Corporate Identity Theft

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Personal identity theft has become one of the unfortunate byproducts of the e-commerce age. Hundreds of thousands of individuals have their identities ransacked by the theft of their Social Security numbers, bank account numbers, credit card numbers, and other personal information tokens. So, just how bad is the problem?

Just last week, the Washington Post reported that one of the nation's biggest information services, ChoicePoint Inc., has admitted that it inadvertently sold the personal and financial records of over 100,000 individuals to fraud artists apparently involved in a massive identity theft scheme. At this writing, a Nigerian national has pled "no contest" to charges that he masterminded the scheme.

For the individuals whose identities have been stolen, the experience of straightening out the crime is a nightmare of unheralded proportions because law enforcement agencies have few tools to catch the thieves. More importantly, the legal system is not set up to handle the restitution of victims of identity theft. Credit ratings are ruined, reputations are besmirched, and financial ramifications can be deadly.

And if that's not bad enough, this sad state of affairs is about to go mainstream, as corporations themselves start to feel the impact of having their own identities stolen. Even corporations that have never dealt in e-business or e-commerce electronic transactions are not immune.

Stealing the Corporate ID

How does one steal a corporation's identity? A recent report by MSNBC entitled "Fake Companies, Real Money" detailed an elaborate scam recently perpetrated on a small New York-based software company.

The owner of the software company discovered that someone had opened up an e-commerce store masquerading as his software company. This is an incredibly easy task to accomplish using nearly any online e-commerce ASP service like Yahoo! or eBay. There is minimal authorization required by these e-commerce ASPs because they are merely processing electronic transactions. They, in turn, rely upon a number of banking transaction service ASPs to route e-commerce transactions to the client's designated bank. These services make money by charging a percentage of the total value of the transaction.

There is also little personal authorization required by the e-commerce transaction provider ASP: Usually, they simply validate that the specific banking service is one of their client banks, and then, using a bank account number provided by the e-commerce client, route the transactions to the bank. For this service, they usually receive a small transaction fee of pennies per transaction.

Banks are, however, required to obtain some form of credit validation before accepting e-commerce transactions on behalf of an organization. What scammers have discovered, however, is that it's just as easy to steal a corporation's identity as it is to steal an individual's: They simply steal the credit history of an individual with exceptional credit credentials and then masquerade that individual's name as an officer of the corporation. They set up a phony Web site listing the individual as owner or COO and direct the bank to use the Web as the beginning reference point for validating their phony credentials.

Making Money Stealing a Corporate Identity

So how does someone make money by stealing a corporation's identity and using a phony e-commerce site with a phony credit rating?

In the New York-based software company's case, the imposters created an alter-identity for the software company on the Internet, complete with an e-commerce store tied to bank accounts that they controlled. Then, over the space of about a week, they funneled thousands of dollars of e-commerce transactions through the bogus e-commerce store, using stolen credit card numbers they had obtained through other forms of identity theft.

Meanwhile, the owner of the software company himself was oblivious to their operation. His rude awakening came when the bank asked him to replace the funds that had been withdrawn from the bank accounts after the credit card companies refused to pay the bank for the bogus transactions. In essence, the scam artists had transformed bogus virtual transactions (promises to pay) into virtual funds (banking transactions) and cashed them in.

By the time the owner of the software company realized what was going on, the scam artists had already withdrawn those funds and disappeared from view. Ultimately, the software company was facing $15,000 in missing funds and $5,000 in legal fees.

As MSNBC reported, 50 companies in the New York metropolitan area became victims of this kind of corporate identity theft at the same time. It was clearly a highly organized and successful scam, and it's just the first round of a plague that we in IT will be asked by our CFOs to help address.

Protecting the Corporate Virtual Identity

The story above shows the ease and speed by which a company's virtual alter ego can be created and its identity stolen. It's also a measure of the increased technological sophistication of criminals. While the problems of personal identity theft have been well-advertised, electronic corporate identity theft is still a relatively new phenomenon. Yet the potential costs can be staggering--not only to the financial bottom line, but to the corporate image with customers and clients.

So what can you do when your CFO asks for your help?

The American Management Association (AMA) has identified six organizational steps that your company can take now to help prevent corporate identity theft from occurring. Read these carefully, and you'll quickly see how you, in IT, can lead the way before a serious incident occurs.

  1. Alert your company officials to the potential--Get your management involved early to establish early-warning procedures. Then, implement a program that makes it easy for employees and customers to report any suspicious spam emails or Web sites that they encounter. Employees, suppliers, distributors, and even customers or investors can help a company monitor for Internet-based corporate identity attacks, sounding the alert in time to mitigate the damage. Teach everyone in the organization how to report these alerts and record them in a central location. Don't assume that someone else will manage this potential problem. Build a central database that records each incident, and then suggest to management that they regularly review the activities recorded.
  2. Educate customers and clients to the potential--The AMA tells organizations to encourage their customers never to click on hidden links in email. Customers should instead directly type or "bookmark" trusted Internet destinations. Spam email can be easily altered so that it appears to have originated from a legitimate source, and such links can be practically indistinguishable from the real thing. Although many companies and organizations have tried to educate consumers on how to detect fraudulent email, even experts can sometimes find it difficult. It's easier to establish a plainly published policy for the benefit of customers that restricts the use of hidden hyperlinks.
  3. Change customer contact policies--Notify your customers that you are adopting a policy never to contact them via email for any reason that would require them to share personal or account information. Why? Because acclimatizing customers to sending personal information via email notifications makes them vulnerable to future identity theft attacks.
  4. Increase your online visibility--The AMA suggests that you make sure your company is easy to find online. Promote the company Web site address, and keep it simple to avoid typos and misspellings. Exert as much control over the customers' online experience as possible by trying not to rely on others to deliver your customers to your site. According to the AMA, when customers attempt to locate your Web site through vehicles such as search engines, partners, or spam, it provides an opportunity for others to intercept them before they arrive.
  5. Manage your virtual identity--Be stringent about managing your domain registrations and be diligent about monitoring for new registrations that include your company name or trademarks. According to the AMA, you may also want to register common typos or misspellings of your Web site address before somebody else does. Once you own those domains, you can then automatically redirect wayward customers to the correct URL address.
  6. Plan ahead--Start to think like the scam artists so you can orchestrate a plan of action. Figure out your company's response to a hypothetical attack before it happens. Who should be contacted? What should the response be to customers and clients, as well as employees? Start looking for resources to help you devise an action plan, including trade associations and professional organizations. Many of these organizations have already begun forming committees to identify and share best practices. According to the AMA, it's also extremely wise to seek advice and establish relationships in advance with law enforcement and other parties who can help take down fraudulent sites if an attack occurs.

Other Things You Can Do Now

Finally and most importantly, don't wait for the organization to be the victim of corporate identity theft. Instead, start the process of formulating strategies now. Engage your management in the conversation and begin talking about what they can do to help prevent it. Join organizations that are seriously involved in charting identity theft, and consider sharing your databases of potential risks with others.

Thomas M. Stockwell is Editor in Chief of MC Press, LP.

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