Tax Refund Fraud


16
Apr 18

Deleted Facebook Cybercrime Groups Had 300,000 Members

Hours after being alerted by KrebsOnSecurity, Facebook last week deleted almost 120 private discussion groups totaling more than 300,000 members who flagrantly promoted a host of illicit activities on the social media network’s platform. The scam groups facilitated a broad spectrum of shady activities, including spamming, wire fraud, account takeovers, phony tax refunds, 419 scams, denial-of-service attack-for-hire services and botnet creation tools. The average age of these groups on Facebook’s platform was two years.

On Thursday, April 12, KrebsOnSecurity spent roughly two hours combing Facebook for groups whose sole purpose appeared to be flouting the company’s terms of service agreement about what types of content it will or will not tolerate on its platform.

One of nearly 120 different closed cybercrime groups operating on Facebook that were deleted late last week. In total, there were more than 300,000 members of these groups. The average age of these groups was two years, but some had existed for up to nine years on Facebook

My research centered on groups whose singular focus was promoting all manner of cyber fraud, but most especially those engaged in identity theft, spamming, account takeovers and credit card fraud. Virtually all of these groups advertised their intent by stating well-known terms of fraud in their group names, such as “botnet helpdesk,” “spamming,” “carding” (referring to credit card fraud), “DDoS” (distributed denial-of-service attacks), “tax refund fraud,” and account takeovers.

Each of these closed groups solicited new members to engage in a variety of shady activities. Some had existed on Facebook for up to nine years; approximately ten percent of them had plied their trade on the social network for more than four years.

Here is a spreadsheet (PDF) listing all of the offending groups reported, including: Their stated group names; the length of time they were present on Facebook; the number of members; whether the group was promoting a third-party site on the dark or clear Web; and a link to the offending group. A copy of the same spreadsheet in .csv format is available here.

The biggest collection of groups banned last week were those promoting the sale and use of stolen credit and debit card accounts. The next largest collection of groups included those facilitating account takeovers — methods for mass-hacking emails and passwords for countless online accounts such Amazon, Google, Netflix, PayPal, as well as a host of online banking services.

This rather active Facebook group, which specialized in identity theft and selling stolen bank account logins, was active for roughly three years and had approximately 2,500 members.

In a statement to KrebsOnSecurity, Facebook pledged to be more proactive about policing its network for these types of groups.

“We thank Mr. Krebs for bringing these groups to our attention, we removed them as soon as we investigated,” said Pete Voss, Facebook’s communications director. “We investigated these groups as soon as we were aware of the report, and once we confirmed that they violated our Community Standards, we disabled them and removed the group admins. We encourage our community to report anything they see that they don’t think should be in Facebook, so we can take swift action.” Continue reading →


11
Apr 18

When Identity Thieves Hack Your Accountant

The Internal Revenue Service has been urging tax preparation firms to step up their cybersecurity efforts this year, warning that identity thieves and hackers increasingly are targeting certified public accountants (CPAs) in a bid to siphon oodles of sensitive personal and financial data on taxpayers. This is the story of a CPA in New Jersey whose compromise by malware led to identity theft and phony tax refund requests filed on behalf of his clients.

Last month, KrebsOnSecurity was alerted by security expert Alex Holden of Hold Security about a malware gang that appears to have focused on CPAs. The crooks in this case were using a Web-based keylogger that recorded every keystroke typed on the target’s machine, and periodically uploaded screenshots of whatever was being displayed on the victim’s computer screen at the time.

If you’ve never seen one of these keyloggers in action, viewing their output can be a bit unnerving. This particular malware is not terribly sophisticated, but nevertheless is quite effective. It not only grabs any data the victim submits into Web-based forms, but also captures any typing — including backspaces and typos as we can see in the screenshot below.

The malware records everything its victims type (including backspaces and typos), and frequently takes snapshots of the victim’s computer screen.

Whoever was running this scheme had all victim information uploaded to a site that was protected from data scraping by search engines, but the site itself did not require any form of authentication to view data harvested from victim PCs. Rather, the stolen information was indexed by victim and ordered by day, meaning anyone who knew the right URL could view each day’s keylogging record as one long image file.

Those records suggest that this particular CPA — “John,” a New Jersey professional whose real name will be left out of this story — likely had his computer compromised sometime in mid-March 2018 (at least, this is as far back as the keylogging records go for John).

It’s also not clear exactly which method the thieves used to get malware on John’s machine. Screenshots for John’s account suggest he routinely ignored messages from Microsoft and other third party Windows programs about the need to apply critical security updates.

Messages like this one — about critical security updates available for QuickBooks — went largely ignored, according to multiple screenshots from John’s computer.

More likely, however, John’s computer was compromised by someone who sent him a booby-trapped email attachment or link. When one considers just how frequently CPAs must need to open Microsoft Office and other files submitted by clients and potential clients via email, it’s not hard to imagine how simple it might be for hackers to target and successfully compromise your average CPA.

The keylogging malware itself appears to have been sold (or perhaps directly deployed) by a cybercriminal who uses the nickname ja_far. This individual markets a $50 keylogger product alongside a malware “crypting” service that guarantees his malware will be undetected by most antivirus products for a given number of days after it is used against a victim.

Ja_far’s sales threads for the keylogger used to steal tax and financial data from hundreds of John’s clients.

It seems likely that ja_far’s keylogger was the source of this data because at one point — early in the morning John’s time — the attacker appears to have accidentally pasted ja_far’s jabber instant messenger address into the victim’s screen instead of his own. In all likelihood, John’s assailant was seeking additional crypting services to ensure the keylogger remained undetected on John’s PC. A couple of minutes later, the intruder downloaded a file to John’s PC from file-sharing site sendspace.com.

The attacker apparently messing around on John’s computer while John was not sitting in front of the keyboard.

What I found remarkable about John’s situation was despite receiving notice after notice that the IRS had rejected many of his clients’ tax returns because those returns had already been filed by fraudsters, for at least two weeks John does not appear to have suspected that his compromised computer was likely the source of said fraud inflicted on his clients (or if he did, he didn’t share this notion with any of his friends or family via email).

Instead, John composed and distributed to his clients a form letter about their rejected returns, and another letter that clients could use to alert the IRS and New Jersey tax authorities of suspected identity fraud. Continue reading →


23
Mar 18

San Diego Sues Experian Over ID Theft Service

The City of San Diego, Calif. is suing consumer credit bureau Experian, alleging that a data breach first reported by KrebsOnSecurity in 2013 affected more than a quarter-million people in San Diego but that Experian never alerted affected consumers as required under California law.

The lawsuit, filed by San Diego city attorney Mara Elliott, concerns a data breach at an Experian subsidiary that lasted for nine months ending in 2013. As first reported here in October 2013, a Vietnamese man named Hieu Minh Ngo ran an identity theft service online and gained access to sensitive consumer information by posing as a licensed private investigator in the United States.

In reality, the fraudster was running his identity theft service from Vietnam, and paying Experian thousands of dollars in cash each month for access to 200 million consumer records. Ngo then resold that access to more than 1,300 customers of his ID theft service. KrebsOnSecurity first wrote about Ngo’s ID theft service — alternately called Superget[dot]info and Findget[dot]mein 2011.

Ngo was arrested after being lured out of Vietnam by the U.S. Secret Service. He later pleaded guilty to identity fraud charges and was sentenced in July 2015 to 13 years in prison.

News of the lawsuit comes from The San Diego Union-Tribune, which says the city attorney alleges that some 30 million consumers could have had their information stolen in the breach, including an estimated 250,000 people in San Diego.

“Elliott’s office cited the Internal Revenue Service in saying hackers filed more than 13,000 false returns using the hacked information, obtaining $65 million in fraudulent tax refunds,” writes Union-Tribune reporter Greg Moran.

Experian did not respond to requests for comment.

Ngo’s Identity theft service, superget.info, which relied on access to consumer databases maintained by a company that Experian purchased in 2012.

In December 2013, an executive from Experian told Congress that the company was not aware of any consumers who had been harmed by the incident. However, soon after Ngo was extradited to the United States, the Secret Service began identifying and rounding up dozens of customers of Ngo’s identity theft service. And most of Ngo’s customers were indeed involved in tax refund fraud with the states and the IRS. Continue reading →


19
Feb 18

IRS Scam Leverages Hacked Tax Preparers, Client Bank Accounts

Identity thieves who specialize in tax refund fraud have been busy of late hacking online accounts at multiple tax preparation firms, using them to file phony refund requests. Once the Internal Revenue Service processes the return and deposits money into bank accounts of the hacked firms’ clients, the crooks contact those clients posing as a collection agency and demand that the money be “returned.”

In one version of the scam, criminals are pretending to be debt collection agency officials acting on behalf of the IRS. They’ll call taxpayers who’ve had fraudulent tax refunds deposited into their bank accounts, claim the refund was deposited in error, and threaten recipients with criminal charges if they fail to forward the money to the collection agency.

This is exactly what happened to a number of customers at a half dozen banks in Oklahoma earlier this month. Elaine Dodd, executive vice president of the fraud division at the Oklahoma Bankers Association, said many financial institutions in the Oklahoma City area had “a good number of customers” who had large sums deposited into their bank accounts at the same time.

Dodd said the bank customers received hefty deposits into their accounts from the U.S. Treasury, and shortly thereafter were contacted by phone by someone claiming to be a collections agent for a firm calling itself DebtCredit and using the Web site name debtcredit[dot]us.

“We’re having customers getting refunds they have not applied for,” Dodd said, noting that the transfers were traced back to a local tax preparer who’d apparently gotten phished or hacked. Those banks are now working with affected customers to close the accounts and open new ones, Dodd said. “If the crooks have breached a tax preparer and can send money to the client, they can sure enough pull money out of those accounts, too.”

Several of the Oklahoma bank’s clients received customized notices from a phony company claiming to be a collections agency hired by the IRS.

The domain debtcredit[dot]us hasn’t been active for some time, but an exact copy of the site to which the bank’s clients were referred by the phony collection agency can be found at jcdebt[dot]com — a domain that was registered less than a month ago. The site purports to be associated with a company in New Jersey called Debt & Credit Consulting Services, but according to a record (PDF) retrieved from the New Jersey Secretary of State’s office, that company’s business license was revoked in 2010.

“You may be puzzled by an erroneous payment from the Internal Revenue Service but in fact it is quite an ordinary situation,” reads the HTML page shared with people who received the fraudulent IRS refunds. It includes a video explaining the matter, and references a case number, the amount and date of the transaction, and provides a list of personal “data reported by the IRS,” including the recipient’s name, Social Security Number (SSN), address, bank name, bank routing number and account number.

All of these details no doubt are included to make the scheme look official; most recipients will never suspect that they received the bank transfer because their accounting firm got hacked.

The scammers even supposedly assign the recipients an individual “appointed debt collector,” complete with a picture of the employee, her name, telephone number and email address. However, the emails to the domain used in the email address from the screenshot above (debtcredit[dot]com) bounced, and no one answers at the provided telephone number.

Along with the Web page listing the recipient’s personal and bank account information, each recipient is given a “transaction error correction letter” with IRS letterhead (see image below) that includes many of the same personal and financial details on the HTML page. It also gives the recipient instructions on the account number, ACH routing and wire number to which the wayward funds are to be wired.

A phony letter from the IRS instructing recipients on how and where to wire the money that was deposited into their bank account as a result of a fraudulent tax refund request filed in their name.

Continue reading →


29
Jan 18

File Your Taxes Before Scammers Do It For You

Today, Jan. 29, is officially the first day of the 2018 tax-filing season, also known as the day fraudsters start requesting phony tax refunds in the names of identity theft victims. Want to minimize the chances of getting hit by tax refund fraud this year? File your taxes before the bad guys can!

Tax refund fraud affects hundreds of thousands, if not millions, of U.S. citizens annually. Victims usually first learn of the crime after having their returns rejected because scammers beat them to it. Even those who are not required to file a return can be victims of refund fraud, as can those who are not actually due a refund from the IRS.

According to the IRS, consumer complaints over tax refund fraud have been declining steadily over the years as the IRS and states enact more stringent measures for screening potentially fraudulent applications.

If you file your taxes electronically and the return is rejected, and if you were the victim of identity theft (e.g., if your Social Security number and other information was leaked in the Equifax breach last year), you should submit an Identity Theft Affidavit (Form 14039). The IRS advises that if you suspect you are a victim of identity theft, continue to pay your taxes and file your tax return, even if you must do so by paper.

If the IRS believes you were likely the victim of tax refund fraud in the previous tax year they will likely send you a special filing PIN that needs to be entered along with this year’s return before the filing will be accepted by the IRS electronically. This year marks the third out of the last five that I’ve received one of these PINs from the IRS.

Of course, filing your taxes early to beat the fraudsters requires one to have all of the tax forms needed to do so. As a sole proprietor, this is a great challenge because many companies take their sweet time sending out 1099 forms and such (even though they’re required to do so by Jan. 31).

A great many companies are now turning to online services to deliver tax forms to contractors, employees and others. For example, I have received several notices via email regarding the availability of 1099 forms online; most say they are sending the forms in snail mail, but that if I need them sooner I can get them online if I just create an account or enter some personal information at some third-party site.

Having seen how so many of these sites handle personal information, I’m not terribly interested in volunteering more of it. According to Bankrate, taxpayers can still file their returns even if they don’t yet have all of their 1099s — as long as you have the correct information about how much you earned.

“Unlike a W-2, you generally don’t have to attach 1099s to your tax return,” Bankrate explains. “They are just issued so you’ll know how much to report, with copies going to the IRS so return processors can double-check your entries. As long as you have the correct information, you can put it on your tax form without having the statement in hand.” Continue reading →


24
Nov 17

Name+DOB+SSN=FAFSA Data Gold Mine

KrebsOnSecurity has sought to call attention to online services which expose sensitive consumer data if the user knows a handful of static details about a person that are broadly for sale in the cybercrime underground, such as name, date of birth, and Social Security Number. Perhaps the most eye-opening example of this is on display at fafsa.ed.gov, the Web site set up by the U.S. Department of Education for anyone interested in applying for federal student financial aid.

Update, Nov. 28, 12:34 p.m. ET: The Education Department says not all of the data elements mentioned below are accessible on a FAFSA applicant if someone merely knows the static details about that person. Read on for their response to this story.

Original story:

Short for the Free Application for Federal Student Aid, FAFSA is an extremely lengthy and detailed form required at all colleges that accept and award federal aid to students.

Visitors to the login page for FAFSA have two options: Enter either the student’s FSA ID and password, or choose “enter the student’s information.” Selecting the latter brings up a prompt to enter the student’s first and last name, followed by their date of birth and Social Security Number.

Anyone who successfully supplies that information on a student who has applied for financial aid through FAFSA then gets to see a virtual colonoscopy of personal information on that individual and their family’s finances — including almost 200 different data elements.

The information returned includes all of these data fields:

1. Student’s Last Name:
2. Student’s First Name:
3. Student’s Middle Initial:
4. Student’s Permanent Mailing Address:
5. Student’s Permanent City:
6. Student’s Permanent State:
7. Student’s Permanent ZIP Code:
8. Student’s Social Security Number:
9. Student’s Date of Birth:
10. Student’s Telephone Number:
11. Student’s Driver’s License Number:
12. Student’s Driver’s License State:
13. Student’s E-mail Address:
14. Student’s Citizenship Status:
15. Student’s Alien Registration Number:
16. Student’s Marital Status:
17. Student’s Marital Status Date:
18. Student’s State of Legal Residence:
19. Was Student a Legal Resident Before January 1, 2012?
20. Student’s Legal Residence Date:
21. Is the Student Male or Female?
22. Register Student With Selective Service System?
23. Drug Conviction Affecting Eligibility?
24. Parent 1 Educational Level:
25. Parent 2 Educational Level:
26. High School or Equivalent Completed?
27a. Student’s High School Name:
27b. Student’s High School City:
27c. Student’s High School State:
28. First Bachelor’s Degree before 2017-2018 School Year?
29. Student’s Grade Level in College in 2017-2018:
30. Type of Degree/Certificate:
31. Interested in Work-study?
32. Student Filed 2015 Income Tax Return?
33. Student’s Type of 2015 Tax Form Used:
34. Student’s 2015 Tax Return Filing Status:
35. Student Eligible to File a 1040A or 1040EZ?
36. Student’s 2015 Adjusted Gross Income:
37. Student’s 2015 U.S. Income Tax Paid:
38. Student’s 2015 Exemptions Claimed:
39. Student’s 2015 Income Earned from Work:
40. Spouse’s 2015 Income Earned from Work:
41. Student’s Total of Cash, Savings, and Checking Accounts:
42. Student’s Net Worth of Current Investments:
43. Student’s Net Worth of Businesses/Investment Farms:
44a. Student’s Education Credits:
44b. Student’s Child Support Paid:
44c. Student’s Taxable Earnings from Need-Based Employment Programs:
44d. Student’s College Grant and Scholarship Aid Reported in AGI:
44e. Student’s Taxable Combat Pay Reported in AGI:
44f. Student’s Cooperative Education Earnings:
45a. Student’s Payments to Tax-Deferred Pensions & Retirement Savings:
45b. Student’s Deductible Payments to IRA/Keogh/Other:
45c. Student’s Child Support Received:
45d. Student’s Tax Exempt Interest Income:
45e. Student’s Untaxed Portions of IRA Distributions:
45f. Student’s Untaxed Portions of Pensions:
45g. Student’s Housing, Food, & Living Allowances:
45h. Student’s Veterans Noneducation Benefits:
45i. Student’s Other Untaxed Income or Benefits:
45j. Money Received or Paid on Student’s Behalf:
46. Student Born Before January 1, 1994?
47. Is Student Married?
48. Working on Master’s or Doctorate in 2017-2018?
49. Is Student on Active Duty in U.S. Armed Forces?
50. Is Student a Veteran?
51. Does Student Have Children He/She Supports?
52. Does Student Have Dependents Other than Children/Spouse?
53. Parents Deceased?/Student Ward of Court?/In Foster Care?
54. Is or Was Student an Emancipated Minor?
55. Is or Was Student in Legal Guardianship?
56. Is Student an Unaccompanied Homeless Youth as Determined by High School/Homeless Liaison?
57. Is Student an Unaccompanied Homeless Youth as Determined by HUD?
58. Is Student an Unaccompanied Homeless Youth as Determined by Director of Homeless Youth Center?
59. Parents’ Marital Status:
60. Parents’ Marital Status Date:
61. Parent 1 (Father’s/Mother’s/Stepparent’s) Social Security Number:
62. Parent 1 (Father’s/Mother’s/Stepparent’s) Last Name:
63. Parent 1 (Father’s/Mother’s/Stepparent’s) First Name Initial:
64. Parent 1 (Father’s/Mother’s/Stepparent’s) Date of Birth:
65. Parent 2 (Father’s/Mother’s/Stepparent’s) Social Security Number:
66. Parent 2 (Father’s/Mother’s/Stepparent’s) Last Name:
67. Parent 2 (Father’s/Mother’s/Stepparent’s) First Name Initial:
68. Parent 2 (Father’s/Mother’s/Stepparent’s) Date of Birth:
69. Parents’ E-mail Address:
70. Parents’ State of Legal Residence:
71. Were Parents Legal Residents Before January 1, 2012?
72. Parents’ Legal Residence Date:
73. Parents’ Number of Family Members in 2017-2018:
74. Parents’ Number in College in 2017-2018 (Parents Excluded):
75. Parents Received Medicaid or Supplemental Security Income?
76. Parents Received SNAP?
77. Parents Received Free/Reduced Price Lunch?
78. Parents Received TANF?
79. Parents Received WIC?
80. Parents Filed 2015 Income Tax Return?
81. Parents’ Type of 2015 Tax Form Used:
82. Parents’ 2015 Tax Return Filing Status:
83. Parents Eligible to File a 1040A or 1040EZ?
84. Is Parent a Dislocated Worker?
85. Parents’ 2015 Adjusted Gross Income:
86. Parents’ 2015 U.S. Income Tax Paid:
87. Parents’ 2015 Exemptions Claimed:
88. Parent 1 (Father’s/Mother’s/Stepparent’s) 2015 Income Earned from Work:
89. Parent 2 (Father’s/Mother’s/Stepparent’s) 2015 Income Earned from Work:
90. Parents’ Total of Cash, Savings, and Checking Accounts:
91. Parents’ Net Worth of Current Investments:
92. Parents’ Net Worth of Businesses/Investment Farms:
93a. Parents’ Education Credits:
93b. Parents’ Child Support Paid:
93c. Parents’ Taxable Earnings from Need-Based Employment Programs:
93d. Parents’ College Grant and Scholarship Aid Reported in AGI:
93e. Parents’ Taxable Combat Pay Reported in AGI:
93f. Parents’ Cooperative Education Earnings:
94a. Parents’ Payments to Tax-Deferred Pensions & Retirement Savings:
94b. Parents’ Deductible Payments to IRA/Keogh/Other:
94c. Parents’ Child Support Received:
94d. Parents’ Tax Exempt Interest Income:
94e. Parents’ Untaxed Portions of IRA Distributions:
94f. Parents’ Untaxed Portions of Pensions:
94g. Parents’ Housing, Food, & Living Allowances:
94h. Parents’ Veterans Noneducation Benefits:
94i. Parents’ Other Untaxed Income or Benefits:
95. Student’s Number of Family Members in 2017-2018:
96. Student’s Number in College in 2017-2018:
97. Student Received Medicaid or Supplemental Security Income?
98. Student Received SNAP?
99. Student Received Free/Reduced Price Lunch?
100. Student Received TANF?
101. Student Received WIC?
102. Is Student or Spouse a Dislocated Worker?
103a. First Federal School Code:
103b. First Housing Plans:
103c. Second Federal School Code:
103d. Second Housing Plans:
103e. Third Federal School Code:
103f. Third Housing Plans:
103g. Fourth Federal School Code:
103h. Fourth Housing Plans:
103i. Fifth Federal School Code:
103j. Fifth Housing Plans:
103k. Sixth Federal School Code:
103l. Sixth Housing Plans:
103m. Seventh Federal School Code:
103n. Seventh Housing Plans:
103o. Eighth Federal School Code:
103p. Eighth Housing Plans:
103q. Ninth Federal School Code:
103r. Ninth Housing Plans:
103s. Tenth Federal School Code:
103t. Tenth Housing Plans:
104. Date Completed:
105. Signed By:
106. Preparer’s Social Security Number:
107. Preparer’s Employer Identification Number (EIN):
108. Preparer’s Signature:

According to the Education Department, nearly 20 million students filled out this form in the 2015/2016 application cycle.

Update: The process described above was based on a demonstration this author saw while sharing a screen with a KrebsOnSecurity reader who had a family member apply for aid through FAFSA. But an Education Department spokesperson took strong exception to my experience, saying that while someone armed with an applicant’s SSN and date of birth would be able to view some of the less sensitive data elements related to an application that has already been submitted and processed, seeing the more sensitive data requires and additional authentication step.

The spokesperson said the data is displayed across several pages that require manual advancement, and that before the pages with financial data are shown the visitor is prompted to supply a username and password that all users are required to create when they start the application process. The agency said that without those credentials, the system should not display the rest of the data.

In cases where a student has saved but not completed an application, the spokesperson said, the applicant is prompted to create a “save key,” or temporary password that needs to be supplied before the financial data is displayed.
Continue reading →


3
May 16

Fraudsters Steal Tax, Salary Data From ADP

Identity thieves stole tax and salary data from payroll giant ADP by registering accounts in the names of employees at more than a dozen customer firms, KrebsOnSecurity has learned. ADP says the incidents occurred because the victim companies all mistakenly published sensitive ADP account information online that made those firms easy targets for tax fraudsters.

adpPatterson, N.J.-based ADP provides payroll, tax and benefits administration for more than 640,000 companies. Last week, U.S. Bancorp (U.S. Bank) — the nation’s fifth-largest commercial bank — warned some of its employees that their W-2 data had been stolen thanks to a weakness in ADP’s customer portal.

ID thieves are interested in W-2 data because it contains much of the information needed to fraudulently request a large tax refund from the U.S. Internal Revenue Service (IRS) in someone else’s name. A reader who works at U.S. Bank shared a letter received from Jennie Carlson, the financial institution’s executive vice president of human resources.

“Since April 19, 2016, we have been actively investigating a security incident with our W-2 provider, ADP,” Carlson wrote. “During the course of that investigation we have learned that an external W-2 portal, maintained by ADP, may have been utilized by unauthorized individuals to access your W-2, which they may have used to file a fraudulent income tax return under your name.”

The letter continued:

“The incident originated because ADP offered an external online portal that has been exploited. For individuals who had never used the external portal, a registration had never been established. Criminals were able to take advantage of that situation to use confidential personal information from other sources to establish a registration in your name at ADP. Once the fraudulent registration was established, they were able to view or download your W-2.”

U.S. Bank spokesman Dana Ripley said the letter was sent to a “small population” of the bank’s more than 64,000 employees. Asked to comment on the letter from U.S. Bank, ADP confirmed that the fraud visited upon U.S. Bank also hit “a very small subset” of the ADP’s total customers this year.

ADP emphasized that the fraudsters needed to have the victim’s personal data — including name, date of birth and Social Security number — to successfully create an account in someone’s name. ADP also stressed that this personal data did not come from its systems, and that thieves appeared to already possess that data when they created the unauthorized accounts at ADP’s portal.

ADP Chief Security Officer Roland Cloutier said customers can choose to create an account at the ADP portal for each employee, or they can defer that process to a later date (but employers do have to chose one or the other, Cloutier said).

According to ADP, new users need to be in possession of two other things (in addition to the victim’s personal data) at a minimum in order to create an account: A custom, company-specific link provided by ADP, and a static code assigned to the customer by ADP.

The problem, Cloutier said, seems to stem from ADP customers that both deferred that signup process for some or all of their employees and at the same time inadvertently published online the link and the company code. As a result, for users who never registered, criminals were able to register as them with fairly basic personal info, and access W-2 data on those individuals. Continue reading →


24
Mar 16

Phishing Victims Muddle Tax Fraud Fight

Many U.S. citizens are bound to experience delays in getting their tax returns processed this year, thanks largely to more stringent controls enacted by Uncle Sam and the states to block fraudulent tax refund requests filed by identity thieves. A steady drip of corporate data breaches involving phished employee W-2 information is adding to the backlog, as is an apparent mass adoption by ID thieves of professional tax services for processing large numbers of phony refund requests.
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According to data released this week by anti-fraud company iovation, the Internal Revenue Service is taking up to three times longer to review 2015 tax returns compared to past years.

Julie Magee, commissioner of Alabama’s Department of Revenue,  said much of the delay this year at the state level is likely due to new “fraud filters” the states have put in place with Gentax, a return processing and auditing system used by about half of U.S. state revenue departments. If the states can’t outright deny a suspicious refund request, they’ll very often deny the requested electronic bank deposit and issue a paper check to the taxpayer’s known address instead.

“Many states decided they weren’t going to start paying refunds until March 1, and on our side we’ve been using all our internal fraud resources and tools to analyze the tax return before we even put it in the queue,” Magee said. “That’s delaying refunds nationwide for the IRS and the states, and it’s pretty much going to also mean a helluva lot of paper checks are going out this year.”

The added fraud filters that states are employing take advantage of data elements shared for the first time this tax season by the major online tax preparation firms such as TurboTax. The filters look for patterns known to be associated with phony refund requests, such how quickly the return was filed, or whether the same Internet address was seen completing multiple returns.

Magee said some of the states have been adding new fraud filters nearly every time they learn of another big breach involving large numbers of stolen or phished employee W2 data, a huge problem this tax season that is forcing dozens of companies large and small to disclose data breaches over the past few weeks.

“Every time we turn around getting a phone call about another breach,” Magee said. “Because of all the different breaches, the states and the IRS have been taking extreme measures to filter, filter, filter. And each time we’d get news of an additional breach, we’d start over, reprogram our fraud filters, and re-assess those returns that were not processed fully yet and those waiting to be processed.”

Magee said the Gentax software assigns each tax return a score for “wage confidence” and “identity confidence,” and that usually fraudulent tax refund requests have high wage confidence but low — if any — identity confidence. That’s because the fraudsters are filing refund requests on taxpayers for whom they already have stolen W2 information. The identity confidence in these cases is low often because the fraudsters are asking to have the money electronically deposited into an account that can’t be directly tied to the taxpayer, or they have incorrectly supplied some of the victim’s data.

“I have zero confidence that filings which match this pattern are legitimate,” Magee said. “It’s early still, but our new filtering system seems to be working. But it’s still a big unknown about the percentage of fraudulent refunds we’re not stopping.”

MORE W2 PHISHING VICTIMS

athookMost states didn’t start processing returns until after March 1, which is exactly when a flood of data breaches related to phished employee W2 data began washing up. As KrebsOnSecurity first warned in mid-February, thieves have been sending targeted phishing emails to human resources and finance employees at countless organizations, spoofing a message from the CEO requesting all employee W2’s in PDF format.

In Magee’s own state, W2 phishers hauled in tax data on an estimated 180 employees of ISCO Industries in Huntsville, and some 425 employees at the EWTN Global Catholic Network in Irondale, Ala. But those are just the ones that have been made public. Magee’s office only learned of those breaches after employees at the affected organizations reached out to journalists who then wrote about the compromises.

Over the past week, KrebsOnSecurity similarly has heard from employees at a broad range of organizations that appear to have fallen victim to W2 phishing scams, including some 28,000 employees of the market research giant Kantar Group; 17,000+ employees of Sprouts Farmer’s Market; call center software provider Aspect; computer backup software maker AcronisKids Dental Kare in Los Angeles; Century Fence, a fencing company in Wisconsin; Nation’s Lending Corporation, a mortgage lending firm in Independent, Ohio; QTI Group, a Wisconsin-based human resources consulting company; and the jousting-and-feasting entertainment company Medieval Times. Continue reading →


16
Mar 16

Thieves Phish Moneytree Employee Tax Data

Payday lending firm Moneytree is the latest company to alert current and former employees that their tax data — including Social Security numbers, salary and address information — was accidentally handed over directly to scam artists.

moneytreeSeattle-based Moneytree sent an email to employees on March 4 stating that “one of our team members fell victim to a phishing scam and revealed payroll information to an external source.”

“Moneytree was apparently targeted by a scam in which the scammer impersonated me and asked for an emailed copy of certain information about the Company’s payroll including Team Member names, home addresses, social security numbers, birthdates and W2 information,” Moneytree co-founder Dennis Bassford wrote to employees.

The message continued:

“Unfortunately, this request was not recognized as a scam, and the information about current and former Team Members who worked in the US at Moneytree in 2015 or were hired in early 2016 was disclosed. The good news is that our servers and security systems were not breached, and our millions of customer records were not affected. The bad news is that our Team Members’ information has been compromised.”

A woman who answered a Moneytree phone number listed in the email confirmed the veracity of the co-founder’s message to employees, but would not say how many employees were notified. According to the company’s profile on Yellowpages.com, Moneytree Inc. maintains a staff of more than 1,200 employees. The company offers check cashing, payday loan, money order, wire transfer, mortgage, lending, prepaid gift cards, and copying and fax services.

Moneytree joins a growing list of companies disclosing to employees that they were duped by W2 phishing scams, which this author first warned about in mid-February.  Earlier this month, data storage giant Seagate acknowledged that a similar phishing scam had compromised the tax and personal data on thousands of current and past employees. Continue reading →


7
Mar 16

IRS Suspends Insecure ‘Get IP PIN’ Feature

Citing ongoing security concerns, the Internal Revenue Service (IRS) has suspended a service offered via its Web site that allowed taxpayers to retrieve so-called IP Protection PINs (IP PINs), codes that the IRS has mailed to some 2.7 million taxpayers to help prevent those individuals from becoming victims of tax refund fraud two years in a row. The move comes just days after KrebsOnSecurity first exposed how ID thieves were abusing the service to revisit tax refund on innocent taxpayers two years running.

irsbldgLast week, this blog told the story of Becky Wittrock, a certified public accountant (CPA) from Sioux Falls, S.D., who received an IP PIN in 2014 after crooks tried to impersonate her to the IRS. Wittrock said she found out her IP PIN had been compromised by thieves this year after she tried to file her tax return on Feb. 25, 2016. Turns out, the crooks beat her to the punch by more than three weeks, filing a large refund request with the IRS on Feb. 2, 2016.

The problem, as Wittrock’s case made clear, is that IRS allows IP PIN recipients to retrieve their PIN via the agency’s Web site, after supplying the answers to four easy-to-guess questions from consumer credit bureau Equifax. These so-called knowledge-based authentication (KBA) or “out-of-wallet” questions focus on things such as previous address, loan amounts and dates and can be successfully enumerated with random guessing. In many cases, the answers can be found by consulting free online services, such as Zillow and Facebook.

In a statement issued Monday evening, the IRS said that as part of its ongoing security review, the agency was temporarily suspending the Identity Protection PIN tool on IRS.gov.

“The IRS is conducting a further review of the application that allows taxpayers to retrieve their IP PINs online and is looking at further strengthening the security features on the tool,” the agency said. Continue reading →