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DOJ Alleges $8 Million Familiar Fraud at Transit Authority

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Would Your Employees Notice Millions in Fraud?

The United States Department of Justice (DOJ) announced indictments against two individuals suspected of familiar fraud schemes that led to $8 million in losses for Massachusetts Bay Transit Authority commuter rail operator Keolis between July 2014 and November 2021. Both the scope and the longevity of these schemes are exceptional, although the methods used to steal the money are very common, raising questions about why the individual charged was able to commit this fraud for so long.

What Happened in the Keolis Familiar Fraud Case?

John P. Pigsley of Beverly, Massachusetts, a former Assistant Chief Engineer of Facilities for Keolis Commuter Services, has been accused of running two schemes that netted $8 million. In the first scheme, Pigsley is accused of conspiring with John Rafferty of Hale’s Location, New Hampshire, the former General Manager of LJ Electric, to create fraudulent invoices for vehicles and equipment, leading to more than $4 million in losses.

In the second scheme, Pigsley is accused of ordering copper wire for Keolis projects, picking it up himself or delivering it to his home address, then selling it to scrap yards. Over the course of several years, Pigsley is alleged to have made more than $4.5 million from the scheme. The actual value of the stolen material was not disclosed.

In a statement, Keolis Commuter Services said, “In late 2021, our enhanced financial controls and project management oversight identified project anomalies linked with the practices of an employee.” According to the DOJ indictment, this was 7 years after the fraud began.

Employees Must Be Empowered to Recognize Risks

Cyber threats are not the only challenges that businesses face. Familiar fraud, committed by an employee, family member or trusted business partner, can be more devastating and more difficult to detect. As with cyber security, employee training is essential to prevent losses. Employees must know how to recognize fraud and trust their instincts. They must also feel empowered to call out anything suspicious.

In the DOJ indictment against Pigsley, three common familiar fraud techniques that should have been caught stand out:

  1. Phony invoices: This is one of the most common types of familiar fraud. An employee with purchasing authority may conspire with a third party to create fake invoices and split the proceeds, or set up shell companies to invoice for goods and services that do not exist. This type of fraud can be difficult to detect in large, complex organizations, such as a railway operations company, or in businesses that frequently order large volumes of material from multiple vendors. Strong vendor approval and verification processes must be in place to detect this type of fraud; all new vendors should be verified by someone other than the person placing the orders. Shipments should be tracked and matched against invoices for at least the first 90 days of any new relationship. Any changes in volume or frequency in orders with a particular vendor should be flagged for follow up.
  2. Home deliveries. There are very few circumstances where an employee should receive materials shipments at home. Home addresses for all employees with purchasing authority should be kept on file by accounting staff. Any deliveries that match against a home address should be flagged for review. Any changes in regular delivery addresses, even if they only account for a portion of a shipment, should also be flagged for review.
  3. Personal pickup. Some employees may pick up and deliver materials as a regular part of their job. In an ideal world, purchasing and pickup are separate, so that no single employee has the ability to order and collect goods. When this is not practical, regular audits must be conducted of employees who can both order and deliver supplies, services and materials. Employees should be able to provide invoices for what was ordered, receipts for what was received and documentation for what was delivered.

Familiar fraud is one of the most difficult challenges that businesses face, because it comes not from external actors, but from trusted co-workers, friends and family. Proper business controls can prevent it, but only if employees understand what to look for and how to respond. Protect Now’s CSI Protection Certification training focuses on cyber crime but enables employees to spot any kind of suspicious behavior by teaching them to trust and act on their instincts. To learn more about our training programs, contact us online or call us at 1-800-658-8311.

Mobile Provider Data Breaches: Know Your Risks

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Last week, AT&T reported the latest in a series of high-profile data breaches. The company announced that approximately 9 million customer records, including names, email addresses, phone numbers and account numbers, were stolen from a third-party marketing firm that had been given access to the data by AT&T.

How do these large-scale data breaches happen?

In several recent cases, criminals targeted marketing firms that provide advertising to mobile carriers or that develop campaigns for mobile users. In the AT&T case, it was noted that the stolen data included eligibility for phone upgrades, making it reasonable to assume that the data breach was related to customer marketing. AT&T gave its customer data to a marketing firm to sell upgrades. The marketing firm was breached.

In other cases, companies that display ads on mobile devices have suffered significant data breaches exposing millions of customer records. In all of these cases, criminals did not target the mobile provider itself, but the third-party agency. Mobile providers typically have strong cyber security practices; the third parties they share your data with may not, making you vulnerable.

What are the risks from mobile data breaches?

Mobile data breaches can carry a particular risk for customers. As reported by Axios, criminals can use personal data from these breaches to launch SIM-swapping attacks, where a criminal clones a SIM card and then uses it to steal multifactor authentication codes. Ordinarily, a criminal who steals your username and password cannot access your accounts if you have two-factor authentication that sends a confirmation code to your phone. If the criminal can clone your phone number with information stolen from a data breach, they can then get the code and access your accounts.

In other words, criminals can defeat two-factor authentication, log in to your accounts and steal or wreak havoc at will. If you see authentication code requests that you did not initiate, log in to the affected accounts immediately and change your password, because it could mean someone is trying to gain access.

A lower level of risk comes from the exposure of phone numbers and email addresses. These will be sold to criminals for spam emails and phishing attempts. If you are a high-value target for hackers, you need to change your passwords and your multifactor authentication method.

What should I do to protect myself from criminal misuse of my data?

Assume that some of your personal data has been compromised. More than 74 million personal records have been posted to the Dark Web so far in 2023, according to Cyble. Next, think like a criminal.

Criminals gather several types of personal information to carry out hacks and phishing attacks. They need your name, address, email and phone number to start. Any additional information they can gather, including passwords or usernames, makes it easier for them to launch an attack.

The best defense is to change your passwords frequently and to be vigilant. Set up two-factor authentication with immediate alerts to your mobile device. The safest way to do this is to have a separate email that you use only for authentication that you never share or use for any other purpose. Have alerts sent to you whenever there is an authentication request sent, rather than having text alerts sent directly to your phone. In many cases, this thwarts SIM swapping.

If you have significant concerns, you may need to get a new phone number, which renders information stolen from data breaches useless. This poses a significant challenge for most people. Acquiring a low-cost second phone that you use solely for authentication can solve the problem without requiring you to change your primary number.

Whenever you can, opt out of data-sharing programs with your mobile provider. They will attempt to discourage this, but doing so removes one avenue that criminals can use to compromise your cyber security.

Are you vigilant with your personal data? Are you vigilant with data on the job? Would you be able to stop a phishing attack launched by a phone call from a criminal? Explore our CSI Protection Certification to develop the skills you need to stop cyber criminals at home and on the job.

How Much Do You Know About Identity Theft?

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You would think with all of the attention on the news out there about hacking, data breaches, and identity theft, that people would be very focused on privacy and protecting their information from the bad guys.

Identity Theft Awareness Check

We all have a lot going on, and identity thieves know this. Always watching, these guys are betting on us being too focused with our day to day lives to notice who we are ultimately sharing our important information with. They literally are waiting for us to make one wrong move.

Are You a Victim of Identity Theft?

The shocking truth is that most of the people who become victims of identity theft don’t even realize it. You could be a victim right now and be none the wiser.

Why? Because generally, a person doesn’t know if they are a victim until they get a notification from their bank or other financial institution Each year, there are more than 16 million people who have their identity stolen.

How is it possible to share your information so easily? Well, there are a couple of ways to do it. For instance, you might have gotten married, you may give away too much information on your social media accounts, or you might have replied to a fake email, phone call, or text.

On top of this, a major life event can put you at a higher risk of becoming a victim, such as getting a new job or having a baby.

How Dangerous is Identity Theft?

Most of us consider identity theft to just be something like credit card fraud, but it is a lot more than that. Though this is common, an identity thief can do a lot more than simply open up a credit card in your name. They can also:

  • Open up a bank account and make changes to your billing address, meaning you would have no idea.
  • Taking out a big loan, such as an auto loan or mortgage, and not paying it off.
  • File a fake tax return, and then taking the money that comes from it.

If you are a victim of identity theft, you might be dealing with it for a number of years to come, and it is a big struggle to clear your name and fix your credit score.

How to Protect Yourself

Thankfully, there are a number of ways that you can protect yourself from being a victim of identity theft. Some of them include:

  • Don’t give your Social Security Number out unless it is totally necessary
  • Don’t allow mail to sit around
  • Don’t respond to any requests for information that seems suspicious
  • Don’t create simple passwords for online accounts

Written by Robert Siciliano, CEO of Credit Parent, Head of Training & Security Awareness Expert at Protect Now, #1 Best Selling Amazon author, Media Personality & Architect of CSI Protection Certification.