some of that money was then sent back to the States, giving the appearance of trading having taken place. Some of it also appears to have gone offshore, with Gibraltar being one of the known destinations. It is also known that the month before Madoff got arrested, the London office paid out $2 million to his wife Ruth. Madoff International had a staff of 25. SFO interviews with them are focusing on "unwarranted payments to third parties.” Although they are coming to the game much later than the Americans, the Brits are acting with uncharacteristic speed. Normally, investigations like this take years before anything ever happens.

FBI PLAYS CATCH-UP AS MORTGAGE FRAUD FLIES OUT OF HAND

As mortgage fraud is now the number one financial crime across the country, the FBI has been forced to play catch-up in an effort to come to grips with the epidemic. With thousands of investigations are underway, and more and more joining the queue every day, more agents are being assigned to this one single crime than ever before. It has gotten so bad, some agents report, that other white collar crimes are being put on the back burner indefinitely. At the Bureau's Chicago office, for example, the agent in charge has issued a directive that mortgage fraud --- and corruption cases --- will be dealt with immediately and any agent wanting to look at any other financial crime needs to have special permission. In other words, all other fraud cases can wait. Property flipping scams and outright lies on mortgage applications are only now coming to light with property values tumbling. The Bureau is hiring new agents and pouring more resources into its already struggling white-collar crime program.

ALLEN STANFORD - ONE STEP CLOSER TO HANDCUFFS?

The WSJ is reporting that Allen Stanford's #2, James Davis, has decided to cooperate with the Feds in the case that began with the SEC's accusations against Stanford and his banking empire for civil fraud.

http://blogs.wsj.com/law/2009/03/24/alarm-bells-for-allen-stanford-financials-no-2-to-cooperate-with-the-feds/

Earlier this month, when the SEC summoned Stanford to testify, the Texas banker took the 5th. Obviously, his lawyers worried that anything he said in a civil hearing could be used against him in a criminal matter. Davis also refused to testify.

Now Davis, who was Stanford's Number Two in the banking dynasty, appears to have done an about-face. It means that Stanford's worst nightmares are now coming true.

Although the two go way back --- they were roommates in college --- Davis must have been convinced that if (or, better put, when) criminal charges come down, he'll also be named. The best defense being a strong offense, it looks like Davis has decided to save his own neck.

Presuming Davis knows where the skeletons are buried, the Feds are using Davis to maneuver Allen Stanford one step closer to handcuffs.

And that is, apparently, long overdue. According to Britain's Sunday Telegraph of February 21, 2009: "Jeffrey Robinson, one of world's leading experts on international financial crime, said, 'Stanford first came on to my radar 12 to 15 years ago when I was looking at bank activities in Antigua. I know an FBI agent who has been trying to pin [drug] charges on him for a decade and prosecutors who have been looking at him for many years.'"

LATEST FROM CALIFORNIA - PROPERTY TAX FRAUD

PROPERTY TAX FRAUD is the latest scam to hit California. In a state that is nearly bankrupt and where property taxes are like to rise substantially, fraudsters are promising home owners that they are in a position to revalue to their property downwards, therefore reducing the tax base which, in turn, means lower taxes to be paid. These scammers show up unannounced, with official looking business cards and official looking forms on clipboards. Simply fill out the form, pay the registration fees with a credit card (or, even better, with cash) and... that's the last you see of your money.

FRAUD UP 36% LAST YEAR

Technology research firm, Gartner Inc, reports in a recent survey, that approximately 7.5% of American adults lost money through financial fraud in 2008. That's an increase of 36% over 2007. The number one culprit --- data breaches. Those include credit, debit and ATM card fraud.

CALLS FROM AREA CODE 062

Don't bother answering calls from area code 062, because it doesn't exist. It's programmed by fraudsters into their caller ID system so that you think it's a genuine area code. And because it's a phony number, you can't even report it to the National Do Not Call Registry.

Speaking of which, the NDNCR is not very good, but it's the best we've got. It only sorts out those honest cold callers who take the time to see your number is on the list. It's worth registering: http://www.donotcall.gov/

And is better than it used to be because, if you've registered after February 2008, you never have to register again. There is a reporting mechanism for caller abuse, which doesn't get anyone arrested but makes you feel a little better about having been abused.

CHECK THAT AREA CODE

KNOW BEFORE YOU CALL BACK - Cellphone charges... and landline charges, too, for that matter... are expensive enough when you're calling overseas, but they come as a real shock when you find them on your bill and didn't know you'd called anyone there.

Your cellphone rings once. You go to answer it, but it doesn't ring again. So you check to see who phoned, and the caller ID announces something official... a hospital, a lawyer's office, a government agency... the sort of call that you'd expect to answer. The number dialed has an area code that appears to be from the States... 809, 284 or 876. Beware, these are overseas calls where the called can earn a fee, as in a premium rate line. 809 is the Dominican Republic, 284 is the British Virgin Islands, and 876 is Jamaica. Scammers understand that most people will dial back to find out who called and why. You wind up on hold for several minutes, and next months phone bill looks like last week's grocery bill. It's gotten so bad that some scammers have worked out ways to obtain a local US number, which then call forwards to some foreign land where the premium rate call clicks in, so even if you think you're phoning, say, Florida, you're actually winding up with a sex line in Vanuatu.

It's a variation on the old text message fraud, "You won a prize." Except this time, all you did was return a call.

How to protect yourself? Obviously, don't return calls to numbers you don't recognize. If it is important, they'll phone back right away, or at the very least, leave voice mail.

If you fall for the scam, immediately contact your service provider.

EMAIL SCAM FROM NOT-THE-IRS

With tax season approaching, the latest email scam is one that's not from the IRS... it just claims to be. What's more, it says you're being investigated for tax fraud. Not me, you insist, alas yes, the email goes on, but you can help your case by providing certain information, notably your social security number, driver's license information and bank and credit card numbers.

To provide that information, you're directed to this site: deptreas.org/irs/7634.

Only two basic things are wrong here. Firstly, US Government sites end in .gov.

And secondly, the IRS doesn't notify you by email if you're under investigation. You get an old fashioned snail mail letter "inviting" you to come see them.

If you are ever in doubt about any email, go with your gut and don't answer it. Get a phone number from the Yellow Pages... never the one listed in the suspect email... and ring to find out for yourself what's happen.

MOVING FRAUD

As the economic crisis worsens and Americans are forced out of their homes, incidents of "moving fraud" are on the increase. Moving companies are deliberately underestimating the cost packing, shipping and unpacking and then, when the household goods arrive at the other end, they're tacking on all sorts of hidden --- and fraudulent --- charges. Moving is stressful enough, so it comes as no surprise that when the company then says, "pay up or we keep your stuff", most people pay. What to do about it? In the end, very little. The government doesn't seem to care much, which is how moving companies can get away with this stuff. In the past year there have been a few indictments, but hardly enough to rewrite the books. However, there may be a way to fight back. If the movers holding you to ransom will take a check (most are too smart and will insist on cash), then pay with the check and stop it. They'll threaten to sue, but most likely won't. Otherwise, pay the bill, use your cellphone camera to capture the movers' faces and the moving truck outside your home, and call the FBI. If it's an interstate move, you can then file a fraud charge. They may not act on yours alone, but if they have sufficient complaints, they will look at it. Otherwise, ring your state's attorney general and ask what that office recommends. Last resort, hire a lawyer (or go to small claim's court) and make the moving company defend itself in front of a judge. Then notify every public outlet you can think of... better business bureau, local press, local media, et. al.

MORTGAGE FRAUD AND THE FBI - IT'S A LIVING

The FBI is going into the business of cracking down on mortgage fraud.

According to the Mortgage Asset Research Institute, we're going through a mortgage fraud crime wave (http://www.marisolutions.com/resources-news/press-release-20090316.asp) as reported cases are up substantially over the past few years.

US News and World Report lists the top ten mortgage fraud states (http://www.usnews.com/blogs/the-home-front/2009/03/17/the-top-10-states-for-mortgage-fraud.html) which are: 10- Colorado, 9- Missouri, 8- California, 7- Michigan, 6- New York, 5- Maryland, 4- Georgia, 3- Illinois, 2- Florida... and the grand winner is 1 - Rhode Island!

How's it being done?The FBI is targeting these fraudulent practices: Undisclosed Kickbacks, clandestine or hidden second mortgages, false income statements, non-occupants claiming to be occupants, down payment gifts that are repaid (it's not a gift if you pay it back, it's a false-loan), inflated purchases prices, financial arrangements which disguise the true extent and method of deposits.

This is a big departure for the Bureau which, since 9/11 has been heavily involved in terrorist investigations. Why suddenly are they becoming the national fraud squad? One reason is because it's necessary. It's also about time. But there's more here than meets the eye. Thanks to the various state and federal asset sharing programs, where criminal proceeds are concerned, the Bureau can take a share of whatever monies are recovered. They might even wind up owning some fraudulently mortgage properties.

So, in a very real sense, mortgage fraud can become an income stream for the otherwise cash-strapped Bureau. And just to prove they're taking it seriously, the Deputy Director announced this week that the FBI is even going undercover to root out the culprits.
(http://www.newsdaily.com/stories/tre52j49t-us-financial-crackdown)

Next stop? How about bonus fraud? Look for undercover agents hunting for asset-shares inside AIG, Bank of America, Citi and all the other "bonus babes." It's a living!

IDENTITY THEFT TOPS FTC COMPLAINT LIST AGAIN!!!

It's seven years in a row now that identity theft has ranked as the number one source of fraud complaints, according to the Federal Trade Commission (FTC).

The FTC puts total consumer fraud losses at $1.2 billion --- which is probably on the low wise because it doesn;t take into account the costs involved with rebuilding your identity and getting you good name back.

Based on that $1.2 billion figure, the FTC says, the average monetary loss for an individual at $349.

Credit card fraud came in second, followed by utilities fraud, employment fraud and bank fraud .

A Call From The Social Security Administration

With more and more "baby boomers" reaching the age of Social Security, the Office of the Inspector General reports an increase in fraudulent phone calls from scammers reporting to be employees of the Social Security Administration (SSA). They identify themselves as employees, and some even provide a toll-free number for call-backs. What they ask for are the usual ID points: your Social Security Number, date of birth, mother's maiden name and financial account information, such as the name of your bank and your account numbers. In some cases, the excuse for the call is that the SSA computers are down. Or, they claim, they need to verify enrollment in Medicare's prescription drug program. The intent of the call, however, is to get to your financial information and, eventually, take over your identity. Complicating matters is the fact that the SSA does, sometimes, phone people, especially when they need to follow-up on a previous application for services. However, the legitimate SSA employee will fully identify himself/herself and give you a contact number. At that point, you merely have to phone the SSA's toll-free number: 1-800-772-1213. And someone there will help you verify the reason for the call and the callers identity. If the call is a scam, the SSA will tell you so. At that point, you can file a fraudulent call claim by providing them with this information:the caller's alleged name, telephone number, time and date of the fraudulent, the information requested by the caller and any other identifying information or details about the call.

KEY WORDS ALERT

KEY WORDS ALERT - Emails that claim to be from English speaking individuals should be in plain English.

One of the easiest ways to spot a Nigerian scam is to see how the fraudsters use the language. This is from an actual Nigerian fraudster... pretending to be British... setting up a victim of a work at home scam. Note how appalling his grammar is:

"I am informing you that your Full Contact Information has been received and
Accepted and It has been forwarded to all our clients as our company representative
whom all payments should be mailed to.

"Immediately I confirm the mailing of any payment to your address I will
notify you and provide the tracking number to the mail so that you can be
available to receive the package and I shall give you further instructions
on what to do.

"Take note that you shall be deducting 10% of each of the
total money received on behalf of my company as your wage and I shall
provide you with the necessary information needed to send the balance to any
of our designated office that shall be provided to you via Western Union
Money Transfer."

Native English speakers don't usually make those sorts of mistakes. Also, note
the capitalization that's used. This fraudster couldn't pass a 6th grade English test,
why would anyone send him in any more based on that?

From "thefraudreport" on Twitter

KEY WORD ALERT --- Beware of emails that say "Please Confirm". If you know the sender, phone and ask. Otherwise, do not respond. Banks, credit card companies and financial institutions NEVER EVER send you an email asking for account information or pass words. Any email that does is a scam. Bin it!

From "thefraudreport" on Twitter

YOU WON A PRIZE --- Unless you actually entered the contest, you didn't win. If they ask for money to send you the prize, it's a scam. One of the most popular lines in this scam is "your email provider enrolled you"... another is, "You were enrolled automatically by Microsoft when you purchased their software." It's all nonsense.

Welcome to The Fraud Report

Brought to you by the folks at "ifitistoogoodtobetrue". We are a collection of experts, financial crime journalists and fraud squad investigators from around the world who want the general public to know about scams, scammers and how to protect themselves. If you have fallen victim to fraud, if you have avoided a scam by recognizing it in advance, if you see a scheme that you're not sure of, let us know. We're here to help. And remember, if it is too good to be true, it ain't true!