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Financial Fraud and Internet Banking: Threats and Countermeasures

Financial fraud has many faces. Whether it involves swindling, debit or credit card fraud, real estate
fraud, drug trafficking, identity theft, deceptive telemarketing, or money laundering, the goal of
cybercriminals is to make as much money as possible within a short time and to do so inconspicuously.
This paper will introduce you to an array of threats facing banks and their customers. It includes some
statistics and descriptions of solutions that should give readers—whether they are responsible for
security in a financial organization or a customer—an overview of the current situation.

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Cyber crime: be afraid, be very afraid

The capabilities of mercenary hackers are expanding, in some areas (namely, China) with the government's help. The same equipment, the same people and sometimes even the same software can be deployed to wage a cyber attack on a country as on a financial institution.

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Andrew Maguire | Exposes the Largest Financial Fraud in History (so far)

Systematic Fraud by US Commodity Futures Trading Commission (CFTC) and J P Morgan in the Gold & Silver Markets
1 April 2010—Andrew Mcguire, independent metals trader turned whistleblower, is at the center of a storm for exposing what could be the largest fraud in history involving countries, banks and government leaders. This gold market is the biggest commodity market in the world and is worth $5.4 trillion a year world wide. On a gross basis it is about 1 1/2 times the US economy.

On March 26th, the day after the Gold Anti-Trust Action Committe (GATA) disclosed at a hearing of the U.S. Commodity Futures Trading Commission that Maguire had given the commission detailed warning of a manipulation of the futures market and the commission had done nothing about it, Mr. Maguire's car was hit by a car careening out of a side road in London. The driver of the vehicle then tried to escape. When a pedestrian eye-witness attempted to block the driver's escape he accelerated at him and would have hit him had the pedestrian not jumped out of the way. The car then hit two other cars in escaping. The driver was apprehended by the police after police helicopters were called in and following a high speed chase.

Andrew and his wife were hospitalized with minor injuries. They were discharged from hospital the following day and should make a full recovery. Source: sott.net

Listen to the King World News interview with Andrew Maguire (30 March 2010).

Interview page at King World News.

The day after the King World News interview with Andrew Mcguire above, King World News interviewed GATA directors Bill Murphy, Chris Powell and Adrian Douglas. The Gold Anti-Trust Action Committee was organized in January 1999 to advocate and undertake litigation against illegal collusion to control the price and supply of gold and related financial securities. Listen to the interview.

Just after the interviews with Andrew Mcguire and the GATA directors, the King World News internet servers were attacked and disabled.

The servers are maintained by one of the largest Internet site hosting companies in the world and one of its technicians told King World News proprietor Eric King, “We cannot figure out why this cluster of servers is being attacked.” The King World News site host has maintained the site on a “grid” system of servers so that ordinary technical problems with any one server cannot disable the site, but this attack was sophisticated and brought down the entire grid. Source: gata.org

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Financial and cyber crime most prevalent economic crime in Malaysia

KUALA LUMPUR, April 13 (Bernama) -- Financial and cyber crimes were among the most prevalent economic crimes commited in Malaysia, says Honorary Group Chairperson of International Cybercrime and Forensics Examiner (ICFE) Group of Companies, Tommy Seah.

Economic crimes constitute fraud, corruption and bribery, identity theft, money laundering, cyber crime, accounting and financial fraud.

He said the most widespread of financial crimes in Malaysia were financial statement frauds, procurement frauds and misappropriation of assets.

Explaining further, Seah said although economic crime in Malaysia was not at an alarming stage it was nevertheless increasing.

"Malaysia is a pretty docile country but we are also not well equipped in preventing such crimes," he said, adding that many people, particularly organisations were not aware of the implications of economic crime.

"Skills and knowledge can be transferred and acquired and Malaysia has the ability but the corporate will to put the house in order is more vital," he said in an interview with Bernama today.

When asked why economic crimes occured, he said: " The desire for a better quality of life is a common denominator of a country.

"When economies grow along with a better quality of life desire also arises.

"And, when they cannot attain a better quality of life legitimately, they tend to achieve it by committing crime."

Seah also said if this crime was not addressed, it becomes a distressing issue for individuals.

"It is important to ensure greater enforcement by the authorities and organisations in order for Malaysia to remain attractive to foreign investors," he said, adding that ICFE and CSI World Headquarters would jointly organise a two-day International Cyber and Economic Crime Conference beginning June 15.

Seah said the conference was aimed at educating professionals and to provide Malaysians an opportunity to update skills, especially in digital forensics, in order to be on par with international standards.

"We are expecting professionals from both the public and private sectors who will gather insights about the field from esteemed local and international speakers," Seah added. (By By Santhia Panjanadan/ Bernama)

Fraud trends and recession go hand in hand

The analysis of fraud trends during the first quarter of 2009 by CIFAS - The UK's Fraud Prevention Service - reveals some particularly alarming patterns. Of particular note are:

• a massive 40% increase in people being impersonated compared with the same period in 2008,
• the continued rise in facility takeover frauds, and
• a surge in false insurance claims.

(Numerical tables are included in the Notes for Editors below).

The unwelcome reappearance of identity fraud

A 40% increase in the number of people being impersonated indicates that the flat trend seen in 2008 (where identity fraud increased by only 0.06% from 2007) was exceptional. While last year's figures were a surprise, the sudden and significant increase in the first quarter of 2009 heralds an unwelcome return of identity fraud as the fraudsters' method of choice; as fraudsters assume creditworthy identities in order to swindle individuals and companies alike: stealing funds, goods and services at someone else's expense.

Facility takeover fraud continues its relentless rise

During this quarter, a staggering 75% increase in facility takeover (also known as account takeover) frauds - where the fraudster gains access to, and plunders the legitimately obtained accounts of innocent victims - continued the steep upward trend seen throughout 2008. This type of fraud is particularly traumatic for the victim, as the impact goes far deeper than any financial losses. The sense of uncertainty inflicted upon victims often undermines their sense of security and well-being as fraudsters leech off of their accounts.

Insurance fraud rises as consumers feel the pinch

Recent reports about the surge in fraudulent insurance claims have received much attention, and CIFAS figures (based on confirmed frauds that satisfy a burden of proof) show similar increases in the fraudulent claims being submitted to CIFAS Members. As the economic climate bites, some consumers appear to be turning to fraud, and to gross exaggeration or fabrication of insurance claims, in order to make ends meet.

The effects of the recession

As previous CIFAS fraud trends releases have noted, the economic slowdown and rises in fraud go hand in hand. The escalation in identity frauds and in facility takeover frauds in the first quarter of 2009 compared with the same period in 2008 confirms this.

Richard Hurley, CIFAS Communications Manager, explains: "It is a commonly held view that fraud rises to the surface during times of economic recession, and these figures substantiate that. With the alarming rise in identity fraud, we are faced with the possibility of a 'chicken or egg' situation: are these increases caused by - or uncovered by - the recession, as lenders and other businesses look even more closely at their existing books?

"It is undeniable that credit has become more difficult to obtain, and this may go some considerable way to explaining the fraudsters' changing methodology. With application fraud proving less fruitful, they are turning to facility takeovers and attempts to assume identities to get their hands on finance. What has to be remembered, however, is that with less new business coming in, much of the fraud being reported may actually relate to finance that was granted before the recession, which originally escaped the anti-fraud industry's magnifying glass."

Comment from the CIFAS Chief Executive

Peter Hurst, CIFAS Chief Executive, warned: "There has been much attention given to the financial impact of the current economic turmoil on society. Fraud is yet another aspect, and one that should not be overlooked. While CIFAS and its Members continue to share information about confirmed fraud, and to reap the benefits by preventing further fraud as a result, society's response to any threat is only achieved by all parties working together.

"As we all continue to 'batten down the hatches' economically, these figures demonstrate clearly that we must, individually and collectively, continue to be alert to the threats surrounding us. From looking after our own identities and personal details, through to ensuring that fraud data sharing is used appropriately to prevent further fraud - we must not allow fraudsters to make the cost of recession any greater."

Notes to Editors:

1. CIFAS is the UK's Fraud Prevention Service with over 260 Member organisations spread across banking, credit cards, asset finance, retail credit, mail order, insurance, investment management, telecommunications, factoring and share dealing. Members share information on identified frauds in the fight to prevent further fraud. CIFAS is unique and was the first data sharing scheme of its type in the world. Other schemes modelled on CIFAS have been set up in Southern Africa and Germany.

2. The following tables show a summary of the statistics and the number of fraud cases recorded by CIFAS Members during the first three months of 2009, broken down by the type of fraud identified. Definitions are given below the table.

	Jan to Mar 2008	Jan to Mar 2009	% change
Fraud Cases Identified	52,286	60,481	15.67%
Financial Benefit/Losses Avoided	£207,681,847	£204,803,036	-1.39%

Fraud Cases Identified refers to each proven instance of fraud identified by CIFAS Members and filed to the CIFAS database. Members must have sufficient evidence to take the case to the police although it is not mandatory that they do so. A fraud case can involve multiple subjects and multiple addresses.

Financial Benefits. This is the amount of money that Members of CIFAS reported that they have saved through being alerted to previous frauds by CIFAS warnings.

Fraud Type	Jan to Mar 2008	Jan to Mar 2009	% Change
Identity Fraud - Granted Identity Fraud - Not Granted Identity Fraud - Total	7,386 10,540 17,926	13,350 11,469 24,819	80.75% 8.81% 38.45%
Application Fraud - Granted Application Fraud - Not Granted Application Fraud - Total	5,040 16,740 21,780	3,206 13,384 16,590	-36.39% -20.05% -23.83%
False Insurance Claim	96	138	43.75%
Facility Takeover Fraud	3,276	5,856	78.75%
Asset Conversion	124	87	-29.84%
Misuse of Facility	9,084	12,991	43.01%
Victims of Impersonation	14,604	20,464	40.13%

Identity Fraud cases include cases of false identity and identity theft.

Application Fraud/False Insurance Claim relates to applications or claims with material falsehood (lies) or false supporting documentation where the name has not been identified as false.

Facility Takeover Fraud occurs where a person (the 'facility hijacker') unlawfully obtains access to details of the 'victim of takeover', namely an existing account holder or policy holder (or of an account or policy of a genuine customer or policy holder) and fraudulently operates the account or policy for his own (or someone else's) benefit.

Asset Conversion relates to the sale of assets subject to a credit agreement where the lender retained ownership of the asset (for example a car or a lorry).

Misuse of Facility is where an account, policy or other facility is used fraudulently.

How the Recession Impacts Online Fraud

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