Posts Tagged: Elaine Dodd

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.

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Sep 13

Crooks Hijack Retirement Funds Via SSA Portal

If you receive direct deposits from the Social Security Administration but haven’t yet registered at the agency’s new online account management portal, now would be a good time take care of that: The SSA and financial institutions say they are tracking a rise in cases wherein identity thieves register an account at the SSA’s portal using a retiree’s personal information and have that retiree’s benefits diverted to prepaid debit cards that the crooks control.

The SSA's "my Social Security" portal.

The SSA’s “my Social Security” portal.

Traditional SSA fraud involves identity thieves tricking the beneficiary’s bank into diverting the payments to another account, either through Social Security’s 800 number or through a financial institution, or through Treasury’s Direct Express program. The newer version of this fraud involves the abuse of the SSA’s my Social Security Web portal, which opened last year and allows individuals to create online accounts with the SSA to check their earnings and otherwise interact with the agency relative to their accounts.

Jonathan Lasher, assistant inspector general for external relations at the SSA’s Office of Inspector General, said that for several years the agency was receiving about 50 such allegations a day, though those numbers have begun to decline. But thieves didn’t go away: They just changed tactics. The trouble really began earlier this year, when the Treasury started requiring that almost all beneficiaries receive payments through direct deposit (though the SSA says paper checks are still available to some beneficiaries under limited circumstances).

At the same time, the SSA added the ability to change direct deposit information via their my Social Security Web portal. Shortly thereafter, the agency began receiving complaints that identity thieves were using the portal to hijack the benefits of individuals who had not yet created an account at the site. According to Lasher, as of August 23, 2013, the SSA has received 18,417 allegations of possibly fraudulent mySocialSecurity account activity. Lasher said while some of the complaints are the result of unsuccessful attempts to open an account fraudulently, some are indeed fraud.

“Social Security has already improved security over this online feature, and we continue to work with them to make additional improvements, while also investigating allegations we receive,” Lasher said. “While it’s an issue we’re taking very seriously, it’s important to keep in mind that about 62 million people receive some type of payment from SSA every month, so the likelihood of becoming a victim is very small, particularly if you’re careful about protecting your personal information.”

Because it’s possible to create just one my Social Security account per Social Security number, registering an account on the portal is one basic way that consumers can avoid becoming victims of this scam. Lasher said in the SSA’s systems, every record is tied to the SSN rather than a person’s name, since there are so many duplicate names.

“Of course, the one way to ensure that no one opens an account in your name is to open one yourself,” Lasher said. “Given the nature of other articles on your site, I think it’s important that I point out that there is no suggestion that SSA’s systems have been compromised; this is an identity theft scheme aimed at redirecting existing benefits, often to prepaid debit cards.”

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Nov 10

Escrow Co. Sues Bank Over $440K Cyber Theft

An escrow firm in Missouri is suing its bank to recover $440,000 that organized cyber thieves stole in an online robbery earlier this year, claiming the bank’s reliance on passwords to secure high-dollar transactions failed to measure up to federal e-banking security guidelines.

The attack against Springfield, Mo. based title insurance provider Choice Escrow and Land Title LLC began late in the afternoon on St. Patrick’s Day, when hackers who had stolen the firm’s online banking ID and password used the information to make a single unauthorized wire transfer for $440,000 to a corporate bank account in Cyprus.

The following day, when Choice Escrow received a notice about the transfer from its financial institution — Tupelo, Miss. based BancorpSouth Inc. — it contacted the bank to dispute the transfer. But by the close of business on March 18, the bank was distancing itself from the incident and its customer, said Jim A. Payne, director of business development for Choice Escrow.

“They said, ‘We’re going to get back to you, we’re working on it’,” Payne said. “What they really were doing is contacting their legal department and figuring out what they were going to say to us. It took them until 5 p.m. to call us back, and they basically said, ‘Sorry, we can’t help you. This is your responsibility.'”

A spokesman for BancorpSouth declined to discuss the bank’s security measures or the specifics of this case, saying the institution does not comment on ongoing litigation.

According to documents filed today with the Circuit Court of Greene County, Mo., BancorpSouth’s most secure option for Internet-based authentication requires the customer to have one user ID and password to approve a wire transfer and another user ID and password to release the same wire transfer. The other option — if the customer waives or does not choose dual control — requires one user ID and password to both approve and release a wire transfer.

Choice Escrow’s lawyers argue that because BancorpSouth allowed wire or funds transfers using two options which were both password-based, its commercial online banking security procedures fell short of 2005 guidance from the Federal Financial Institutions Examination Council (FFIEC), which warned that single-factor authentication as the only control mechanism is inadequate for high-risk transactions involving the movement of funds to other parties.

“BancorpSouth should have, and could have, offered a commercially reasonable multifactor authentication method, since it had ample time (more than four years, October 2005 to March 2010) and knowledge of the need and requirement to provide its customers with secure authentication methods, as evidenced from the numerous documents it received, and/or knew about or should have known about, from the FFIEC and FDIC,” the complaint charges.

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