By Larry Greenemeier
InformationWeek
A recent spike in identity theft among business executives reported
this week highlights a troubling new tactic that criminals are using
to commit fraud against not just consumers but businesses themselves.
Within a two-week period in January, there was a sharp increase in the
number of business executives reporting that their identities had
fraudulently been used to open up lines of credit with a number of
different merchants, says Julie Fergerson, a founder of the Merchant
Risk Council and vice president of emerging technologies for
anti-fraud security vendor Debix, a provider identity protection
services that prompts banks to call individuals before opening new
credit cards and loans in the individual's name. The Merchant Risk
Council, created in 2003 when the Merchant Fraud Squad and the
Internet Fraud Round Table merged, is a group of more than 7,800
merchants, vendors, financial institutions, and law enforcement
agencies that seek to improve cyber-fraud prevention.
The scam is most likely to hit executives at small to mid-size
companies that allow their employees to open lines of credit in the
executive's name in order to purchase business supplies, at a merchant
such as OfficeMax or Staples. In one case, goods being ordered in the
name of one U.S. business executive were shipped to the U.K. and then
on to Africa, Fergerson says, adding, "There are at least 200
companies known at this time to have issued credit in this guy's
name." There's now an alert out discouraging merchants from extending
credit to this executive. Fergerson declined to identify the executive
specifically because law enforcement is investigating the crime.
The scam works for three reasons. Business executives tend to have
excellent credit, merchants are less likely to scrutinize an
application for a business line of credit because risk has
traditionally been low, and the merchant billing cycle to businesses
is typically as much as 60 days, giving the fraudster plenty of time
before the merchant and business owner identify the fraud. When the
merchant tries to collect on the money they're owed, the transaction
is denied because it's not tied to a legitimate account. Nor has the
business under whose name the account was created received any of the
merchandise. This means the merchant has to eat the cost of the
merchandise. During the two-week period in January, Fergerson saw nine
cases of business executive identity theft, whereas normally she would
see only one or two.
Mounting concern over identity theft and fraud comes as Bank of
America Tuesday said its online banking customers will be able to use
their cell phones and smart phones to check account balances, pay
bills, and transfer money. With more and more mobile phone users in
the U.S. able to access mobile Internet through their cell phones,
Bank of America realizes it's got to balance these security concerns
with the need to grow its online and mobile banking channels. The new
service will be available to Cingular, Sprint-Nextel, T-Mobile, and
Verizon Wireless customers and is launching in March in Tennessee,
with plans to expand nationwide in subsequent months. The bank is
assuring customers that information will remain encrypted when sent
between the mobile phone and the bank.
This latest twist on identity theft and fraud comes as law enforcement
continues to sort out the recent cyber theft of sensitive customer
information stolen from retailer TJX, which was storing customer
information in violation of the Payment Card Industry Data Security
Standard created by Visa and MasterCard. Fergerson says she expects to
see law enforcement announce a breakthrough in the case within the
next 90 days, although she declined to provide more specifics. On
Feb. 7, Massachusetts Attorney General Martha Coakley announced that
her office's Consumer Protection Division is leading a multi-state
civil investigation into the TJX security breach. TJX has acknowledged
that information regarding credit and debit cards sales transactions
in TJX's stores in the U.S., Canada, and Puerto Rico during 2003, as
well as such information for these stores for the period from mid-May
through December 2006, may have been accessed.
Identity theft has topped the Federal Trade Commission's annual
"Consumer Fraud and Identity Theft Complaint Data" report for the past
seven years, in 2006 accounting for 36% of the 674,354 complaints
received.
With this latest scam against business executives, it's not just their
customers that these executives need to protect; it's their own
company's credit and ability to work with suppliers.
Copyright 2007 CMP Media LLC.
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Larry Greenmeierm, InfoWeek (infoweek@telecom-digest.org)