Stanley’s Musings - Fintech, Banking & Payments News #2

Thoughts on fintech, banking, payments, risk management, AI, going green, economics, business and much more…

The latest edition is now available - HERE 

Crypto frenzy is rife with ‘hucksters, fraudsters, scam artists’

The current crypto frenzy is “reminiscent of what we had in the 1920s before the federal securities laws were put in place,” said U.S. Securities and Exchange Commission Chairman Gary Gensler. He went on to add that “... Hucksters. Fraudsters. Scam artists. Ponzi schemes. The public is left in line at the bankruptcy court.”

“The crypto securities markets should not be allowed to undermine the well-earned trust the public has in the capital markets,” Gensler said. “The crypto markets should not be allowed to harm investors.”

The SEC this week brought separate actions against Binance and Coinbase, alleging they had unlawfully offered securities intermediation functions without registering them with the regulatory agency. The agency also alleged Coinbase commingled its exchange, broker-dealer and clearinghouse functions. The SEC also accused Binance of commingling investors’ assets.

Read the full article HERE.

The Billion Dollar Scam

From the BBC World Service. Investigative reporter Simona Weinglass leads a #BBCEye investigation into a criminal network, believed to have scammed more than a billion dollars from victims across the globe. The organisation sponsored a top-tier football club to promote its online trading platform, promising investors the chance of astonishing returns. But what lies behind the claims? The search – from a mansion in London, to a forest in Scandinavia and a call centre in Georgia – reveals a web of deceit. We hear from victims, undercover agents and police, in a bid to track down who’s in charge.

Money Mule Scam Siphons $214Mn Worldwide

From Info Security –

“A sophisticated scam targeting businesses working with foreign suppliers and businesses that regularly perform wire transfer payments is making the rounds, involving the recruitment of money mules and fraudulent “business opportunities.”

The US federal Internet Crime Complaint Center (IC3) is warning that the Business E-mail Compromise (BEC) gambit, formerly known as the man-in-the-email scam, is actively recruiting victims to receive fraudulent funds into their personal accounts in exchange for a commission—who are then directed to quickly transfer the funds using wire transfer services or another bank account, usually outside the US. Asian banks, located in China and Hong Kong, are the most commonly reported ending destination for the transfers.

Upon direction, mules may sometimes open business accounts for fake corporations, both of which may be incorporated in the true name of the mule.”

Read more>>

The Booster Bag Scam

The Booster Bag Scam will make you think twice about where you set your purse or bag down in an airport, hotel, coffee shop, or anywhere else a thief might be lurking.

I had never heard of this scam until seeing this video demonstration and can see how easy it would be to pull off. If the scam artist is using a pretty girl as his accomplice I'm pretty sure most men would fall victim to the distraction and be scammed.

It’s something to be aware of.

Why it is so important to shield your PIN at ATMs

According to E.A.S.T. (European ATM Security Team) the very first thing a cardholder should do is to protect his/her PIN. The video below reveals how criminals can get hold of your four-digit PIN when you use an ATM that they have targeted. However, as the video shows, by simply shielding the keypad with your free hand, keys, wallet or purse, you can easily stop a criminal from finding out your PIN. Watch the video to see what they see.

"Ransomware" scam in Russia

Russian police have launched an investigation into a criminal gang that installed malicious "ransomware" programs on thousands of PCs and then forced victims to send SMS messages in order to unlock their PCs. According to local reports that scam may have netted Russian criminals millions of dollars.

Russian police seized computer equipment and detained a Russian "crime family" in connection with the crime. 10 people are expected to be charged. Tens of thousands victims affected by the scam live in Russia, Ukraine, Belarus and Moldova.

The scam ring worked this way: they used news sites to spread their malicious software, known as WinLock, which disables certain Windows components, rendering the PC unusable, and then displays pornographic images.

To unlock the code, victims must send SMS messages that cost between 300 rubles (US$9.72) and 1,000 rubles.

The scam is "very popular" in countries such as Russia at the moment, antivirus vendor Kaspersky Lab said in an e-mailed statement.

Doing a web search? Take care about what you look for

This year Cameron Diaz took the first place in the list of most dangerous search clues to be typed in the search engine query according to an annual McAfee report. Last year the top of the list was occupied by Jessica Biel.

If you look for any of the celebrities in the McAfee's annual list of the most dangerous stars to search for on the Web you risk to have a virus installed on your PC after you press some links in the search results.

"It's sort of a little bit of rivalry from the traditional world going to the cyber world," said Dmitri Alperovitch, McAfee's vice president of threat research. "It's fascinating how cyber criminals can be so in tune with the popularity of various actresses and models. …They're actually a fantastic barometer of their popularity."

McAfee published the rankings of the riskiest websites every year using its free software SiteAdvisor. Its 2010 study, which McAfee has just released, found that users have a 19 percent chance of landing on a malicious site when they search the Web for "Cameron Diaz." Searching for pictures and downloads of the actress gives you a 10 percent chance of reaching a site infected with spyware, adware, spam, phishing, viruses and other cyber traps that can harm your computer or steal personal information.

Alperovitch said that even though celebrity searches were safer overall this year, searching for Diaz is even riskier than searching for Biel.

"She's been in the spotlight recently with a number of blockbuster movies, "Knight and Day," of course, with Tom Cruise," he said. "What we see is that we people who are in the news recently… they tend to be at the top of the list because they're on peoples' minds. People tend to go on Google and Bing and search for them after they've watched their movies. Cyber criminals realize that very well and target people when they do this."

The full list of the most dangerous names to search on the web is as follows:

1. Cameron Diaz
2. Julia Roberts
3. Jessica Biel
4. Gisele Bundchen
5. Brad Pitt
6. Adriana Lima
7. Jennifer Love Hewitt, Nicole Kidman
8. Tom Cruise

FBI issues warning over denial-of-service phone scam

The FBI has issued a warning to Americans after a spate of telecommunications denial-of-service (TDoS) attacks left fraudsters able to access online bank and brokerage accounts. The TDoS attacks use automated dialing programs and multiple accounts to overwhelm victims' mobile phones and land lines with thousands of calls.

When victims answer the calls they hear dead air, an innocuous recorded message, advertisement, or a telephone sex menu. The attacks are a diversionary tactic, enabling the fraudsters to use personal information about the victim they've acquired through social engineering techniques or malware to pilfer online accounts.

Because the victim's phone lines are tied up, their banks are unable to contact them to verify transfers, enabling the fraudsters to empty accounts.

The FBI says it discovered the new-style attacks through a private industry partner, which found a Florida dentist who lost $400,000 from his retirement account after a denial-of-service attack on his phones.

Since April "there has definitely been a noticeable surge in telephone denial-of-service attacks, with numerous incidents having been reported in several Eastern states" says the agency.

It has now teamed up with the Communication Fraud Control Association - comprised of security professionals from communication providers - to analyze the patterns and trends of telephone denial-of-service attacks, educate the public, and catch the fraudsters.

Banker Arrested on NZ$ 17 million Fraud Charges

Citadel Advantage’s Correspondent in New Zealand reports that an investment banker from that country’s ASB Bank has been arrested on fraud charges totaling nearly NZ$ 18 million (USD 12.8 million).

Stephen Gerard Versalko, aged 51, was arrested last Friday and appeared in the Auckland District Court to face three charges by the Serious Fraud Office after a three-month investigation.

The Serious Fraud Office alleges that as a senior investment adviser, Versalko defrauded nearly 30 wealthy ASB clients of NZ$17,763,110 over a nine year period until he was fired by the bank last August.

Defence lawyer Stuart Grieve, said that Versalko had been co-operating with the Serious Fraud Office since the alleged offending came to light in August. Mr. Grieve successfully sought for his client to be released on bail without entering a plea. Versalko is scheduled to appear in the Auckland District Court on January 26.

Mr. Grieve also asked Judge Emma Aitken to suppress the specific allegations made by the Serious Fraud Office as there was a possibility the media would report them as fact. These allegations appeared in a document that outlined how Versalko allegedly defrauded the bank customers, what he allegedly spent the money on, how he was caught and how he described himself to Serious Fraud Office investigators.

Serious Fraud Office prosecutor Patrick McCann argued for the allegations to be published, under the principle of open justice. But Judge Aitken ruled that because she had no confidence in the media to report the summary as unproven allegations, not fact, it would be suppressed.

The charges against Versalko allege that he obtained NZ$12,958,608 from 17 ASB Bank clients by conducting 68 fraudulent transactions between October 2003 and August 2009.

A second charge accuses Versalko of offering fictitious investment opportunities to obtain NZ$1,074,077 in 12 fraudulent transactions between August 2000 and September 2003.

The third charge is that Versalko obtained NZ$3,730,423 from 28 ASB clients by conducting 43 fraudulent transactions between October 2003 and April 2009.

The ASB Bank refused to comment on the charges but said customers who had lost money had been repaid. Serious Fraud Office director Adam Feeley said the alleged fraud by Versalko, if proven, would be "one of the larger employee frauds in New Zealand in recent years", and the agency had responded with a speedy and thorough investigation.

"In tough market conditions there is a legitimate public expectation that law enforcement agencies will act in a timely manner to prevent or minimize the impacts of crime on society."

Risk Management - Focus on Fraud

CITADEL ADVANTAGE is presenting a 2-day intensive training course on Fraud within the context of Operations Risk Management in Madrid, Spain on the 22 & 23 February 2010.

Fraud can be extremely difficult to detect and studies show that most fraud occurs from or through trusted insiders. How aware are you or employees of fraud? Do they have a clear understanding of the role they play in detecting fraud? Do they understand you organization’s fraud policies and procedures?

“Risk Management - Focus on Fraud” is a 2-day intensive course on fraud and how it presents huge challenges for banks, requiring them to radically modify behavior and increase their vigilance in many of the traditional risks associated with banking activities.

Can your bank or organization cope with fraud? In fact could you even identify a fraud in your working environment? Are you maximizing your staffs’ potential to reduce fraud and error in your systems?

A major by-product of the financial crisis was the number of frauds which have come to light – frauds that had been running for years.

Don't miss this opportunity to ensure that you and your staff are able to understand fraud and its ramifications.
WHAT THIS COURSE COVERS
What you and your staff will gain from this course

• Understanding the Human Dynamic – Greed and Fraud
• Understand and identify the key Fraud indicators and Red Flags
• Understanding Operational Risk – in the context of Fraud
• Positioning the organization to successfully manage the ever-present Fraud problem.
• Successful approaches to identifying and mitigating Fraud

WHO SHOULD ATTEND?
• Senior Bank Executives
• Risk Managers
• Operations Managers
• Internal and External Auditors
• Operations Officers
• Business Managers
• Compliance Officers
• I.T. applications providers serving financial institutions
• Consultants and professionals serving the financial services industry.

For more details including a fully descriptive course brochure e-mail us at courses@citadeladvantage.com today. Please indicate FRAUD-MADRID in the subject line.

Annual ATM losses in Europe are approaching EUR 500 million – What should consumers do?

With the annual cost of ATM crime in Europe approaching half a billion Euros, the European Network and Information Security Agency (ENISA), is advising consumers to be more aware of the risks and take precautions to avoid personal loss. The rapid growth in the number of ATMs, together with more sophisticated attacks and fraud has resulted in an alarming 149% rise in ATM attacks in 2008.

These worrying findings, along with information and case studies highlighting the different ATM crimes and recommendations to help detect and prevent them, have been published in a paper by ENISA entitled ‘ATM Crime: Overview of the European situation and golden rules on how to avoid it’.

The number of ATMs in Europe increased 6% last year to almost 400,000, with many now found in remote site locations such as convenience stores, airports and petrol stations. Seventy-two percent of European ATMs are located in just five countries: UK, Spain, Germany, France and Italy.

Cash taken illegally from ATMs is still the preferred method for criminals who obtain pin numbers using a wide range of techniques from ‘shoulder surfing’ to complex skimming techniques. This can involve the usage of a small spy camera, a false PIN overlay and even fake machines; while increasingly Blue Tooth wireless technology is used to transmit card and PIN details to a nearby laptop computer. During 2008 alone, a total of 10,302 skimming incidents were reported in Europe.
Other methods used to extract money include trapping and then retrieving users’ cards, stopping withdrawals in the middle of a transaction only to complete them when the victim has left and even trapping cash in the machine. Organised criminal gangs are also using sophisticated phishing techniques and hacking into bank computer systems and web sites to obtain PIN and account information.

ATM burglaries and physical attacks have also seen an increase by 32% over the last 12 months from ram raids and explosions to the use of rotary saws, thermal lances and diamond drills.

As part of this process ENISA has drawn up its list of Golden Rules to offer maximum protection with minimum effort. You can download the ENISA report at http://www.enisa.europa.eu/doc/pdf/publications/ATM_crime.pdf

The Nigerian 419 scam

A fascinating insight into the 419 scammers as they ply their trade. This is a picture that one doesn’t normally see. Read it on the Washington Post's website

http://www.washingtonpost.com/wp-dyn/content/article/2009/08/06/AR2009080603764.html?wpisrc=newsletter&wpisrc=newsletter&wpisrc=newsletter

Online Scams Jump as More Africans Go Online

New technology comes at a price. This interesting article in PC World is a warning that all is not gold at the end of the technology rainbow (Remember to click on the Post Title to view). Mobile payment developers and banks who are venturing into this area for the first time should take note.