Small Business Identity Theft and Fraud

The sorts of crimes we’ve been seeing perpetrated against individuals are starting to be perpetrated against small businesses:

In July, a school district near Pittsburgh sued to recover $700,000 taken from it. In May, a Texas company was robbed of $1.2 million. An electronics testing firm in Baton Rouge, La., said it was bilked of nearly $100,000. In many cases, the advisory warned, the scammers infiltrate companies in a similar fashion: They send a targeted e-mail to the company’s controller or treasurer, a message that contains either a virus-laden attachment or a link that — when opened — surreptitiously installs malicious software designed to steal passwords. Armed with those credentials, the crooks then initiate a series of wire transfers, usually in increments of less than $10,000 to avoid banks’ anti-money-laundering reporting requirements. The alert states that these scams typically rely on help from “money mules” — willing or unwitting individuals in the United States — often hired by the criminals via popular Internet job boards. Once enlisted, the mules are instructed to set up bank accounts, withdraw the fraudulent deposits and then wire the money to fraudsters, the majority of which are in Eastern Europe, according to the advisory.

This has the potential to grow into a very big problem. Even worse:

Businesses do not enjoy the same legal protections as consumers when banking online. Consumers typically have up to 60 days from the receipt of a monthly statement to dispute any unauthorized charges. In contrast, companies that bank online are regulated under the Uniform Commercial Code, which holds that commercial banking customers have roughly two business days to spot and dispute unauthorized activity if they want to hold out any hope of recovering unauthorized transfers from their accounts.

And, of course, the security externality means that the banks care much less:

“The banks spend a lot of money on protecting consumer customers because they owe money if the consumer loses money,” Litan said. “But the banks don’t spend the same resources on the corporate accounts because they don’t have to refund the corporate losses.”

Posted on August 26, 2009 at 5:46 AM • 47 Comments