1

It’s Not a Rocket Science:Defrauding Banks’ Customers by

Phone

University of Portsmouth3rd of June, 2014

2

These days everyone seems to be afraid of them, right?

What is Telephone Fraud?

• A fraudster uses a pre-paid mobile phone for calling potential victims at random

• Introduces himself as a police officer

• Uses psychological intimidation techniques to scare victims into believing that their bank accounts are being used by organized crime and corrupt bank staff to launder money

• Imitates that a victim’s call is being redirected to the bank’s call centre

• Obtains victim’s online banking login details and transfers victim’s money to the accounts controlled by the criminals

• In addition, fraudsters often use victim’s online banking facility to obtain small loans in the victim’s name from the pay day loan companies

3

Online Banking Facility

4

Variations of Telephone Fraud Before 2010

• Known as ‘It’s me, mother!’ fraud

• Fraudsters called random numbers usually late in the evening or at night,

• Pretended they were close relatives (e.g. sons or grandsons) who had just caused traffic accidents and seriously injured someone; therefore they needed money to sort out the problem (i.e. bribe a police officer, lawyer, etc.).

• If distressed victims complied, accomplices promptly turned up at the victims’ addresses to collect bribe money

• Another variation of this fraud involved text messages about lottery winnings which could be claimed only after purchasing top up codes for prepaid GSM cards

5

6

Variations of Telephone Fraud After 2010

• Crooks finally discover they can target customers who use online banking facility

• Initially target job seekers whose details can be obtained through classifieds online / newspapers, etc

• However, criminals soon invent and utilize the law enforcement angle and start targeting just about everyone

Houston, we have a problem!

Old Variation vs. New Variation

• Limited gain• Limited range of potential

victims• Requires physical contact • Difficult to recruit couriers

• Significantly increases gains• Everyone’s a potential target• No physical contact with the

victims• Abundance of money mules

7

8

According to the Lithuanian police, 95 per cent of fraudulent phone calls originate in Lithuanian prisons

(Source: Respublika, 12th of March, 2012)

Telephone Fraud Statistics from SEB Bank

9

No. of Victims

Total Loss / LTL

Pay day Loans / LTL

No. of Money Mules

2012 97 428 000,00 144 000,00 89

2013 273 1 467 588,00 252 484,00 340

2014 (1st Q) 16 57 127,00 9 782,00 22

Total 386 1 952 715,00 406 266,00 451

NB! One British Pound = 4,3 LTL

Police Statistics on Telephone Fraud, 2012

• Registered 816 telephone fraud incidents

• Total estimated loss: 2 782 000,00 LTL

• Total cost of police investigation: • 1 200 000,00 LTL• Number of confiscated phones in

prisons – 7 884

(Source: Lietuvos Rytas, 15th of May, 2013)

10

11

Profile of a Victim

• The majority of victims – 95 per cent - are women • Average age - 55 years old• Average loss – 5 376,00 LTL• Many victims had been aware about telephone fraud

and its modus operandi (Suzuki, K., 2010)• In addition to financial loss, victims often suffer loss of

self esteem, because they blame themselves for having been ‘so stupid’

• The society contributes to this social stigma by labeling victims as gullible or plain stupid (University of Exeter, 2009)

• In other words, it is the victim’s fault or as the old adage has it - ‘A fool and his money are soon parted’

• Additionally, this type of fraud undermines confidence general public has in public and private institutions and erodes sense of security in everyday life (Suzuki, K., 2011)

Stupid cow!How on earthcould I fall for that!?

12

13

Profile of a Money Mule

• The average age of a money mule is 28-30 years old

• Often these individuals are unemployed recipients of social benefits from the state

• Most of them know that their involvement facilitates criminal activity

• However, when one bank closes their accounts, they open a new one in another bank and continue to assist telephone fraudsters

Bank accounts

for sale!

The Fake CEO/CFO Scam

• A multinational company makes a public announcement about its intentions to divest in certain regions/countries

• A couple of days later a regional CFO employed in a subsidiary of the multinational company receives a telephone call from someone who claims to be the CFO of the parent company

• The fake CFO tells the victim the matter is very confidential since it’s related to the sale of the parent company’s business in the region

• An accomplice poses as a female lawyer and e-mails a confidentiality agreement to the victim

• The duo convince the regional CFO to make an urgent international transfer of more than 400 000,00 EUR to a business bank account in Lithuania

• The funds are subsequently diverted to the banks’ accounts in Cyprus, Israel, Thailand and Romania

• The time between the first telephone call and the actual transfer of money is less than one hour

• All information about the victim company and the individuals affected was harvested online (e.g. LinkedIn profiles, press releases, etc.)

14

15

Implications for the Banking Industry

• The banks aren’t directly affected since they do not compensate losses to the victims of fraud

• However, since this type of fraud targets users of electronic banking, some customers might stop or be reluctant to use this products, and this might have some impact on the long term plans of the banking industry

• Additionally, fraudsters might start targeting SMEs or invent new and more elaborate fraudulent schemes

• Finally, if the incidence of telephone fraud continues to increase, the regulator might step in and introduce new rules

How do we tackle telephone fraud?

16

17

How do we tackle telephone fraud (cont’d)?

• Training staff to identify customers who are at higher risks, so they could provide customers with relevant advise on risk mitigation techniques

• Advising staff on how to identify potential money mules• Raising customers awareness through communication campaigns in

the news media, etc.• Reduction of daily transfer limits for customers who do not want to

replace password cards with TAN generators• Employing an internally developed monitoring software that detects

and suspends suspicious transactions• Addressing this issue to various stakeholders – police, department

of prisons, telecommunication companies, etc.• Assisting Vilnius University with a research on the victims of

telephone fraud

Remaining Challenges

• Banks are reluctant to exchange fraud statistics

• Banks do not exchange data on fraudsters and money mules

• Banking legislation doesn’t provide any guidance on how banks should deal with fraud

• Police do not compile comprehensive statistics on telephone fraud

• ‘It’s your own fault’ attitude prevalent towards the victims of telephone fraud

• Fraudsters are always one or two steps ahead; therefore, they eventually come up with new variations or target new products/channels (e.g. Germany, Latvia and Estonia (Source: Lietuvos Rytas, 5th of August, 2013)

18

19

Variations of Telephone Fraud in Other Countries

Courier Fraud (UK) Ore-Ore Sagi / Furikome Fraud (Japan)

Variations of Telephone Fraud in Other Countries (cont’d)

20Voice Phishing Fraud (South Korea) Tелефонные Mошенники (Russia)

21

If this particular type of fraud is of further interest:

• Use Google to find out more variations around the world:– Voice Phishing (South Korea)– Virtual Kidnapping / Telephone Extortion (South America)– Courier Fraud (United Kingdom)– Ore-ore Sagi / Furikome Fraud (Japan)– Jamaican Lottery (USA)– Telefon Betrug / Schockanrufen (Germany)– Tелефонные Mошенники (Russia)– Faux Neveu / Faux président (France, Switzerland)– Metoda Accidentul (Romania)– Grandparents Scam (North America)– And many many more…

Thank you for your attention!

If you’re interested in this topic, you’re welcome to get in touch with me through

23