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Phishing and Federal Law Enforcement

Phishing and Federal Law Enforcement. Jonathan J. Rusch Special Counsel for Fraud Prevention Fraud Section, Criminal Division U.S. Department of Justice Washington, DC ABA Administrative Law and Regulatory Practice Section Atlanta, Georgia August 6, 2004. Overview.

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Phishing and Federal Law Enforcement

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  1. Phishing and Federal Law Enforcement Jonathan J. Rusch Special Counsel for Fraud Prevention Fraud Section, Criminal Division U.S. Department of Justice Washington, DC ABA Administrative Law and Regulatory Practice Section Atlanta, Georgia August 6, 2004

  2. Overview • A Definition and Principal Types of Phishing • Statistics Relating to Phishing • U.S. Enforcement Actions Against Phishers • Other Nations’ Enforcement Actions Against Phishers • U.S. Federal Criminal Statutes Applicable to Phishing • Law Enforcement Resources

  3. A Definition and Principal Types of Phishing

  4. A Definition of Phishing • Any criminal scheme in which digital communications play a significant role in – • acquiring multiple victims’ identifying or personal financial data by deception, and • transferring or transmitting multiple victims’ data via the Internet for criminal use • Note: Analysis of phishing schemes should not focus just on one type (e.g., bogus e-mails)

  5. Principal Types of Phishing • Most Common: “Dragnet” Method • E-mails with falsified corporate identification, directing large class of people to websites with similarly falsified identification • Specific prospective victims not identified in advance, but false information conveyed to trigger immediate victim response • “Rod-and-Reel” Method • Targeted initial contacts with prospective victims • Specific prospective victims defined in advance, and false information conveyed to trigger responses • “Lobsterpot” Method • Creation of websites similar to legitimate corporate websites that narrowly defined class of victims are likely to seek out • Smaller class of prospective victims identified in advance, but no triggering of victim response

  6. Statistics Relating to Phishing

  7. Gartner Group (May 2004) • Direct financial losses from phishing attacks cost U.S. financial services firms about $1.2 billion in 2003

  8. U.S. Enforcement Actions Against Phishers

  9. Dragnet Phishing Cases • United States v. Forcellina (D. Conn., sentenced Apr. 30 and June 18, 2004) • Husband, 23, accessed chat rooms, used device to capture screen names of chat room participants; then sent e-mails pretending to be ISP requiring correct billing information, including current credit-card number • Used credit-card numbers and other personal data to arrange for wire transfers of funds via Western Union, but had others pick up funds from Western Union • Husband and wife pleaded guilty to conspiracy to commit access device fraud • Husband sentenced to 18 months imprisonment; wife sentenced to 6 months home confinement

  10. Dragnet Phishing Cases • United States v. Hill (S.D. Tex., sentenced May 2004); FTC v. Hill (S.D. Tex., preliminary injunction December 2003) • Defendant operated AOL and PayPal phishing scheme, used fraudulently obtained credit-card numbers to obtain goods and services costing more than $47,000 • Defendant pleaded guilty in February 2004 to possession and use of access devices • Sentenced to 46 months imprisonment

  11. Dragnet Phishing Cases • United States v. Carr (E.D. Va. 2003) • Helen Carr, 55, of Akron, Ohio, sent fake e-mail messages to AOL customers in United States and several foreign countries • Customers advised that they must update their credit card/personal information on file with AOL to maintain their accounts • Guilty plea October 2003 to conspiracy to possess unauthorized access devices • Sentenced in January 2004 to 46 months imprisonment • George Patterson, a co-conspirator, previously pleaded guilty to the same charge and was sentenced in July 2003 to 37 months imprisonment

  12. Dragnet Phishing Cases • United States v. Guevara (W.D. Wash. 2003) • Matthew Guevara, 21, of Chicago, Illinois, created false e-mail accounts with Hotmail and unauthorized website with the address www.msnbilling.com through Yahoo! • Then sent MSN customers e-mail messages, purporting to come from MSN, that directed customers to fraudulent www.msnbilling.com website and asked them to verify their accounts by providing name, MSN account, and credit card data • Website automatically forwarded each customer’s data to one of Guevara's false Hotmail accounts; Guevara used stolen credit card information himself and provided it to another person as well • Guilty plea in September 2003 to wire fraud • Sentenced January 2004 to 5 years probation, 6 months home confinement

  13. Dragnet Phishing Cases • FTC v. ___ (C.D. Cal. 2003) • Juvenile sent emails to consumers saying they needed to update AOL account information or risk losing their access. The emails sent recipients to a site that looked authentic but asked for detailed personal and financial information. The youth used the information to buy things online, open PayPal accounts, and open AOL accounts to send more junk email • Juvenile agreed to pay $3,500 to settle FTC charges • Cooperation between FTC, DOJ Computer Crime and Intellectual Property Section, FBI, U.S. Attorney for Eastern Virginia, Postal Inspection Service, and Los Angeles County District Attorney’s Office

  14. Rod-and-Reel Phishing Cases • United States v. Gebrezihir (S.D.N.Y. 2003) • Isaac Gebrezihir allegedly involved with scheme to send phony letters on bank letterhead, along with altered or counterfeit IRS forms, to victims, generally foreign nationals living abroad with bank accounts in the United States • Some of altered or counterfeit forms appear similar to actual IRS forms that are sent to non-resident aliens who maintain accounts at U.S. banks • Fraudulent IRS forms all require personal information concerning victim and victim’s bank account • Fraudulent bank letter instructs victim to fill out fraudulent IRS form and then fax completed form, ostensibly to the IRS or to the bank • Fax numbers provided to the victims are Internet-based fax numbers that convert all incoming faxes to e-mail attachments and then forward attachments to free e-mail accounts • Wire transfer instructions then sent to banks and, in many instances, large amounts of money are transferred from victims’ accounts, usually to overseas accounts • Overall investigation has identified more than $700,000 in losses • Indicted Nov. 2003

  15. Rod-and-Reel Phishing Cases • Romanian Arrest (2003) • Romanian General Directorate for Combating Organized Crime, in cooperation with Secret Service, arrested a subject in Alba Julia, Romania • Individual forwarded spoofed e-mails resembling actual auction webpage to the attention of unsuccessful bidders in an online auction • On spoofed page, the subject advised victims of availability of similar item for a better price; upon visiting the "sale" page, victims were asked for personal information including their name, bank account numbers and passwords. • Victims then advised that they "won" the spoofed auction and agreed to send money to the subject through a spoofed escrow site created by the subject • Scheme resulted in nearly $500,000 in on-line losses

  16. Lobsterpot Phishing Case • United States v. Kalin (D.N.J., Nov. 2003) • Shawn Kalin of Las Vegas, Nevada, allegedly registered four websites with domain names deceptively similar to website operated by DealerTrack, Inc. • DealerTrack provides services via the Internet to auto dealerships located throughout the United States, including dealers’ ordering credit reports on prospective automobile buyers • Because Kalin’s websites designed to be almost identical to main page of the www.dealertrack.com, Kalin allegedly got a number of dealership employees mistakenly to enter usernames and passwords at his sites • Could then get unauthorized access to DealerTrack for personal data • Kalin charged in criminal complaint Nov. 2003

  17. Other Nations’ Enforcement Actions Against Phishers

  18. United Kingdom • April 2004: National High-Tech Crime Unit (NHTCU) arrests 21-year-old British national for “copycat” phishing scheme involving online bank • Reportedly first in United Kingdom • May 2004: NHTCU arrests 12 Eastern European nationals suspected of laundering money from “phished” bank accounts

  19. Australia • April 2004: Australian Federal Police reportedly seeking cooperation from French authorities to shut down domain name associated with large-scale phishing scheme

  20. U.S. Federal Criminal Statutes Applicable to Phishing

  21. Identity Theft – 18 U.S.C. 1028(a)(7) • Elements • Knowingly using or transferring • Another (real) person’s “means of identification” • “Means” includes name, SSN, DOB, driver’s license, passport number; unique biometric data; unique EIN, address, or routing code; or access device (e.g., credit-card or financial account number) • With intent to commit/aid or abet any unlawful activity that constitutes a federal violation or state or local felony

  22. Identity Theft – 18 U.S.C. 1028(a)(7) • Penalties • Imprisonment (Maximum) • Fraud-Related Violation - 15 years imprisonment If, as result of offense, any individual committing the offense obtains anything of value aggregating $1,000 or more during any 1-year period • Basic Violation - 3 years imprisonment • Fine – Maximum $250,000 for individuals • Forfeiture - Any personal property used or intended to be used to commit offense

  23. Identity Theft – 18 U.S.C. 1028(a)(7) • Examples of Section 1028(a)(7) Offenses • United States v. Butcher (N.D. Ohio, indictment filed Apr. 28, 2004) • Defendant allegedly applied for 10 credit card accounts using the identifier information of another person, including her name, Social Security account number and date of birth, without authorization. • United States v. Christensen (D. Ariz., pleaded guilty Jan. 20, 2004) • Defendant used more than 50 different identities of others – typically prison inmates serving long sentences – to obtain more than $313,000 in student loans

  24. Wire Fraud – 18 U.S.C. 1343 • Elements • Scheme or artifice to defraud or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises • Transmits (or causes transmission of) by means of wire communication in interstate or foreign commerce • Writing, signs, signals, pictures, sounds for purpose of executing scheme or artifice

  25. Wire Fraud – 18 U.S.C. 1343 • Penalties • Imprisonment (Maximum) • 30 years imprisonment if violation affects a financial institution (e.g., bank or savings and loan) • 20 years imprisonment in other cases • Fine – Maximum $250,000 for individuals • Forfeiture

  26. Wire Fraud – 18 U.S.C. 1343 • Examples of Section 1343 Offenses • Initial e-mails to prospective victims • Victim responses to bogus website or window • Criminal’s transmission of victim’s personal and financial data to other computers across state or international borders

  27. Mail Fraud – 18 U.S.C. 1341 • Elements • Scheme or artifice to defraud, or for obtaining money or property by means of false or fraudulent pretenses, representations, or promises • Placing in authorized depository for mail matter any matter or thing to be sent or delivered by U.S. Postal Service (or depositing anything to be sent or delivered by private or commercial interstate carrier), or receiving matter or thing from U.S. Postal Service or private or commercial interstate carrier • For purpose of executing such scheme or artifice • Note: Causing innocent intermediary or victim to use mail can constitute mail fraud

  28. Mail Fraud – 18 U.S.C. 1341 • Penalties • Imprisonment (Maximum) • 30 years if violation affect financial institution • 20 years in other cases • Fine • Maximum $250,000 for individuals • Forfeiture • Examples of Section 1341 Offenses • Criminal’s mailing initial solicitation to prospective victims • Victim’s mailing response or payment

  29. Access Device Fraud – 18 U.S.C. 1029 • Elements – Section 1029(a)(2) • Knowingly and with intent to defraud traffics in or uses one or more unauthorized access devices (e.g., access devices obtained with intent to defraud) during any 1-year period • By such conduct obtains anything of value aggregating $1,000 or more during that period • Elements – Section 1029(a)(3) • Knowingly and with intent to defraud possesses 15 or more unauthorized access devices

  30. Access Device Fraud – 18 U.S.C. 1029 • Elements – Section 1029(a)(5) • Knowingly and with intent to defraud effects transactions with 1 or more access devices issued to another person or persons • To receive payment or any other thing of value during any 1-year period the aggregate value of which is equal to or greater than $1,000 • Elements – Section 1029(a)(10) • Without authorization of credit card system or member or its agent • Knowingly and with intent to defraud causes or arranges for another person to present to member or its agent, for payment, 1 or more evidences or records of transactions made by an access device

  31. Access Device Fraud – 18 U.S.C. 1029 • Penalties • Imprisonment (Maximum) • 10 years imprisonment for 1029(a)(2), (3) • 15 years imprisonment for 1029(a)(5), (10) • Fine – Maximum $250,000 for individuals • Forfeiture

  32. Bank Fraud - 18 U.S.C. 1344 • Elements • Knowingly executing, or attempting to execute • Scheme or artifice to defraud financial institution, or to obtain money, funds, etc. under financial institution’s custody by means of false or fraudulent pretenses, representations, or promises • Penalties • Imprisonment (Maximum) - 30 years imprisonment • Fine – Maximum $250,000 • Forfeiture • Examples of Section 1344 Offenses • United States v. Gebrezihir (S.D.N.Y. 2003) • United States v. Yip (S.D.N.Y. 2003) • Individuals stole identifying and other data from employer, then used data to open PayPal accounts and fund those accounts by direct transfers from victims’ bank accounts

  33. Computer Fraud and Abuse – 18 U.S.C. 1030 • Elements of Section 1030(a)(2)(C) Offense • Intentionally accessing computer without authorization or exceeding authorization, and • Thereby obtaining information from any protected computer if conduct involved interstate or foreign communication • Penalties • Imprisonment (Maximum) • Felony – 5 years if offense or attempt to commit offense committed for private financial gain, in furtherance of any criminal or tortious act in violation of U.S. Constitution or U.S. federal or state law • Basic offense - 1 year for first offense or attempt • Fine • Examples • United States v. Kalin (D.N.J. 2003)

  34. Computer Fraud and Abuse – 18 U.S.C. 1030 • Elements of Section 1030(a)(4) Offense • Knowingly and with intent to defraud accesses a protected computer without authorization, or exceeds authorized access • By means of such conduct furthers the intended fraud and obtains anything of value • Unless object of fraud and thing obtained consists only of use of computer and value of such use is not more than $5,000 in any 1-year period • Penalties • Imprisonment (Maximum) • 5 years for first offense or attempt, 10 years for subsequent • Fine • Forfeiture

  35. Computer Fraud and Abuse – 18 U.S.C. 1030 • Examples of Section 1030(a)(4) Offense • Hacking into computer with Trojan horse and downloading numbers of credit-card or bank accounts, then debiting those accounts • Accessing company computer to cause unauthorized disbursals of stock to personal brokerage accounts [United States v. Osowski (N.D. Cal. 2001)]

  36. CAN-SPAM – 18 U.S.C. 1037 • Elements of Section 1037 Offenses • Knowingly -- • (1) accessing protected computer without authorization, and intentionally initiates transmission of multiple commercial e-mail messages from or through such computer, • (2) uses protected computer to relay or retransmit multiple commercial e-mail messages, with intent to deceive or mislead recipients, or any Internet access service, as to the origin of such messages, • (3) materially falsifies header information in multiple commercial e-mail messages and intentionally initiates transmission of such messages, • (4) registers, using information that materially falsifies identity of actual registrant, for 5 or more e-mail accounts or online user accounts or two or more domain names, and intentionally initiates transmission of multiple commercial e-mail messages from any combination of such accounts or domain names, or • (5) falsely represents oneself to be registrant or legitimate successor in interest to registrant of 5 or more Internet Protocol addresses, and intentionally initiates the transmission of multiple commercial electronic mail messages from such addresses • In or affecting interstate or foreign commerce

  37. CAN-SPAM – 18 U.S.C. 1037 • Penalties • Imprisonment (Maximum) • 5 years if – • Offense is committed in furtherance of any felony under the laws of the United States or of any State; or • Defendant has previously been convicted under section 1037 or section 1030, or under the law of any State for conduct involving transmission of multiple commercial e-mail mail messages or unauthorized access to a computer system; • Less in other circumstances for various section 1037 offenses • Fine • Forfeiture

  38. Identity Theft Penalty Enhancement Act – 18 U.S.C. 1028A (July 15, 2004) • Aggravated Identity Theft • If individual knowingly transfers, possesses, or uses, without lawful authority, a means of identification of another person during and in relation to any felony enumerated in section 1028A(c), two years imprisonment in addition to punishment provided for that underlying felony • Felonies include 18 U.S.C. 1028, 1029, 1030, 1037, 1341, 1343, 1344 • If individual does so during and in relation to terrorism-related felony, five years imprisonment in addition to punishment provided for that underlying felony • In either case, no probation for person convicted of section 1028A violation, and in general no concurrent sentencing for section 1028A violation and other violations

  39. Identity Theft Penalty Enhancement Act – 18 U.S.C. 1028A (July 15, 2004) • Amendments of Current 18 U.S.C. 1028(a)(7) • Section now covers knowing possession, without lawful authority, of another’s means of identification, with requisite intent to commit an unlawful activity that constitutes federal offense or state or local felony • Section now covers knowing and unauthorized possession, transfer, or use of another’s means of identification in connection with an unlawful activity that constitutes federal offense or state or local felony • Section now increases maximum term of imprisonment for basic felony under section 1028(a)(7) from 3 to 5 years • Section now sets 25 years imprisonment as maximum for identity theft relating to domestic or international terrorism

  40. Identity Theft Penalty Enhancement Act – 18 U.S.C. 1028A (July 15, 2004) • Revision of Federal Sentencing Guidelines • Sentencing Commission is directed to review and amend Guidelines to ensure appropriate punishment for identity theft offenses involving an abuse of position

  41. Law Enforcement Responses to Phishing

  42. Federal Investigative Agencies Addressing Phishing • FBI • United States Secret Service • United States Postal Inspection Service • Social Security Administration Office of Inspector General

  43. Phishing Complaint Reporting • FTC Identity Theft Data Clearinghouse • Internet Crime Complaint Center • Began as Internet Fraud Complaint Center in May 2000 • Joint project of FBI and National White Collar Crime Center • Receives online complaints from public, analyzes trends and patterns, and sends investigative “packages” to most relevant investigative field offices • http://www.ic3.gov

  44. Enforcement Coordination on Phishing • Enforcement “Takedowns” and “Sweeps” • November 2003 – Operation Cyber Sweep • Arrests or convictions of more than 125 individuals, and return of more than 70 indictments, for various internet fraud and other online economic crime offenses • Cases involved more than 125,000 victims with losses of more than $100 million • 34 U.S. Attorneys Offices, FBI, Postal, FTC, Secret Service, Immigration and Customs Enforcement, state, local, and foreign law enforcement • Cooperation and collaboration with industry and foreign law enforcement agencies • Similar Operations • Operation E-Con – May 2003 • Identity Theft – May 2002 • Operation Cyber Loss – May 2001

  45. Enforcement Coordination on Phishing • Task Forces and Specialized Units • More than 40 FBI, Secret Service, and SSA-OIG task forces with focus on identity theft • U.S. Attorney Computer Hacking and Intellectual Property (CHIP) Units • Training • Joint training for federal prosecutors and agents on Internet fraud includes training on phishing • Interagency Working Groups • Telemarketing and Internet Fraud Working Group • Identity Theft Subcommittee of Attorney General’s Council on White-Collar Crime

  46. Prevention and Education on Phishing • FTC • Website on Identity Theft – www.consumer.gov/idtheft • Consumer Alert - http://www.ftc.gov/bcp/conline/pubs/alerts/phishingalrt.htm • U.S. Department of Justice • Website on Identity Theft and Fraud – www.usdoj.gov/criminal/fraud/idtheft.html • Special Report on Phishing - http://www.usdoj.gov/criminal/fraud/Phishing.pdf • United Kingdom • Government Website on Identity Theft - www.identity-theft.org.uk

  47. Contact Data for Jonathan J. Rusch • E-Mail: Jonathan.Rusch2@usdoj.gov • Fax: 202-514-7021 • Phone: 202-514-0631 • Mail: Fraud Section, Criminal Division, U.S. Department of Justice, 10th Street and Constitution Avenue, N.W., Bond Building, Room 4300, Washington, DC 20530

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