Fraud

Types of Fraud

Check Fraud Credit Card Fraud Credit Fraud Identity Theft

Check Fraud

Definition Unlawful use of checks in order to illegally acquire or

borrow funds that do not exist within the account balance or account-holder’s legal ownership▪ Stealing an unsigned check from someone else for the purpose

of passing it as yours▪ Writing a check that doesn’t have enough funds in the checking

account to cover it, or the checking account doesn’t exist at all Statistics

500M checks are forged in US each year, for a total of over $10B

Surprised?▪ Checks are the most popular form of payment for business-to-

business transactions, estimates are 80%

Types of Check Fraud

Paper Hanging When a person writes checks on a checking account that they know is

closed Check Kiting

When a person opens 2 checking accounts, writes a check from one account to the other

Withdraws money from 2nd account before it has time to clear Check bounces from 1st account

Check Washing Intercept a check, usually in the mail Use chemicals to remove all of the writing on the check so they can

write in their own information Forgery

A person takes or steals a check from a business they work for and writes it out to themselves

A person alters a check that has been legitimately written by adding words and/or digits in order to inflate the amount

Credit Card Fraud

Unauthorized charges to your credit card

Counterfeit cards Occurs when:

Cards are lost or stolen Mail is diverted by criminals Employees of a business steal customer

information

Credit Card Fraud

The Federal Trade Commission estimates that 10 million people are victimized by credit card theft each year

Credit card companies lose close to $50 billion dollars per year because of fraud

These costs “trickle down” in higher interest rates and fees for all consumers

The bottom line...

All cardholders pay for credit card fraud losses Victims spend time and money to repair

the damage Credit card issuers charge higher fees

and interest rates to cover their losses

Corporate Breaches

Target November 27 – December 15, 2013 40 million shoppers potentially affected Point-of-sale system hacked▪ Malware in terminals where cards swiped or ▪ Customer data collected while on route from Target to

its credit card processors Thieves gained access to data on the magnetic

strips▪ Produce counterfeit versions▪ Withdraw cash from ATMs with counterfeit debit cards

Corporate Breaches

Home Depot April – September, 2014 56 million cards potentially compromised Software that was slipped into the companies’

networks▪ Used to skim payment-card data▪ Unique, custom-built malware

Customers not liable for fraudulent charges▪ $450 in Home Depot gift cards billed to my Visa via paypal

Cost Home Depot $62M in investigation, credit monitoring service, call center staffing▪ Reimbursed $27M for its insurance

Credit Fraud

Lying in any way on a written application for a loan, goods or property, or a credit card Giving a fake or stolen Social Security

number Giving a fake name and address Misrepresenting your income, financial

obligations and ability to pay

Identity Theft

Identity theft is the use of someone’s personal information, such as their Social Security number or date of birth, to commit financial fraud

Type of Fraud Percent Reported

Misuse of Existing Credit Card 64.1%

Misuse of Other Existing Bank Account 35%

Misuse of Personal Information 14.2%

Identity Theft

Fastest growing crime in America Every minute about 19 people fall victim to

identity theft It takes the average victim an estimated $500

and 30 hours to resolve each identity theft crime

Studies have shown that it’s becoming more common for the ones stealing your identity to be those closest to you 32% were family members or relatives 18% were friends, neighbors, or in-home employees

TX Penalties for Fraud

Check Fraud Forgery - is a State Jail Felony Stealing or receiving a stolen check - is

a Class A Misdemeanor Credit Card Fraud

State Jail Felony▪ Punishable by fines and up to 2 years in a

state jail

TX Penalties for Fraud

Identity Theft

Additionally, if you are convicted of identity theft, the judge can order you to pay restitution to the victims▪ Any lost income or other expenses incurred while trying to resolve problems caused by the theft

Number of Identification Items

Classification Penalty

Less than 5 State Jail Felony180 days to 2 years in a state jail and/or a fine of not more than $10,000

5 or more, but less than 10

Third-degree Felony

2 to 10 years in a state prison and/or a fine of not more than $10,000

10 or more, but less than 50

Second-degree Felony

2 to 20 years in a state prison and/or a fine of not more than $10,000

50 or more First-degree Felony5 to 99 years in a state prison and/or a fine of not more than $10,000

How It’s Done

Dumpster Diving Stealing credit card information from

discarded receipts or account statements in people’s trash▪ Shred unwanted documents that contain

Social Security numbers, bank and credit card information and other sensitive financial information

How It’s Done

Skimming When dishonest employees make illegal

copies of credit or debit cards using a “skimmer” device that captures credit card numbers and other account information

The stolen credit informationis used to make purchases byphone and internet, or to make counterfeit cards

How It’s Done

Phishing A financial crime that starts with

massive numbers of deceptive spam e-mails

These e-mails look like they come from your bank

But they are just a trick to get account numbers and passwords

Example of Phishing

How to Prevent It

Only carry essential documents with you Don’t carry extra credit cards, your Social Security card,

birth certificate or passport on you Keep new checks out of the mail

When ordering new checks, pick them up at the bank instead of having them mailed to your home

Be careful when giving out personal information over the phone Only give info if you initiate the call

Your trash is their treasure Shred your receipts, credit card bills, bank statements, etc.

Make sure others are keeping you safe Ensure that your employer, landlord or anyone else with

access to your personal date keeps your records safe

How to Prevent It

Protect your Social Security Number Do not print on your personal checks

Follow your credit card billing cycles closely Go with electronic statements If have paper copies, make sure you receive each

month Keep a list of account numbers, expiration dates

and telephone numbers filed away Good to have if your wallet is stolen

Create passwords or PIN numbers out of a random mix of letters and numbers Do not use your birthday or other familiar numbers Makes it harder to break

Security Codes

Credit card companies use security codes to help prevent unauthorized or fraudulent use by phone and online These numbers help ensure that you

have the card — not just the account number

Merchants are prohibited from keeping or storing any security codes after transactions are completed

Security Codes

Security codes for Visa, MasterCard and Discover cards are the 3 digits located on the back of the card in the signature box.

Security codes for American Express are 4 digits long, printed on the front of the card above the right side of the main credit card number.

New Cards

For added protection, credit card issuers ask you to call from home to activate new credit cards

As soon as you receive your new card, sign the back of it with a permanent black ink pen

Should you write “Ask for ID”?

Writing “Ask for ID” in the signature space may not be a good idea as your transactions might not go through if the card isn’t signed

Consider signing your card and also writing “Ask for ID”

In case your card is lost or stolen

Record all your account numbers and company contact information and keep the record in a secure place

That way you can easily find whom to call to report the loss

Protect your PIN

Never write down your personal identification number (PIN)

Never give your PIN to anyone

Protect your account numbers

Never write your credit card number on post cards or on the outside of envelopes

Never provide your card number on the phone, unless you know it’s a legitimate, reputable business

Never give your account number to anyone who calls you on the phone or sends you an e-mail

If you let others use your card, you are responsible for charges

Billing Statements

Review credit card statements closely on the day they arrive Report any questionable charges to your

card issuer immediately A missing credit card statement may

indicate stolen mail Contact your card issuer right away if

your bill doesn’t arrive around the usual date

Online account access

If you have a computer, consider signing up for online account access

This way you can track your account activity between statements

Liability

Fraud victims are not generally required to pay for unauthorized charges

Victims may be liable for up to $50 of the loss, depending on the circumstances

Protect your wallet or purse

Keep a close eye on your belongings Never carry all your credit cards Bring only the 1 or 2 cards you might

need Carry your credit cards separate

from your wallet If your wallet or purse is lost or

stolen, call your credit card issuers immediately

Watch your credit card

Watch closely when store or restaurant employees handle your card to make sure they are not copying or “Skimming” your credit card number

After you make a purchase and your card is handed back to you, make sure the card is yours.

Take Precautions

Notify your credit card company if you are going to be traveling away from home to prevent any inconvenience if your issuer should block your account from being used in a different city

Notify your credit card company if you are going to make any unusually large purchases so that your account is not flagged for possible fraud

Safeguard your Mail

Notify the post office and your credit card company immediately if you change your address

Lock your mailbox. Never leave mail in an unlocked mail box or apartment building lobby

Put your return address on out-going mail

Shred unwanted credit card solicitations before discarding

Internet Safeguards

If you bank online, don’t use “automatic sign on” for bank or credit card sites

Avoid providing your credit card number to websites offering “free access”

Install a firewall in your computer to prevent unauthorized access from hackers

Reporting creditcard fraud

To report credit card fraud Call your card company immediately

about▪ Lost or stolen cards or PIN numbers▪ Unauthorized charges on your statement

Request a fraud affidavit Get a police report if necessary

The Fair Credit Billing Act is a federal law that gives you the right to

resolve billing errors, including unauthorized charges If something goes wrong, you have the right to

dispute the charge To dispute billing errors on your statement,

contact your card issuer within 60 days from the statement date or you lose your right to file a dispute

Note: There is no time limit for reporting fraudulent charges.

Disputing charges

Always dispute billing errors in writing. You can call your card company and follow up with a letter. Describe the dispute in a few sentences Send it to the correct address for billing

disputes Do not include your dispute letter with

your bill payment