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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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April 25, 2016


Be Careful, Be Very Careful

Less than halfway through the spring season of banking and payments conferences, the dominant theme of cybercrime is ringing loud and clear. In the 2015 conferences, it was virtual currency, but this year, it is the threat of cyberattacks against individuals and business in both widespread and singular manners. At a payments conference last week, a representative of the Internet Crime Complaint Center (IC3) told the session audience about her center's work. The IC3 has served since 2000 as a conduit for the public to provide information to the FBI regarding suspected Internet-facilitated criminal activity. IC3 tracks and investigates hacking, money laundering, identity theft, advanced fee, and ransomware schemes. It also tracks and investigates efforts to steal intellectual property and trade secrets.

In its latest annual report, IC3 provides detailed statistics on Internet-related complaints and trends. In 2014, the center received almost 270,000 complaints, accounting for more than $800 million in losses. Average monthly complaints received were 22,452. Complaint volume peaked in July at 24,521; the month with the fewest was February, with 20,888.

I asked the IC3 representative about the top complaints the unit was currently seeing. She indicated that email compromise of targeted businesses was the primary complaint and the one that generally resulted in the highest financial loss per complaint. It is common for employees in accounting areas to be targeted. They receive spoofed emails instructing them to initiate wire transfers or to change invoice remittance payments to fraudulent parties and locations, often accounts at financial institutions located in eastern Europe or the Asian-Pacific region. Although representing less than 1 percent of the total complaints filed in 2014, the losses from business email compromise accounted for 28 percent of the total losses reported, and from January 2015 to January 2016 the loss rate increased 270 percent.

Advanced fee schemes involving home rentals or sales, automobile sales, dating services, and lottery/prize winnings are also common. As the name implies, the criminals gain the confidence of victims and demand upfront payment as a sign of good faith. Once they receive the first payment, they will often try for additional payments before disappearing.

Finally, intimidation or extortion schemes are becoming more prevalent. The criminal generally contacts the victims by phone, accuses them of being past due on tax payments or utility bills, and says if immediate payment is not made, their property will be confiscated or they will be arrested. Often the criminal has used social engineering or public records to obtain legitimate data to make their representation of the agency seem more legitimate.

The size and frequency of data breaches of financial institutions, retailers, health care and insurance companies, and government agencies have led some people to conclude that just about everyone's personal identification information has been compromised to some level. I believe it is sensible to be a bit distrustful and apprehensive about the legitimacy of offers or information you might receive through emails or websites, especially those with which you are unfamiliar. Many of the attempts are easy to spot but many others involve highly sophisticated techniques, so one should be extremely careful when on the Internet.

Photo of David Lott By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

April 25, 2016 in cybercrime , data security , fraud , identity theft | Permalink

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