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FBI BUSTS CREDIT CARD CYBERGANG

An alleged credit card thief, who has been identified as using the online handle “John Dillinger,” has emerged as a suspect in an aggressive FBI law enforcement action to be announced Friday. The action, dubbed Operation Cardkeeper, has resulted in 17 arrests of hackers and carders this week in the United States and Poland. The investigation is also focusing on three suspects in Romania who were questioned this week by Romanian authorities, as well as U.S. suspects in seven states. Authorities say more arrests are likely.

A law enforcement source told Wired News that Dillinger and other Americans indicted in the case received stolen credit card numbers from Romanian phishers and others, then used the numbers to purchase items they later resold. According to an indictment unsealed Thursday in U.S. District Court in Virginia, the person identified as using the Dillinger nickname was seized in San Diego in June on unrelated charges before being transferred to Virginia where he faces at least five counts of identity theft and access device fraud for using stolen credit card numbers belonging to Capital One bank customers.

Wired News interviewed a carder using that nick earlier this year, who spoke on condition of anonymity. In the interview, the carder said that three Romanian phishers contacted him in 2004 looking for partners to cash out U.S. Bank accounts, using account and PINs they obtained through phishing.

The indictment doesn’t mention U.S. Bank or other activities that Dillinger discussed with Wired News. Authorities say the indictment does not reflect everything that went into the charges against him. Dillinger likely faces two to five years in prison if convicted. He has a Nov. 13 hearing scheduled in Richmond, Virginia.

In addition to Dillinger, three other Americans and 11 Poles were arrested. The Americans are Dana Carlotta Warren, 29, of Atlanta, and Zanadu Lyons, 24, and Frederick Hale, 27, both of Columbus, Ohio. The suspects were caught with cards and MSR-206 machines used to encode data onto blank credit cards. “Zanadu (Lyons) was attempting to flush counterfeit credit cards down the toilet when authorities were attempting to execute the search warrant,” the law enforcement source said.

According to the source, the Richmond FBI and the U.S. Attorney’s office launched Cardkeeper around August 2004 after seeing a lot of theft involving Richmond-area banks. They were surprised at what they found once they started tracing the source of the stolen card numbers. “Just in Virginia we identified tens of thousands of compromised credit card numbers, maybe over 100,000,” he said. “I don’t know that anyone has ever tallied that up. There were also several thousand compromised identities (that we were seeing) trafficking over the internet.”

The thieves obtained credit and debit card numbers through phishing scams and by hacking into databases, then distributed the numbers to accomplices through CcpowerForums, Darkmarket and other carding sites devoted to international cybercrime.

Among the Polish suspects arrested are Mateusz Rymski, aka “Blindroot,” who the FBI identifies as a leader of the ring. The source said Rymski hacked into third-party web servers and then rented their illicit access to other criminals to host their phishing pages or use as a proxy to hide their trails. “He was selling root access to multiple Romanians who were engaged in phishing and credit card fraud,” said the source. “And the Romanians were distributing compromised credit card numbers on the order of the thousands, if not higher than that.”

The Romanians are also suspected of writing keystroke-logging software to collect card numbers and other data from infected computers.

Wired
3 November 2006

SA: CRIME STATS INDICATE BROAD, STEADY PROGRESS

Discussing the recently released crime statistics, made public as part of the South African Police Service (SAPS) annual report, Business Against Crime CEO Siphiwe Nzimande says that the publication of the numbers is crucial to inform the understanding of reported crime in the country, the strategic and operational priorities of the SAPS and underscore the successes of the SAPS.

“The newly released crime statistics indicate that steady progress continues to be made in the national fight against crime across a broad front, building on the achievement over the previous few years,” he adds.

These positive tendencies are, however, counter- balanced by negative trends in specified crime categories, especially regarding serious and violent crime instigated by organised crime syndicates. “Negative trends have continued beyond the reporting period and have the potential to overshadow successes achieved in the year under review in the national fight against crime,” Nzimande comments.

The report indicates an ongoing high level of serious and violent crime in the business sector, including robberies undertaken by well-armed, highly organised groups on the cash-in-transit, gaming and retail sectors. Nzimande says that both the number of aggravated robberies and the financial losses remain a serious cause for concern. “However, owing to proactive and decisive action taken by both businesses and government, the number of fatalities and deaths in these robberies are being reduced.” The Industry Alignment Forum, which is facilitated by Business Against Crime, categorised business robberies, syndicated theft and commercial crime as ‘common threats’, as a result of the ongoing prevalence of these crimes.

The partnership is now poised to make a meaningful impact on these crimes in the coming months, particularly since government recently prioritised aggravated robberies for special focused action. “The real challenge is to reduce the overall levels of crime and violence. It is incumbent that all South Africans work together with government in eradicating the scourge of crime and violence in our society, while promoting good moral values,” Nzimande urges.

Business Against Crime and the business sector have welcomed the decision by President Thabo Mbeki to re-energise the partnership between business and government at the highest possible level with respect to the national crime challenges. This, according to Nzimande, will create an environment for joint engagement between the leadership of the Justice, Crime Prevention and Security Cluster as well as representatives from the Business Working Group and Business Against Crime.

Business Against Crime is and has been involved in many crime-prevention programmes and initiatives throughout South Africa. The criminal-justice strengthening programme is designed to build and support the Department of Justice and Constitutional Development, through the implementation of various initiatives founded by USAID. The Tiisa Thuto programme teaches nonviolent methods of conflict resolution and positive morality, including life skills and personal values, in schools to reduce crime and violence, while improving the standards of learning. The support programme for police stations aims to improve service delivery at police stations through effective management, best practices, skills and capacity development.

The commercial-crime programme has established specialised commercial crime court centres (SCCCCs) countrywide, staffed by specialists to ensure quick and appropriate senten- cing for the convicted. Four SCCCCs have been established in Tshwane, Johannesburg, Port Elizabeth and Durban. Future courts of this kind will be established in Cape Town and Bloemfontein. Nzimande reports that the SCCCC initiative has achieved an average 98% conviction rate and the case-processing time has been reduced from 30 months, in 1999, to 14 months, last year.

One of the biggest initiatives is the organised crime programme, which aims to reduce large-scale syndicated crimes by removing the commercial benefit in the trade of stolen goods, as well as effective prosecution of offenders. The current focus is on vehicle theft and hijacking, cellphone theft and the theft of copper cables. This programme has resulted in significant improvement in business processes within the vehicle-management system, aimed at rooting out fraud and corruption and improving service delivery. It has been implemented throughout Gauteng and was initiated in the North West, Mpumalanga, the Eastern Cape and Kwazulu-Natal. “We have seen a 30% reduction in hijackings in Gauteng over the past year and have a coordinated approach to chop shop disruption operations supported by legislation,” Nzimande continues. Additionally, the programme has allowed for more control over the movement of so-called ‘vehicles in transit’, reducing the illegal registration of second-hand vehicles locally.

The correctional services support programme was introduced to the Department of Correctional Services in its quest to become one of the best in the world, delivering correctional services with integrity and excellence. The main objective of the project is to create a human rights environment in which persons under correction can be developed, resulting in their complete rehabilitation. In line with this, Business Against Crime is focused on the development and implementation of technology strategy, implementation of the integrated human resources strategy, and the development and implementation of the costing model.

Another initiative undertaken by Business Against Crime was the creation of an industry alignment forum, which seeks to align and enhance business-sector initiatives aimed at reducing crime and violence.

Mining Weekly 03-10-06

RUSSIA: WITNESSES TO RECEIVE BODYGUARDS

Witnesses whose testimony in court could cost them their lives will get bodyguards and possibly plastic surgery under a witness protection program approved by the Cabinet. Other protective measures include relocation and bulletproof vests. The $35.5 million program is meant to shore up the country’s shaky criminal justice system, the government said this week on its web site.

Legislators have wanted a witness protection program for years. The State Duma passed measures in 1995 and 1997 that would have created one, but President Boris Yeltsin vetoed both bills. Then, in 2004, President Vladimir Putin signed the law on government defense of victims, witnesses and other participants in legal proceedings. But human rights activists and crime experts say that the law opens the door to police abuse and that the government is unable, in any event, to offer witnesses much protection.

The Interior Ministry, the Federal Security Service, the State Customs Committee and the Federal Drug Control Service would be responsible for protecting witnesses.

The Moscow Times
Friday, November 3, 2006. Issue 3533. Page 2.

MARSHALS NET NEARLY 11,000 FUGITIVES

WASHINGTON — Nearly 11,000 sex offenders, gang members and other fugitives were swept up in what the Justice Department on Thursday called a sting targeting the “worst of the worst” criminals on the run.

Last week’s roundup, led by the U.S. Marshals Service, included Allen Marksberry, an unregistered sex offender in Rickman, Tenn., who was baby-sitting several young children when he was arrested on Oct. 24. Also nabbed were Demetrius Avery Jackson, an accused cop killer in Birmingham, Ala., and Eric Dewayne Meneese, a Crips gang member, in Nashville, Tenn.

The weeklong sting, code-named Operation Falcon III, also led to the shooting death of a Georgia fugitive who was killed by authorities as he came out of his house, officials said. Additionally, the neighbor of a fugitive in Florida fired _ but missed _ police approaching her home. Both incidents are under investigation, said John F. Clark, director of the Marshals Service.

The roundup, in 24 states east of the Mississippi River, targeted “the worst of the worst fugitive felons in the country,” Attorney General Albert Gonzales said at a Washington news conference. “America’s neighborhoods are safer today, thanks to Operation Falcon III,” Gonzales said. Two earlier stings _ Falcons I and II _ were held in April over the last two years. Gonzales and Clark denied that next week’s elections played any part in scheduling the latest crackdown.

“I can assure you that the coordination of getting 3,000-plus officers and agents, and everybody together to do this, just takes a lot of coordination,” Clark said, adding that he wanted to do the roundup in the fall _ before the winter weather hit. In all, Gonzales said officials caught 10,773 fugitives _ including 1,659 sex offenders, 364 gang members and thousands of others sought on kidnapping, robbery, burglary, carjacking and weapons charges. More than 230 weapons were seized.

Those totals represent a fraction of doors knocked on, liquor store drive-bys, construction site surveillances and tips chased down by agents during the weeklong sweep. Finding the fugitives _ even at their homes in the early-morning hours _ proved to be a hit-or-miss mission for the federal, state and local authorities. A six-hour sting in Washington, D.C., last Thursday morning, for example, netted none of the accused drug dealers sought by a team of seven agents from the U.S. Marshals, Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Immigration and Customs Enforcement, State Department and the city’s Metropolitan Police Department.

“He was there a week or so ago,” muttered Marshals Inspector Robert Hoffmaster, after a pre-daybreak search of a house for an accused drug dealer. In upstate New York, some fugitives tried to hide in unusual places. “We grabbed one guy out of the shower,” said Joe Ciccarelli, supervisor of the U.S. Marshals fugitive task force in New York’s northern district. “We found people hiding in between insulation, rolled up in rugs, inside of cabinets, inside of closets that a person shouldn’t be able to fit in, but they end up fitting in and we have had to call the fire department to get them out.”

Of the sex offenders nabbed, 971 had failed to register with authorities as required by law _ what Gonzales called the largest number ever captured in a single law enforcement effort. Gonzales said prosecutors likely would seek to charge some of them under the 2006 Adam Walsh Act. That law, approved by Congress last summer, created federal penalties for sex offenders who fail register with communities. The law was named for six-year-old Adam Walsh, who was abducted from a Florida shopping mall and murdered in 1981.

Falcon III showed the Marshals “have proven their extraordinary ability to quickly capture thousands of sexual predators,” said Ernie Allen, president of the National Center for Missing & Exploited Children. Normally, the Marshals regional task forces round up about 1,000 fugitives each week, officials said. An estimated 1 million fugitives are on the loose nationwide.

The Associated Press
Thursday, November 2, 2006; 9:20 PM

ITALIAN PM WEIGHS UP MILITARY MISSION TO NAPLES

The Prime Minister of Italy is considering sending the army to restore order to Naples, where a bloody crime spree has claimed seven lives since Friday. Romano Prodi was quoted by the Ansa news agency saying he was “making an assessment” of the long term benefits of deploying the military to quell a surge in violence believed to be related to rivalries within the Camorra, the Neapolitan branch of the Mafia. “This time the fight against crime will not be carried out to soothe public opinion for a few days or a few months, but it will be a permanent fight to bring safety to the citizens,” he said.

Earlier, the Interior Minister, Giuliano Amato, said more than 1,000 police reinforcements would arrive in the southern city on November 9 to reinforce the local force of 13,000, which has been unable to rein in the recent violence. Signor Amato spoke after a 36-year old man was shot dead in a video games shop in Naples in what officials said appeared to be a Mafia-related murder. It was the fifth killing since Friday. Shortly after the announcement, two members of the Camorra were murdered in Torre del Greco, a small town near Naples in what police said was a settling of scores.

The possible deployment of the army comes after an appeal from the regional governor of Naples, Antonio Bassolino, who has asked for more security forces and “more sophisticated means” of fighting crime in the city. “We are sitting on a volcano,” he told La Repubblica newspaper, which reported today that many of the extra 1,000 police were expected to protect tourist areas in the popular holiday destination, as well as help in the fight against the Camorra and rampant local crime.

The weekend’s rush of killings has been a mixture of organised and casual crime. On Friday, a tobacconist killed an armed robber and seriously wounded an accomplice trying to steal his earnings. On Saturday a masked gunman killed Patrizia Marino, a 63-year-old Mafia drug dealer whose husband and two sons were recently murdered. Later that night a 16-year-old killed his girlfriend’s former boyfriend. On Monday, a petty criminal was shot dead Naples’s old city, and a passer-by was injured.

Timesonline.co.uk
01-11-06

ANALYSIS: NAPLES, A CITY IN THE GRIP OF THE CAMORRA

If you want to know why Romano Prodi, the Italian Prime Minister, is considering sending in troops to Naples just ask Roberto Saviano, a 28 year old Neapolitan writer whose best selling novel Gomorra, came out in May. “Gomorra” is a play on the word “Camorra”, the Naples network of Mafia clans, and the book pulls no punches in revealing how they operate — and naming names. As a result Signor Saviano is in fear of his life, and has been given round-the-clock police protection. His plight confirms what everyone in Naples already knows: that although the city is ostensibly run by the local authorities, the parallel power structure of the Camorra is all pervasive.

Even before he went into hiding with an armed guard Signor Saviano began to realise he had antagonised a deadly enemy with tentacles throughout the city when local shopkeepers and bar owners turned him away rather than risk punishment from local Mafia bosses by serving him. The Camorra, he says, has murdered “about 3,600 people” since he was born. Some run down housing estates in the suburbs, such as Scampia, are Mafia fiefdoms where the police hardly dare enter.

When I went to Scampia earlier this year after a particularly horrific series of murders — one Mafia victim was decapitated with a tile cutter and then burned in his car — my taxi driver refused to linger, saying he would pick me up later, “if you are still here”. The Camorra offers its own social network, a sense of community, however perverted, and jobs of a kind for the unemployed young, mostly related to cigarette smuggling, drugs or petty crime.

Women are also part of this powerful hidden structure: whenever police try to arrest a Mafia boss in Naples, it is the women who obstruct them (and who in some cases take over the clans from their imprisoned husbands or brothers).

Much of the Camorra’s power stems from drugs, above all heroine and cocaine. In Scampia, junkies openly inject themselves in the rubbish strewn underpasses. Most of the turf wars between the Mafia families revolve around the struggle to control the highly lucrative drugs market.

But the violence has seeped into the historic centre as well. This week a known mafioso was shot dead in full view of passers by near the Cathedral as he was coming out of bar. In the summer a Canadian tourist was shot in the leg by a stray bullet during a Mafia shootout, and an American tourist who gave chase to two muggers was set on by local people who sympathised with the criminals rather than the victim. Hotels have taken to handing guests plastic watches so they can leave their Rolexes in the hotel safe.

Naples remains a colourful, warm-hearted and vibrant city, with gems such as the San Carlo Opera and Capodimonte Museum. Its pizza (invented in Naples) is unsurpassed, and the views over the Bay of Naples are breathtaking.

Under Antonio Bassolino, the former mayor in the 1990s, the central Piazza del Plebiscito was cleared of cars to make a pedestrian area opposite the Royal Palace, crimes such as bag snatching were reduced, and historic buildings were restored. But even Signor Bassolino, now President of the Campania region, admits that the Mafia has re-established its grip and the city is sliding towards chaos, with piles of rotting rubbish in the streets and daily murders and muggings. “The Camorra, street crime and violence risk robbing us of our future and our children’s future” he says.

Bringing in the army recalls the emergency in Sicily in 1992-98, when 150,000 soldiers were sent in to deal with Mob crimes. Signor Bassolino however would prefer more police on the streets rather than troops. A thousand extra police are to be deployed in a plan devised by Giuliano Amato, the Interior Minister, and Signor Prodi will travel to the city tomorrow for a summit with local leaders on the current “crime emergency”. In the end, as Rosa Russo Jervolino, the current mayor, rightly says, “the roots of the problem are social and cultural… We must be able to offer our youngsters values, education and above all work opportunities which can give them a good quality of life”.

The question is whether the Prodi government, already hard pressed to find cash to reduce Italy’s huge budget deficit, can find the resources to underwrite long term reforms to give Naples jobs and hope while simultaneously taking immediate emergency measures to halt the wave of violence. “We must radically and permanently revisit the way we defend the safety of our citizens,” Signor Amato said. “We want a true change of direction — for the first time we are betting everything on permanent measures, not temporary ones.”

President Giorgio Napolitano, who is from Naples himself, expressed his “anguish”, saying Naples was facing “a social and cultural emergency” as well as a criminal one. The Italian South is suffering however from a chronic lack of investment under successive governments of both Left and Right, despite numerous high minded projects for development of the Mezzogiorno. Meanwhile the situation on the ground spirals out of control: the latest deaths have taken the number of those killed in Naples and the surrounding province since the start of the year to 72, of which 50 are Camorra-linked .

Four thousand known mafiosi are active in and around Naples, and businesses pay an estimated €30 billion to the Camorra every year, with the situation aggravated by a controversial prisoner amnesty this summer in which 7,800 inmates were released from Naples’ jails, many of them — obviously — mafiosi. Perhaps the authorities should have asked Roberto Saviano first if this was a wise move.

Timesonlie.co.uk
01-11-06

CHINA: LAW ON FINANCIAL CRIMES BROADENED

CHINA’S top legislature yesterday expanded the scope of an anti-money laundering law to include accepting bribes. The definition of money laundering also has expanded to include corruption, violating financial management regulations and financial fraud. The law is expected to come into effect on January 1.

Previously, the law only identified drug trafficking, organized crime, terrorist crimes and smuggling as money laundering crimes. China’s officials and analysts believed the coverage was too narrow. They called for stepping up efforts to combat money laundering, which has risen in recent years along with activities such as embezzlement, drug trafficking and other smuggling. The law demands financial and some non-financial institutions to maintain record on clients and transaction records and to report large and suspect transactions.

The People’s Bank of China is the nerve center of the anti-money laundering campaign. Its provincial branch offices are authorized to investigate suspect fund transfers of financial institutions. The law demands financial and certain non-financial institutions to keep identity information of clients and transaction records, report large and suspect transactions. The law offers a legal basis for checking the flow of cash of corrupt officials, said Lang Sheng, an official on criminal law with the Standing Committee of the National People’s Congress.

The People’s Bank of China, or central bank, is the nerve center of the anti-money laundering campaign. Its offices are empowered to monitor and investigate suspect money flows and mete out administrative punishment to employees for allowing the illegal transfer of money. The move is designed to widen the legal net to combat money laundering.

The China Anti-Money Laundering Monitoring and Analysis Center, an office under the central bank set up in 2004, says 683 suspicious money laundering cases had been reported to the police by the end of 2005. They involved 137.8 billion yuan (US$17.2 billion) and over US$1 billion.

The law does not detail the legal power of the center, but allows it to gather “necessary information from departments and institutions under the State Council.” The law is also expected to help facilitate China’s application to the Financial Action Task Force – a Paris-based inter-governmental body that promotes policies to combat money laundering.

Xinhua 01-11-06w

GUINEA-BISSAU SEEKS AID TO FIGHT ORGANISED CRIME

BISSAU, Oct 25 (Reuters) – Short of patrol ships, planes, radios and even a prison, Guinea-Bissau is in danger of falling under the control of international organised crime gangs trafficking drugs, arms and migrants, security experts and diplomats say. The government of this tiny, coup-prone West African state, one of the poorest and most unstable in the world, is urgently seeking millions of dollars of foreign aid to modernise its army and police to tackle this security threat.

International donors, who will meet on Nov. 7-8 in Geneva to consider the aid request, want guarantees that the restless armed forces can be reshaped to keep the peace and not destroy it. The military has staged a rash of coups and mutinies and fought a brief civil war since Portugal granted the territory independence in 1974. “This is such a small and poor country that it can become a centre for organised crime. It can be bought,” a foreign diplomat, who asked not to be named, told Reuters.
Diplomats say recent interceptions of drugs, arms and illegal migrants point to Guinea-Bissau becoming a defenceless target of trans-national crime.

The United Nations, which maintains a peace-building mission in Guinea-Bissau, is supporting the government’s request for financing for a $170 million security reform programme. This proposes reducing and modernising the army, and retraining the police and judiciary. The plan forms part of a $400 million overall aid request intended to haul the country’s 1.4 million people out of abject poverty. Most eke out a living from fishing and farming and cashew nuts are the main export crop.
The crumbling capital Bissau is plagued by almost permanent power outages, most roads become pot-holed quagmires a few dozen kilometres outside the city and civil servants have not been paid for three months. “Guinea-Bissau wants to be a state of law and order,” Justice Minister Namuano Dias Gomes told Reuters on Wednesday. “Unfortunately, the only thing our armed forces know about is waging war … in times of peace,” he added.

DRUG TRANSIT ROUTE
Diplomats say President Joao Bernardo “Nino” Vieira, who returned to power through elections last year, appears to support the reforms, although it remains to be seen whether his fractious military chiefs will accept them. Vieira, who ruled the country for nearly two decades after seizing power in a 1980 military coup, was himself ousted by rebellious officers in 1999.
The U.N. Office on Drugs and Crime says international drug cartels have honed in on Guinea-Bissau — with its 5,000 km (3,000 miles) of jagged coastline, river inlets, mangrove creeks and remote islands — as an ideal transit route to ship narcotics from Latin America to Europe.

Lack of training and resources has resulted in the almost total absence of any policing of the national territory and its borders, the U.N. agency says. The national headquarters of the judicial police looks more like a junk yard than a police station. “They have no radios, no vehicles and no laboratories … We don’t even have a prison,” Justice Minister Gomes said. “If international criminals have discovered Guinea-Bissau, it is because they have discovered its weaknesses,” he said. Gomes said the government was seeking financing for a $9 million project to build a 600-cell prison and also wanted funding for a modern identity card system.

25 Oct 2006 16:20:56 GMT
Source: Reuters

NEW BOOK: TRANSNATIONAL CRIME AND THE INTERFACE BETWEEN LEGAL AND ILLEGAL ACTORS. THE CASE OF THE ILLICIT ART AND ANTIQUITIES TRADE.

A.J.G Tijhuis

Paperback, 250 pages, (October 2006)
Publisher: Wolf Legal Publishers Language: English
ISBN-10 : 9058501957 Price: €30

Synopsis
How does transnational crime interact with legal companies and governments? Are legal actors primarily victimized by transnational criminals or are the two connected by collaborative relationships? And how are these crimes transformed into legitimate activities? This book seeks to answer these and related questions. The research presented is based on a thorough study of the literature on transnational crime as well as an empirical study of the illicit art and antiquities trade. Transnational crime in this study includes, besides the illicit art and antiquities trade, for example drug trafficking, cigarette smuggling, the trade in ‘blood diamonds’, human trafficking and international terrorism. The study of the illicit art and antiquities trade is based on data that were gathered in the Netherlands, France, Italy and the United Kingdom. The data sources included official files as well as interviews with archaeologists, museum curators, art dealers and other persons in and around the art and antiquities trade.

Edgar Tijhuis (1976) studied Law, Political Science and American Studies at the University of Amsterdam. He currently works as a lawyer at Pontius Lawyers in Amsterdam and the Netherlands Institute for the Study of Crime and Law Enforcement in Leiden. The present research was conducted at the Netherlands Institute for the Study of Crime and Law Enforcement in Leiden.

ORGANIZED CRIME STEALS MILLIONS FROM ONLINE BROKERS

The feds are investigating fraudulent activities that have cost brokers and their clients millions, forcing one company to take a one-time charge of $18 million.

Last week during a conference call with financial analysts, New York-based E*Trade noted that it had taken a one-time charge of $18 million due to online fraud.

“We have experienced a serious increase in fraud relating to identity theft,” said Mitchell Caplan, E*Trade’s chief executive, in the earnings call last Wednesday. That fraud, said Caplan, has been traced to a “concerted ring in Eastern Europe and Thailand,” but new processes and technology had nearly eliminated the fraud. “In the last three weeks, we’ve seen that level of fraud drop to almost zero,” Caplan claimed. Both the FBI and the Securities and Exchange Commission (SEC) are looking into the fraud, he said.

According to reports by Bloomberg News, Omaha, Neb.-based TD Ameritrade has also been hit by fraudsters out of Europe and Asia.

The criminals are using a number of profitable techniques, said Ameritrade and other sources quoted by Bloomberg, including a “pump-and-dump” scheme where thieves used customers’ funds to drive up the prices of marginal stocks. The criminals would then sell shares they had purchased earlier for a large profit. The scheme typically sets off few or no security alerts at online brokers because no money is withdrawn from the compromised accounts, Bloomberg said. In other ploys, identity thieves open accounts using stolen names, then use those accounts for illegal trading or money laundering. Any investigation leads authorities to the victim, who appears to be responsible.

Customer fraud losses were made good by E*Trade and TD Ameritrade, both of which announced earlier this year that they would reimburse customers. Federal law does not require brokers to refund customers.

E*Trade has also aggressively pushed two-factor authentication tokens to customers. The tokens, which use RSA’s SecurID authentication technology, are about the size of a flash drive, and generate codes that change every few seconds. Customers use the code, along with the usual username and password, to access accounts.

On the conference call with investors, Caplan said customers who used the tokens hadn’t been touched by the Eastern European or Asian fraud gangs. “But not everyone has them, and when they have them, not everyone chooses to use them,” he said. Some or all of E*Trade’s $18 million loss may be covered by insurance, Caplan added, although he declined to give details.

TechWeb News
Oct 24, 2006 02:14 PM

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