Phony Identities Result in $200 Million Fraud

Recently, the FBI arrested 13 people in four states. Their crime? Allegedly creating thousands of phony identities with which to steal at least $200 million in one of the largest credit card fraud schemes ever charged by the Department of Justice.

Bloomberg reports that after using 7,000 false identities to obtain 25,000 credit cards, the conspirators ran the scam through real businesses such as jewelry stores, and at least 80 sham companies under more than 1,800 addresses. 

The defendants charged in the complaint allegedly used fake Social Security numbers to fabricate identities and obtain credit cards, doctoring credit reports to pump up the cards’ spending and borrowing power. They would then borrow or spend as much as they could (based on their fraudulently-obtained credit history) and proceed to default on the debts, robbing businesses and financial institutions of more than $200 million in confirmed losses. When the credit card balances went unpaid, there was no one to hold responsible. In the end, however, retailers, merchants, banks, and credit card companies paid the bills.

According to a statement by the FBI, “This elaborate network utilized thousands of false identities, fraudulent bank accounts, fake companies, and collusive merchants to defraud financial institutions of hundreds of millions of dollars in order to facilitate extravagant lifestyles they could otherwise not afford.”

It appears that this scam was particularly lucrative for the criminals because there were no actual flesh-and-blood victims of identity theft to take notice.  One device may be opening a new credit card account—then going to an online retailer and applying for instant credit—all within minutes. Frauds like this, while highly sophisticated in nature, can be detected early with the right tool in place. Through velocity triggers and shared experience across multiple businesses, iovation can proactively detect the activity, alert affected businesses, and thwart the attacks. This is great news for the protected businesses, and also great news for the consumers who would otherwise be dealing with fraudulent charges made under their identities.

Robert is a personal security and identity theft expert contributor to iovation. He is the author of 99 Things You Wish You Knew Before Your Mobile was Hacked! Disclosures.