While there has been much coverage of missing data discs, hackers cracking systems and the like, the full extent of the underground world of fraud has only just been revealed in a deeply disturbing report which was published today. Symantec, the leading internet security firm, have announced the results of their recent review of the criminal underground network which the police are finding so hard to crack. It seems that while we battle to maintain the security of our systems and personal details, those which have been stolen are on sale for as little as £5 to anyone who is interested!

Even though the UK has been in the news of late over a number of high profile data handling errors, this is something which is taking a grip right around the world. Top of the league, again, was the US with over 31% of worldwide fraudulent activity within their boundaries, China and Germany accounted for 7% each and while the share of fraudulent activity in the UK was only 4% of the worldwide figures, the details are still alarming. So what exactly is going on?

There are a number of issues which need to be addressed to improve online security which include :-

Social Networking Sites

As bizarre as this may sound, Social Network Sites are the first port of call for many of those looking to commit ID fraud or worse, with many users of these sites posting very detailed and personal information on their profiles. Using the details available it is then possible to obtain copies of birth certificates, etc and assume the life of someone else. This can lead to loan applications, mortgages, credit cards and much more, with the victims only finding out when it is too late.

Spyware

Spyware is something which we have all come across but it is still the tool of choice for so many fraudsters, offering the chance to upload software to a victim’s computer, access their files and in many cases use their computer to carryout more fraudulent activity in the name of someone else. It is vital that we all ensure that our machines are safe, our firewalls are up to date and carryout regular virus scans to see if any new threats have sneaked in.

Password Protection

How many of us use the same user name and password for a vast array of our secure accounts and websites? How many of us have not changed our passwords at any time in the last 6 months? How many of us think that it will never happen to me? These are the easy pickings for the hackers and the fraudsters, and it has proved very very simple to hack into a whole array of bank accounts and cause havoc.

The fact that personal information on a possible fraud victim is changing hands for anything from £5 in these online cyber crime shops is frightening enough, but the fact that many of us are making it so easy for them is even more alarming. Let us all do our bit and try to stamp out what could become a massive crime wave if we are not careful.

As if the Nick Leeson “rogue trader” episode of 1995 was not enough for the financial markets to digest, we have today seen inter-market fraud taken to a new level with news that ONE rogue trader has taken a $7 billion gamble with the funds of establish French Bank Societe Generale - and lost the lot!

The person in question is believed to be Frenchman Jerome Kerviel, a 31-year-old trader who worked on the firms Delta One products team, which basically involved taking large positions on the future movement of share prices. The fraudulent transactions seem to have taken place between 2007 and 2008, and using a number of techniques which he seems to have gleaned from his time in the back office, the trader has managed to conceal his position until now.

While the Bank will still report a profit for the year, the massive hit on the bank’s asset base will force them into the market to raise more capital to shore up their balance sheet. The banks shares were suspended at the opening of today’s market trading but soon resumed after the announcement, immediately falling 3.6%. Societe Generale are unwilling to give away much detail until a full review has been carried out, but there are major question about how a trader earning less that 100,000 Euros a year has been able to rack up such large positions, apparently unnoticed by the company’s accounts department.

There is also a secondary problem for the bank now that this situation has been released to the public – if one trader could hold the bank over a barrel to the tune of $7 billion, are there any more skeletons in the cupboard?

Until a full review of the banks positions and internal procedures has been carried out – not to mention probable intervention by the regulators – there will be a sense of uncertainty regarding the company and the share price is likely to suffer further during this period.

As news that insurance company Aviva may have been the victim of a cruel hoax, designed to give inside investors a massive windfall, it seems that the climate of uncertainty is continuing in the financial sector.

Aviva is one of the UKs largest insurers and what appeared to be an internal memo from the company’s Finance Director Philip Scott to Chief Executive Andrew Moss cast serious doubt on the company’s financial health.  The fake memo was released to one of the tabloid newspapers from a “whistle-blower” from within the company, who was supposedly looking to expose a possible liquidity problem.

After becoming aware of the scam the company alerted the Financial Services Authority who have taken up the investigation, and it was quickly confirmed that there was no truth at all in the fake memo.  This is a classic “bear raid”, which allows a group of investors to sell shares prior to bad news being announced, and then buy them back lower down – crystallising a potential massive profit for themselves.

While “short selling” – selling shares you do not own, with the intention of buying them back at a cheaper price – is not illegal, the circulation of false rumours and untruths is a serious offence which is covered by a whole host of financial regulations.  If the people involved in this scam are found then they risk serious criminal charges and possible prison sentences. 

This episode shows how uncertain and lacking in confidence the financial sector is at the moment, but customers of Aviva have nothing to fear – thankfully!

As the population still digest the enormity of the loss of confidential information for 25 million people in the UK, many are starting to ask the question, “Can the ID card program survive?”

The confidence in the governments ability to securely retain the type and amount of data which will be required for ID cards has forced many of the public and MPs to think again.  Can they really afford to back a system which has the potential to be even more damaging than the loss of 25 million records, can they take the chance that security systems and procedures are in place to retain and protect this information? The answer at the moment is no…………

It would be greatly unfair to say that the current Labour government were the only ones ever to lose such information, as it has happened time and time again in the past and will no doubt happen in the future.  One of the main problems for today’s government is the speed with which rumours grow legs and are manipulated by the press.  There will have been many occasions in the past, throughout the years, where information has disappeared in a similar fashion (although not on the same scale) and it has been kept quiet.

The government effectively had their hands forced with the current situation with rumours rife in the press and on websites, that something was seriously wrong.  Faced with such a problem and the fact the news was leaking out, a hurried statement needed to be issued, perhaps giving the authorities less time to stop the potential for fraud or find the discs in question.

The saga also puts the spotlight back onto recent redundancies within the civil service, at a time when MPs are holding out their own hands for more and more benefits, pensions and greater salaries.  Many are asking how MPs can justify putting the very services which we consider safe and secure at risk, while increasing their own income from the same pot – i.e. the tax payer.  

While the news that the HMR&C have “lost” two CDs holding the private and banking details of about 25 million people in the UK has been headline news for the last 24 hours, is your bank account really at risk? Will you become the victim of ID theft?

The sad fact is that no matter how hard the government try to convince people that there is no risk, there is a REAL risk to you from a number of different angles. 

Firstly there is the possibility that someone may actually have access to your bank details, your names and address, your previous addresses and your previous names.   Using this information it is not hard to redirect bank statements, cheque books and the like to a new address.

Secondly, there is a very definite threat of ID theft for both the adults on the discs and the children, with full names, addresses, dates of birth and national insurance numbers all present on the CDs which have gone missing.  This is a fraudsters dream, giving them more than enough information to apply for loans on your behalf, credit cards and many other financial liabilities – liabilities that you will be left with.

The Chancellor of the Exchequer stated yesterday that anyone found to have lost out due to this information falling into the wrong hands will receive full cover under the Banking Code.  But why on earth should the Banking Code be expected to cover what are in reality the short comings of the government? Whatever happens, if any compensation is paid out it will come out of the public purse in some way.  Forget those promises to be reimbursed; it is actually your own money they would use to do this!

While the authorities claim that the information does not seem to have fallen into the wrong hands as yet, you can bet your last dollar that each and every gang of crooks up and down the country will be looking for these discs, and the information held on them – something which could be worth millions of pounds in the right hands.  This is a problem which has possible repercussions many many months into the future – and you will only find out when it is too late!

While the internet has been beneficial in so many areas of life, it has opened us all up to the scammers, the fraudsters and the con artists.  Quite simply, we are listing a summary of the 3 latest scams on the internet, so that you do not fall victim to them.  Be very careful!

The 3 latest scams include :-

The “foreign language course” scam

The is scam which has arisen in the US and has up until now been targeted at the Hispanic community.  Customers are encouraged to sign up to a “free” language course, but when they actually sign up they will soon be subjected to massive handling charges and shipping fees.  They will receive statements and invoices for goods which they never received, or even ordered, and threatening letters demanding payment.  The US authorities currently have a number of names which they are investigating.

The Florida Lottery scam has returned - version 2

While there have been hundreds of lottery scams around for years, we have recently seen the release of an “updated” scam involving the Florida Lottery.  Victims are sent a cheque in the post, with the forged signature of secretary of the Lottery (the person who would actually sign the real cheques) stating that they have won a sweep stake.  All they need to do is bank the cheque, and send a cheque to the scammers to cover government taxes, duty ,etc

The victim then sends off the cheque and banks the “winning” cheque, only to see that it is rejected after a few days because the signature is a fake.  By the time this has happened, the fraudsters has cashed the victims cheque and is not contactable.

The “relative in trouble” scam

This scam has appeared many times in the Far East and is set to hit the western world at some stage very soon.  The fraudsters have been targeting old ladies with children of working age, often by checking the victims details online, locally, etc. 

The victim will receive a phone call from a “police officer” advising them that there son / daughter has been caught committing a criminal offence and the police are looking to prosecute (normally an offence of a sexual nature).  While the relative will hear what sounds like a sobbing person in the background (supposedly their son, daughter, etc) they will be passed on to a lawyer who suggests that a one off payment could prevent further action by the police.

This scam has caught out many people, with money being passed over to the “lawyer” within a short space of time.  Many people have only realised that it was a scam when their son / daughter returned home with no knowledge of the “offence”!

There are many more frauds and scams coming online on a regular basis, and we will be posting more details in due course.

A report by BDO Stoy Hayward has highlighted an increase of some 42% in UK business fraud over the last 12 months, with many believing that this is just the tip of the iceberg.  Its seems that a mixture or potential rewards, reduced chances of being caught and light sentences have tipped the risk reward ratio in favour of the fraudsters - some of whom who make a career out of defrauding customers, tax, etc.

While there are a number of frauds popular with the criminals, two of the main ones are :-

Carousel Fraud

This type of fraud is becoming more and more popular with businesses around Europe, and the changes to the European market structure have highlighted the potential rewards.  It is now easy to move goods around Europe and take advantage of the tax benefits, whereby no VAT is charged.

Many companies have been found to be billing none existing sales to customers, and then claiming back the VAT from the tax authorities.  With the authorities under the impression that the goods had been sold, many companies have been caught out reselling the goods in other areas of Europe, and reclaiming VAT on yet more none existent sales.  The potential rewards from these frauds are enormous, and detection rates are very low with the authorities stretched to the limit.

Business To Business Fraud

There have been numerous examples of business to business fraud, whether this is the sale of none existing goods, fraudulent banking transactions or employee fraud.  The problem with business frauds is that those who suffer do not want the rest of the industry to know their problems, they need to keep their reputations intact.   This has led to prosecution rates falling as low as 15%, with many companies not willing to take the matter to court, and only really interested in getting back the funds involved in the fraud.

The internet has opened up many markets for fraudsters, with spyware and email fraud becoming more and more common.  It is proving near impossible to trace many of these online fraudsters who can move there bases around the globe at the touch of a button.  This is one major downside to the increasing use of the internet.