False Identification as a Facilitator

1
CHECK FRAUD TRAINING
SSA Maxwell D. Marker Federal Bureau of
Investigation Chicago Division
2
Objectives

• Overall View of Check Fraud Crime Problem
• Common Schemes
• Suggestions

3
Check Fraud

• How bad is it???

4
CHECK FRAUD

• The intentional negotiation of a check without
  the account holders approval or authorization.

5
Bank Fraud in Perspective

• FY 2005 losses to Bank Robbery, Burglary and
  Larceny - 42.1 Million (4,963 cases)
• FY 2005 losses reported to the FBI due to
  Financial Institution Fraud - 2.7 Billion (5,065
  cases)

6
Check Fraudsters are not always a nice group of
criminals.
7
Number of Violations of Check-Related Fraud SARS
Fiscal Years 2002 2006 (10/1/01 12/31/05)
Nationwide
Number of SARs received
8
Dollar Losses Reported of Check-Related Fraud
SARS Fiscal Years 2002 2006 (10/1/01
12/31/05) Nationwide
Dollar Losses Reported in Millions
Dollar Losses Reported in Millions
Rounded to nearest millionth
9
Check Fraud Losses by Type

• 2002 American Bankers Association Survey
• Forged Makers Signatures 24
• Non-Sufficient Funds (NSF)
  24
• Closed Account Checks 10
• Counterfeit Checks 9
• Forged Endorsement 8

10
Check Fraud

• Schemes and Techniques

11
Forged Makers Signature

• Signature applied to stolen checks
• Facilitated through desktop publishing
• Generally speaking, bank absorbs first months
  losses
• Can be part of ongoing embezzlement scheme

12
Non-Sufficient Funds (NSF)/ Closed Account Checks

• Scheme 1 Checks are utilized to boost existing
  account balance, funds are removed via ATM before
  the NSF check is returned

13
NSF/Closed Account Checks

• Scheme 2 Checks are utilized to pay down the
  balance on an existing maxed out credit card,
  balance zeroed out, charged up again. (Doubling)

14
NSF/Closed Account Checks

• Scheme 3 Money Orders/Cashiers checks deposited
  in banks by unwitting co-conspirators who
  absorb loss.

15
NSF/Closed Account Checks
16
Counterfeit Checks

• Old School - Check Washing
• Chemical removal of ink from face of check.
• Checks are then re-written.

17
Counterfeit Checks

• Counterfeit checks are primarily manufactured by
  desk top publishing
• Lap top and desk top computers

Federal Trade Commission Created May 15, 2002
1The percents total to more than 100 because
approximately 20 of all victims experienced more
than one type of identity theft.
18
Check Manufacturing Software
19
Counterfeit Checks

• Largest external fraud problem for Regional banks
• Usually perpetrated by rings
• Highly organized
• Recruitment of insiders

20
Counterfeit Checks

• The accounts of large corporations are often
  targeted

21
Counterfeit Payroll Checks
22
Payroll Check Schemes

• Removal of checks from middle or back of
  checkbook.
• Use of counterfeit checks.
• Smaller amounts, wide distribution.
• Perpetrated using rings.

23
Counterfeit Personal Checks
24
Counterfeit Personal Checks

• May involve identity theft.
• Points of Compromise
• Mail theft
• Insiders
• Persons close to individual

25
Forged Endorsement

• Forged Endorsement applied to stolen checks
• Either
• Isolated incident (check stolen from mailbox)
• Ongoing embezzlement scheme (insider at
  corporation)

26
Forged Endorsement

• Look for falsification in internal journals to
  compensate for forged endorsement/forged maker
• Cost of goods sold may be inflated in general
  ledger
• Fraudulent Accounts payable may be created
• Legitimate Accounts Receivable may be diverted to
  PO Boxes or co-conspirators

27
Antonia Denise Hicks

• Embezzled 1,981,000 from her employer, a real
  estate acquisition company.
• Paid false invoices in the name of a legitimate
  vendor to a false bank account.
• When she was arrested 1.2 million in assets were
  seized, including almost 845,000 in her bank
  account.

28
Current Payroll Check Scheme

• Nationwide Organization.
• Breaking into construction trailers.
• Stealing checks after hours.
• Cashing false payroll checks Friday after 5 p.m.
  and Saturdays at the issuing bank.

29
Current Overpayment Scheme

• Internet sales of merchandise
• Typically paid with cashiers check for over
  purchase amount
• Request Western Union return of overpayment
  amount.
• Original instrument later comes back as forged.

30
Fake Identification Facilitating the Check Fraud
Process
31
Methods of Obtaining False IDs

• Fraudulently obtained genuine documents
• Alterations made to genuine documents
• Counterfeit
• Desktop publishing technology
• Offset printing

32
Fake Identification in action
33
Internet Sources

• WEB SITES, SUCH AS WWW.FAKE ID.NET ARE
  AVAILABLE TO ALL WHO WISH A NEW IDENTITY.
• - Look like legitimate ID/Drivers License but
  somewhere, probably on the back, contains the
  word Novelty somewhere in small print

34
(No Transcript)
35
(No Transcript)
36
False Identification as a Facilitator

• Provides cloak of anonymity while groundwork is
  laid
• Rental of mail drops, post office boxes, safe
  deposit boxes, vehicles, storage lockers,
  apartments, office space.
• Activation of pagers, cellular telephones,
  telephone and fax lines, gas and electric.
• Obtaining these papers critical to case

37
False Identification as a Facilitator contd...

• Enhances the chances of success, or is a required
  element, in the commission of almost all
  financial crimes
• Obtaining cash and merchandise with checks
  obtained through the use of someone elses
  account information
• Passing counterfeit travelers checks, commercial
  checks, personal checks, and cashiers checks
  using someone elses identity.

38
Nkemululam Tony Job

• Job used over 27 known aliases and was identified
  by fingerprints.
• Job used false identification to open bank
  accounts into which he would deposit forged
  checks.

39
Card Sharks Investigation

• Waikiki area supported a large network of
  producers of fake identities.
• Prosecuted under 18 U.S.C. 1028 Knowing and
  unlawful production of false identification
  documents.
• Utilized undercover purchases and CWs high
  profile simultaneous raid on numerous targets.
• Joint case between FBI, HPD and USSS.
• Prosecuted using 18 U.S.C. 1028.

40
Application for Fake Identification used by one
Cardsharks Subject
41
Subjects tried to insulate themselves by using
claims of novelty id and disclaimers.
42
Examples of Fake Identification Purchase in
Cardsharks Investigation
43
Examples of Fake Identification Purchase in
Cardsharks Investigation
44
Check Fraud

• Criminal Statutes

45
Title 18 United States Code Section 1344

• Bank Fraud
• Whoever knowingly executes, or attempts to
  execute, a scheme or artifice
• (1) to defraud a financial institution
• (2) to obtain any of the money, funds, credits,
  assetsowned, under the custody or control of a
  financial institution, by means of false or
  fraudulent pretenses, representations, or
  promisesshall be fined not more than 1 million
  or imprisoned not more than 30 years or both.

46
Other Federal Statutes used to prosecute Check
Fraud Activity

• Title 18 Section 371 Conspiracy. Overt acts
  include forgery, theft of checks, opening account
  with fake ID, etc..
• 18 USC 513 Forgery. Passing a forged security
  of an organization with intent to deceive
• 18 USC 514 - Counterfeit or forged Government
  Checks

47
Statutes used to prosecute Check Fraud Activity

• Title 18 Section 1343 - Wire Fraud wiring
  proceeds, use of fax machine or telephone to
  carry out fraud
• Title 18 Section 1341 - Mail Fraud use of
  mails, Fed Ex to carry out fraud

48
Statutes used to prosecute Check Fraud Activity

• Title 18 Section 1029 - Access Device Fraud
  Credit/Debit Cards utilized in furtherance of
  Check Fraud
• Title 18 Section 1030 - Computer Crimes
  Unauthorized access by insiders in obtaining
  account information in furtherance of Check Fraud

49
What can we do??
50
Loss Avoidance Tools

• Placing /Extending holds
• Closing High Risk Accounts
• Refusing Questionable Transactions
• Returning Questionable Items to Bank of Deposit
• Positive Pay

51
Look closely at suspicious instruments.

• Is the handwriting consistent throughout?
• Look for obvious signs of erasure or alteration.
• Compare signatures and the appearance of the
  presenter with the signature and picture on the
  identification.

52
Third party checks

• Use additional security procedures, such as
  requiring a thumbprint on checks.
• Require an additional piece of identification.
• Must have a policy that is consistently applied.
• Particularly important due to Check 21.

53
Red Flags in Check Orders

• Request for orders to be mailed to
  an address other than that
  appearing on check
• Payment by money order or request to be billed
• Order received via priority mail or Fed Ex
• Frequent calls to customer service to verify
  status of the order

54
New Accounts reps should be on the lookout for

• Telephone number or exchange that does not match
  the address or that has been disconnected.
• Home address that is
• Outside of the institutions geographic area.
• A major highway.
• Identified by suite or number, which may
  indicate a commercial mail acceptance facility.
• Be sure to comply with institutions KYC rules.

55
Final Thoughts

• Three Most Important Fraud Prevention Items
• (1) Have a Policy!!!
• (2) Train your staff!!!
• (3) Use Common Sense!!!

56
(No Transcript)