1. Its easy to steal. Its much harder to enjoy the proceeds…
Frauds and Scams
Jack Lang
***Health Warning***
DO NOT TRY THIS AT HOME
You will meet strange new people and change your life….not for the better
Its easy to steal. Its much harder to enjoy the proceeds…

2. Frauds and Scams Straightforward dishonesty System weaknesses
False accounting
Insider abuse
False customer claims
Credit cards etc: Attacks and counter measures
Identity theft
Long firm
Con tricks
System weaknesses
Telco fraud
TV decoders
Hack attack: blackmail – DoS attacks
Inside trading and market manipulation
Insider trading: Guinness, Leason and others
Boiler room schemes
Money laundering: layering
Unreal Maths
Ponzi schemes
Lotteries
Financial Euphoria
Institutional fraud
Enron, false customer numbers, churn
Countermeasures
Follow the money

3. Dishonesty Most likely attack Insider with authorised access
False accounting
Spoof invoices
Spoof purchases
Spoof bank orders etc
Poor control: Leason etc
Countermeasures:
Cleanliness:
Double entry book-keeping; asset register; purchasing system
2 signatures for critical functions (e.g. cheques)
Good control systems and audit
Locks & keys
Vet staff & have good staff relations
Corporate culture
Unusual behaviour patterns
Unsocial hours, expensive tastes

4. Credit Cards Overall cost of fraud Motivation – who gets the reward?
Spain 0.01%
UK 0.2%
USA 1.0%
BUT for certain sites, customer not present – 40%
Motivation – who gets the reward?
Huge hype “Evil Hackers”
Employment for security types
No case of fraud resulting from interception!
Getting sense from mail is hard
Real problem: hacked or crooked end systems
Many ways to collect or generate valid card numbers
“Shoulder surfing” – video camera
Hacking end systems more for show than practicality

5. Dishonest customers False customer claims and repudiation
“I did not order these goods”
“You did not ship me the goods I ordered”
Countermeasures:
Audit
Secure audit trails
Stolen credit cards
Check card before shipping
e.g. $1 transaction end to end
Check ship address is card address

6. Credit Cards Originally fraud risk borne by banks
Introduction of mail order and telephone (and web) order (MOTO) risk for transactions with the cardholder not present passed to merchant.
MOTO have lower floor limits, and in delivery only to cardholder address
Not possible to check addresses for e-delivery, or overseas or services like Worldpay)
40% fraud for some sites
Paypal fraud
Traditional frauds:
Stolen cards
Pre-issue
Identity theft

7. Credit Cards Evolution of forgery Free Lunch Attack Countermeasure
Simple copy
Hologram
Alter embossing
Check mag strip
Emboss mag strip #
TDC
Make up strip
CVV, CVC
Skimming
Intrusion detection
Free Lunch

8. Lotteries and Scams Lotteries: tax on the ignorant
Poor estimate of low probability events
Premium rate telephone scams
TV quiz shows and auctions
Phone this number to win…
Straight frauds
Ponzi schemes (Pyramid sells)
Credit card and other personal details misuse
Telecom scams
Boiler room operations

9. False Identity Legend: e.g. Giles Murchiston Long Firm Fraud
Birth certificate ->Passport
Passport + Utility Bill-> Bank Account
Bank Account -> Credit Card
-> NHS record, Employment benefit
address (e.g Hotmail, NetIdentity)
Telephone entry
Long Firm Fraud

10. Con tricks Setup Hook and Bait Sting Shut-out Select the mark
Establish credibility
Hook and Bait
Small steps
Greed and desire
Sting
Special limited time offer…
Things are not what they seem…
Shut-out
Exit route

11. FTC Top Ten Top Ten Dot Cons
Con artists have gone high-tech, using new technology to peddle traditional scams. Scam artists can be just a click away. 
Internet Auctions
You might not get what you bought….
International Modem Dialing
Hold on while we re-direct you
Internet Access Services
Didn’t we tell you about the cancellation fee?
Credit Card Fraud
Web Cramming
Let us design your web site/process your orders…
Multilevel Marketing Plans and Pyramids
Travel and VacationBusiness
Investment Opportunities
Health Care Products and Services

12. HK Top Ten
No.1 - Fake Gold Rings No.2 - Bogus Modelling Agencies No.3 - London ("Loco") Gold No.4 - Fake Herbs etc. No.5 - "Dropped" Money No.6 - The "Ketchup" Gang No.7 - Nigerian Letters No.8 - Chain Letters And Pyramid Schemes No.9 - Overclocking No.10 - Superstition Deception

13. System weaknesses Telco fraud Re-direct TV decoders Blocking
Fake cards
Hack attacks:
blackmail –
DoS attacks

14. Inside trading and market manipulation
Insider trading: Guinness, and others
Market illiquid for small stocks or large orders
“Upstairs market”
What is a “fair market”?
Anonymity and disclosure:
Pre-trade
Post-trade
Boiler room schemes
Money laundering:
Layering
Getting it into and out of the banking system
Bureau de Change & offshore banks
Disguise as legitimate business

15. Unreal Maths Ponzi schemes Much older
Named after Carl Ponzi, who collected $9.8 million from 10,550 people ( including ¾ of the Boston Police Force ) and then paid out $7.8 million in just 8 months in 1920 Boston by offering  profits of 50% every 45 days. 
Much older
Pay early investors from later capital
Pyramid selling (Multi-Level Marketing) MM
Albania

17. More Maths Lotteries Financial Euphoria
Tax on the poor and the ignorant
How Casonava made his money
Not all promoters are honest!
Financial Euphoria
Tulipmania (1637)
South Sea Bubble (1720)
Railways (1849)
Radio and Aeroplanes (1920)
Dot.Com
J.K. Galbraith

18. Institutional & Governmental fraud
False assurances
Enron BP
Murdoch
3G Telco licences
Bad statistics
Telco customer numbers, churn
Unemployment, hospital waiting lists
Web-site clicks, adverts

19. Countermeasures Caution Cleanliness Follow the money
If something is too good to be true, it probably is!
Cleanliness
Conventional double-entry bookkeeping
Audit
Culture
Realistic risk assesment
Follow the money
Hard to disappear