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GOOD MORNING,
CHAIRMAN STEARNS, AND MEMBERS OF THE SUBCOMMITTEE ON COMMERCE, TRADE AND
CONSUMER PROTECTION. I AM PLEASED TO APPEAR TODAY ON BEHALF OF THE FEDERAL
BUREAU OF INVESTIGATION AND SHARE WITH YOUR SUBCOMMITTEE THE FBI'S PERSPECTIVE
ON THE INTERNET FRAUD CRIME PROBLEM.
LET ME BEGIN BY
EMPHASIZING THAT THE FBI PLACES A HIGH PRIORITY ON INVESTIGATING INTERNET FRAUD
MATTERS AND IS COMMITTED TO WORKING WITH THIS SUBCOMMITTEE AND ALL OF CONGRESS
TO ENSURE THAT LAW ENFORCEMENT AND THE PRIVATE SECTOR HAVE THE NECESSARY TOOLS
AND PROTECTIONS TO COMBAT THESE CRIMES. IT IS ONLY WITH THE VALUABLE COOPERATION
OF PRIVATE SECTOR COMPANIES SUCH AS THOSE REPRESENTED HERE TODAY THAT EFFORTS TO
COMBAT INTERNET FRAUD WILL SUCCEED. THE FBI RECOGNIZES AND APPRECIATES THE
INTEREST AND EFFORTS OF THESE AND OTHER COMPANIES IN PREVENTING INTERNET FRAUD
AS WELL AS THEIR WILLINGNESS TO WORK WITH LAW ENFORCEMENT TO ADDRESS THE
PROBLEM.
I WOULD LIKE TO
FIRST DISCUSS RESULTS OF A SERIES OF INVESTIGATIONS AGAINST INTERNET FRAUD
ANNOUNCED TODAY BY THE FBI AND DEPARTMENT OF JUSTICE, FOLLOWED BY AN FBI
PERSPECTIVE AS TO THE EXTENT OF THE INTERNET FRAUD CRIME PROBLEM ALONG WITH THE
UNIQUE CHALLENGES FACED BY LAW ENFORCEMENT IN ADDRESSING IT, AND THEN GIVE YOU
AN OVERVIEW OF WHAT THE FBI IS DOING TO ADDRESS THE PROBLEM INCLUDING DETAILS
CONCERNING THE INTERNET FRAUD COMPLAINT CENTER.
AS NOTED ABOVE,
TODAY, THE FBI AND THE DEPARTMENT OF JUSTICE IS ANNOUNCING A NATIONWIDE SWEEP
INTO INTERNET FRAUD, CODE NAMED "OPERATION CYBER LOSS," INITIATED BY
THE FBI'S INTERNET FRAUD COMPLAINT CENTER (IFCC) AND COORDINATED BY FBI OFFICES,
U.S. POSTAL INSPECTION SERVICE (USPIS), INTERNAL REVENUE SERVICE-CRIMINAL
INVESTIGATIVE DIVISION, U.S. CUSTOMS SERVICE, UNITED STATES SECRET SERVICE, AND
NUMEROUS STATE AND LOCAL LAW ENFORCEMENT ENTITIES. THE INTERNET FRAUD SCHEMES
EXPOSED AS PART OF THIS INVESTIGATION REPRESENT OVER 56,000 VICTIMS NATIONWIDE
WHO SUFFERED CUMULATIVE LOSSES IN EXCESS OF $117 MILLION. AMONG THE INTERNET
FRAUD SCHEMES HIGHLIGHTED BY OPERATION CYBER-LOSS WERE THOSE INVOLVING ON-LINE
AUCTION FRAUD, SYSTEMIC NON-DELIVERY OF MERCHANDISE PURCHASED OVER THE INTERNET,
CREDIT/DEBIT CARD FRAUD, IDENTITY THEFT, VARIOUS INVESTMENT AND SECURITIES
FRAUDS, MULTI-LEVEL MARKETING AND PONZI/PYRAMID SCHEMES. APPROXIMATELY 90
SUBJECTS HAVE BEEN CHARGED AS A RESULT OF OPERATION CYBER-LOSS FOR WIRE FRAUD,
MAIL FRAUD, CONSPIRACY TO COMMIT FRAUD, MONEY LAUNDERING, BANK FRAUD, AND
INTELLECTUAL PROPERTY RIGHTS (SOFTWARE PIRACY). TWENTY-SIX DIFFERENT FBI FIELD
OFFICES THROUGHOUT THE COUNTRY HAVE BEEN INVOLVED IN THE CYBER LOSS
INVESTIGATION. AS IS TRUE OF INTERNET FRAUD IN GENERAL, SUBJECTS AND VICTIMS
INVOLVED IN THIS OPERATION WERE SCATTERED THROUGHOUT THE WORLD. ACTION TAKEN
THIS WEEK IN CONNECTION WITH THIS OPERATION REPRESENTS ONLY A SMALL FRACTION OF
CASES REFERRED BY THE IFCC AND ONLY REPRESENT CASES CULMINATING IN SIGNIFICANT
PROSECUTIVE ACTION.
THE SCHEMES
IDENTIFIED AS PART OF OPERATION CYBER-LOSS VARY WIDELY IN TYPE AND COMPLEXITY.
THEY TEND TO BE MULTI-JURISDICTIONAL WITH SUBJECTS AND VICTIMS SCATTERED ACROSS
THE UNITED STATES AND THE WORLD. WHILE MANY OF THE SCHEMES INVOLVED AN ELEMENT
OF ON-LINE AUCTION FRAUD, THIS WAS OFTEN ONLY ONE ASPECT OF A SUBJECT'S
FRAUDULENT ACTIVITIES. THE CASES REFLECT THE NATURE OF FRAUDSTERS TO MIGRATE
FROM ONE FRAUDULENT SCHEME TO ANOTHER, AND IS INDICATIVE OF CRIMINAL BEHAVIOR
THAT WOULD ONLY CONTINUE TO EXPAND IF LEFT UNADDRESSED. WE WILL ATTACH TO OUR
STATEMENT FOR THE RECORD SUMMARIES OF SOME OF THE FRAUD SCHEMES EXPOSED AS PART
OF THIS OPERATION. IT SHOULD BE POINTED OUT THAT THESE SUMMARIES DO NOT REFLECT
ALL OF THE CASES INCLUDED AS PART OF OPERATION CYBER LOSS SINCE A NUMBER OF
THESE CASES ARE ONGOING AND DETAILS CANNOT BE PROVIDED AT THIS TIME DUE TO
MATTERS BEING UNDER SEAL AND/OR SO AS NOT TO COMPROMISE THE INVESTIGATION.
THE IFCC IS A JOINT
OPERATION WITH THE FBI AND THE NATIONAL WHITE COLLAR CRIME CENTER (NW3C). THE
NW3C IS A NON-PROFIT ORGANIZATION WHICH IS PARTIALLY FUNDED BY THE DEPARTMENT OF
JUSTICE. THE MISSION OF NW3C IS TO PROVIDE A NATIONWIDE SUPPORT SYSTEM FOR THE
PREVENTION, INVESTIGATION AND PROSECUTION OF ECONOMIC CRIMES.
A LITTLE OVER A YEAR
AGO, ON MAY 8, 2000, THE IFCC OPENED ITS DOORS TO COMBAT THE GROWING PROBLEM OF
FRAUD OVER THE INTERNET. THE INTERNET IS CHANGING THE WORLD AS WE KNOW IT, AND
PROMISES TO CHANGE HOW WE BUY THINGS, HOW WE COMMUNICATE, WHERE WE GET
ENTERTAINMENT, NEWS, AND WEATHER, WHERE WE WORK, AND MUCH, MUCH MORE WHILE
BRINGING ENORMOUS BENEFITS TO SOCIETY. THE GROWTH AND UTILIZATION OF THE
INTERNET AS A COMMUNICATIONS AND COMMERCE TOOL IS UNSURPASSED IN MODERN HISTORY.
CURRENT TRENDS REFLECT THIS REMARKABLE GROWTH:
•
INTERNET USERS IN THE U.S. REACHED 65 MILLION IN 1998, OVER 100 MILLION IN
1999, AND IS EXPECTED TO EXCEED 200 MILLION THIS YEAR.1
•
BUSINESS-TO-BUSINESS E-COMMERCE TOTALED OVER $100 BILLION IN 1999 (MORE THAN
DOUBLING FROM 1998) AND IS EXPECTED TO GROW TO OVER ONE TRILLION DOLLARS BY
2003. WORLDWIDE NET COMMERCE, BOTH BUSINESS-TO-BUSINESS AND
BUSINESS-TO-CONSUMER, WILL HIT AN ESTIMATED $6.8 TRILLION IN 2004.2
THE VAST MAJORITY OF
COMMUNICATION AND COMMERCE CONDUCTED VIA THE INTERNET IS FOR LAWFUL PURPOSES.
HOWEVER, THE INTERNET IS INCREASINGLY UTILIZED TO FOSTER FRAUDULENT SCHEMES.
JUST AS PRIOR TECHNOLOGICAL ADVANCES HAVE BROUGHT DRAMATIC IMPROVEMENTS FOR
SOCIETY, THEY HAVE ALSO CREATED NEW OPPORTUNITIES FOR WRONGDOING. AS WORLDWIDE
DEPENDENCE ON TECHNOLOGY INCREASES, HIGH-TECH CRIME IS BECOMING AN INCREASINGLY
ATTRACTIVE SOURCE OF REVENUE FOR ORGANIZED CRIME GROUPS, AS WELL AS AN
ATTRACTIVE OPTION FOR THEM TO MAKE COMMERCIAL AND FINANCIAL TRANSACTIONS THAT
SUPPORT CRIMINAL ACTIVITY. CRIMINAL ACTIVITY IN THE CYBER WORLD PRESENTS A
DAUNTING CHALLENGE AT ALL LEVELS OF LAW ENFORCEMENT. IN THE PAST, A NATION'S
BORDER ACTED AS A BARRIER TO THE DEVELOPMENT OF MANY CRIMINAL ENTERPRISES,
ORGANIZATIONS AND CONSPIRACIES. OVER THE PAST FIVE YEARS, THE ADVENT OF THE
INTERNET AS A BUSINESS AND COMMUNICATION TOOL HAS ERASED THESE BORDERS. CYBER
CRIMINALS AND ORGANIZATIONS POSE SIGNIFICANT THREATS TO GLOBAL COMMERCE AND
SOCIETY.
THE USE OF THE
INTERNET FOR CRIMINAL PURPOSES IS ONE OF THE MOST CRITICAL CHALLENGES FACING THE
FBI AND LAW ENFORCEMENT IN GENERAL. UNDERSTANDING AND USING THE INTERNET TO
COMBAT INTERNET FRAUD IS ESSENTIAL FOR LAW ENFORCEMENT. THE FRAUD BEING
COMMITTED OVER THE INTERNET IS THE SAME TYPE OF WHITE COLLAR FRAUD THE FBI HAS
TRADITIONALLY INVESTIGATED BUT POSES ADDITIONAL CONCERNS AND CHALLENGES BECAUSE
OF THE NEW ENVIRONMENT IN WHICH IT IS LOCATED. INTERNET FRAUD IS DEFINED AS ANY
FRAUDULENT SCHEME IN WHICH ONE OR MORE COMPONENTS OF THE INTERNET, SUCH AS WEB
SITES, CHAT ROOMS, AND E-MAIL, PLAY A SIGNIFICANT ROLE IN OFFERING NON-EXISTENT
GOODS OR SERVICES TO CONSUMERS, COMMUNICATING FALSE OR FRAUDULENT
REPRESENTATIONS ABOUT THE SCHEMES TO CONSUMERS, OR TRANSMITTING VICTIMS' FUNDS,
ACCESS DEVICES, OR OTHER ITEMS OF VALUE TO THE CONTROL OF THE SCHEME'S
PERPETRATORS. THE ACCESSABILITY OF SUCH AN IMMENSE AUDIENCE COUPLED WITH THE
ANONYMITY OF THE SUBJECT, REQUIRE A DIFFERENT APPROACH. THE INTERNET IS A
PERFECT VEHICLE TO LOCATE VICTIMS AND PROVIDE THE ENVIRONMENT WHERE THE VICTIMS
DON'T SEE OR SPEAK TO THE FRAUDSTERS. THE INTERNET ENVIRONMENT OFTEN CREATES A
FALSE SENSE OF SECURITY AMONG USERS LEADING THEM TO CHECK OUT OPPORTUNITIES
FOUND ON THE INTERNET LESS THOROUGHLY THAN THEY MIGHT OTHERWISE. ANYONE IN THE
PRIVACY OF THEIR OWN HOME CAN CREATE A VERY PERSUASIVE VEHICLE FOR FRAUD OVER
THE INTERNET. THE EXPENSES ASSOCIATED WITH THE OPERATION OF A "HOME
PAGE" AND THE USE OF ELECTRONIC MAIL (E-MAIL) ARE MINIMAL. CON ARTISTS DO
NOT REQUIRE THE CAPITAL TO SEND OUT MAILERS, HIRE PEOPLE TO RESPOND TO THE
MAILERS, FINANCE AND OPERATE TOLL FREE NUMBERS. THIS TECHNOLOGY HAS EVOLVED
EXPONENTIALLY OVER THE PAST FEW YEARS AND WILL CONTINUE TO EVOLVE AT A
TREMENDOUS RATE.
INTERNET FRAUD DOES
NOT HAVE TRADITIONAL BOUNDARIES AS SEEN IN THE TRADITIONAL SCHEMES. NO ONE KNOWS
THE FULL EXTENT OF THE FRAUD BEING COMMITTED ON THE INTERNET. NOT ALL VICTIMS
REPORT FRAUD, AND THOSE WHO DO, DO NOT REPORT IT TO ONE CENTRAL REPOSITORY. FOR
TRADITIONAL FRAUD SCHEMES THE FBI HAS SYSTEMS IN PLACE TO IDENTIFY AND TRACK
FRAUD THROUGHOUT THE COUNTRY. FOR EXAMPLE, A CON MAN OPENS UP SHOP IN CHICAGO,
FINDS A LOCATION, OBTAINS PHONES, HIRES PERSONNEL, AND BEGINS TO DEFRAUD PEOPLE.
WHEN VICTIMS DON'T RECEIVE WHAT THEY WERE PROMISED AND REALIZED THAT THEY HAVE
BEEN DEFRAUDED, THEY WILL CONTACT THEIR LOCAL FIELD OFFICE OF THE FBI, AND
PROVIDE THE COMPLAINT INFORMATION, WHICH WILL BE FORWARDED TO THE CHICAGO OFFICE
(WHERE THE FRAUD IS OCCURRING). THE FBI IN CHICAGO RECEIVES A NUMBER OF THESE
COMPLAINTS AND INITIATES AN INVESTIGATION. FRAUD OVER THE INTERNET DOES NOT NEED
A PHYSICAL LOCATION, NOR PERSONNEL, NOR TELEPHONES. INTERNET FRAUD IS
DISJOINTED, AND SPREAD THROUGHOUT THE COUNTRY. THE TRADITIONAL METHODS OF
DETECTING, REPORTING, AND INVESTIGATING FRAUD FAIL IN THIS VIRTUAL ENVIRONMENT.
VICTIMS OF FRAUD HAVE BEEN UNSURE OF HOW OR WHERE TO REPORT WHAT THEY SEE OR
WHAT THEY HAVE EXPERIENCED ON THE INTERNET. LAW ENFORCEMENT AGENCIES HAVE
RECEIVED COMPLAINTS IN A PIECEMEAL FASHION, MOST NOT REACHING A LEVEL TO ADVANCE
THE COMPLAINT TO AN INVESTIGATION. ANOTHER PROBLEM IS VENUE, WITHOUT SOME
TECHNICAL INVESTIGATORY STEPS IT IS DIFFICULT TO IDENTIFY THE LOCATION OF A
WEBSITE OR THE ORIGIN OF AN E-MAIL.
WHAT MAKES
INTERNET FRAUD EVEN MORE OF A CONCERN FOR LAW ENFORCEMENT AUTHORITIES IS THE
CHANGING DEMOGRAPHICS OF INTERNET USERS. IN GENERAL, ACCORDING TO A RECENT
STUDY, THE ONLINE POPULATION TENDS TO BE YOUNGER, MORE AFFLUENT, AND BETTER
EDUCATED THAN THE GENERAL ADULT POPULATION.3 BUT WHILE THE 18-34 AGE GROUP IS
THE LARGEST SINGLE AGE GROUP ONLINE -- REPRESENTING 39 PERCENT OF THE WORLD WIDE
WEB POPULATION4 — THE CONSENSUS IS THAT THE 50- AND-OLDER AGE GROUP IS THE
FASTEST-GROWING AGE GROUP ONLINE.5 MOREOVER, ACCORDING TO A RECENT SURVEY, THE
50-AND-OLDER GROUP SURFED THE WEB 19 PERCENT LONGER THAN ALL WEB USERS
COMBINED.6 IF OLDER ADULTS SPEND MORE TIME ON THE INTERNET, AND HAVE MORE ASSETS
THAN YOUNGER ADULTS THAT ARE AVAILABLE FOR DISCRETIONARY USES SUCH AS INVESTMENT
OPPORTUNITIES, THEY MAY BE MORE LIKELY TO BE SOUGHT OUT BY ONLINE FRAUDULENT
SCHEMES, AS LAW ENFORCEMENT AUTHORITIES HAVE FOUND WITH TRADITIONAL
TELEMARKETING FRAUD SCHEMES. IT SHOULD THEREFORE NOT BE SURPRISING THAT A NUMBER
OF OLDER ADULTS WHO USE THE INTERNET ARE CONCERNED ABOUT SUCH SCHEMES PREYING ON
THEIR AGE GROUP.7
THE INTERNET
PROVIDES CRIMINALS WITH A TREMENDOUS WAY TO LOCATE NUMEROUS VICTIMS AT MINIMAL
COSTS. THE VICTIMS NEVER SEE OR SPEAK TO THE SUBJECTS, AND OFTEN DON'T KNOW
WHERE THE SUBJECTS ARE ACTUALLY LOCATED. CRIMES COMMITTED USING COMPUTERS AS A
COMMUNICATION OR STORAGE DEVICE HAVE DIFFERENT PERSONNEL AND RESOURCE
IMPLICATIONS THAN SIMILAR OFFENSES COMMITTED WITHOUT THESE TOOLS. ELECTRONIC
DATA IS PERISHABLE - EASILY DELETED, MANIPULATED AND MODIFIED WITH LITTLE
EFFORT. THE VERY NATURE OF THE INTERNET AND THE RAPID PACE OF TECHNOLOGICAL
CHANGE IN OUR SOCIETY RESULT IN OTHERWISE TRADITIONAL FRAUD SCHEMES BECOMING
MAGNIFIED WHEN THESE TOOLS ARE UTILIZED AS PART OF THE SCHEME. THE INTERNET
PRESENTS NEW AND SIGNIFICANT INVESTIGATORY CHALLENGES FOR LAW ENFORCEMENT AT ALL
LEVELS. THESE CHALLENGES INCLUDE: THE NEED TO TRACK DOWN SOPHISTICATED USERS WHO
COMMIT UNLAWFUL ACTS ON THE INTERNET WHILE HIDING THEIR IDENTITIES; THE NEED FOR
CLOSE COORDINATION AMONG LAW ENFORCEMENT AGENCIES; AND THE NEED FOR TRAINED AND
WELL-EQUIPPED PERSONNEL TO GATHER EVIDENCE, INVESTIGATE, AND PROSECUTE THESE
CASES. VICTIMS ARE OFTEN SCATTERED AROUND THE COUNTRY IN DIFFERENT JURISDICTIONS
OR COUNTRIES THAN THE SUBJECT(S). SUBJECTS LOCATED IN OTHER COUNTRIES ARE
INCREASINGLY TARGETING VICTIMS IN THE U.S. UTILIZING THE INTERNET. EVIDENCE CAN
BE STORED REMOTELY IN LOCATIONS NOT IN PHYSICAL PROXIMITY TO EITHER THEIR OWNER
OR THE LOCATION OF CRIMINAL ACTIVITY. IN ADDITION, LOSSES SUFFERED BY VICTIMS IN
INDIVIDUAL JURISDICTIONS MAY NOT MEET PROSECUTIVE THRESHOLDS EVEN THOUGH TOTAL
LOSSES THROUGH THE SAME SCHEME MAY BE SUBSTANTIAL. IN ORDER TO SUBPOENA RECORDS,
UTILIZE ELECTRONIC SURVEILLANCE, EXECUTE SEARCH WARRANTS, SEIZE EVIDENCE AND
EXAMINE IT IN FOREIGN COUNTRIES, THE FBI MUST RELY UPON LOCAL AUTHORITIES FOR
ASSISTANCE. IN SOME CASES, LOCAL POLICE FORCES DO NOT UNDERSTAND OR CANNOT COPE
WITH TECHNOLOGY. IN OTHER CASES, THESE NATIONS SIMPLY DO NOT HAVE ADEQUATE LAWS
REGARDING CYBER CRIME AND ARE THEREFORE LIMITED IN THEIR ABILITY TO PROVIDE
ASSISTANCE. OUR LEGAL ATTACHE PROGRAM PROVIDES CRITICAL CONTRIBUTIONS IN THESE
MATTERS.
CYBER CRIME EXISTS
ACROSS FBI PROGRAM BOUNDARIES AND WITHOUT REGARD TO INTERNATIONAL BORDERS. AMONG
THE FBI PROGRAM AREAS IMPACTED BY CYBER CRIME ARE: SECURITIES AND COMMODITIES
TRANSACTIONS, PRIME BANK SCHEMES, TELEMARKETING SCHEMES, ONLINE BANKING FRAUDS,
GOVERNMENT PROGRAM AND PRIVATE HEALTH CARE FRAUD SCHEMES, ONLINE PHARMACY
SCHEMES, ONLINE AUCTION FRAUDS, IDENTITY THEFT, INTELLECTUAL PROPERTY THEFT,
BUSINESS-TO-BUSINESS FRAUDS, NON-DELIVERY OF SERVICES, NIGERIAN LETTER
SOLICITATIONS, CREDIT CARD FRAUD, E-COMMERCE AND TRADING, E-COMMERCE AND
GOVERNMENT PROCUREMENT, ONLINE GAMBLING, ORGANIZED CRIME/DRUGS, TERRORISM,
FUGITIVES, PURCHASE AND SALE OF STOLEN/COUNTERFEIT MERCHANDISE, CHILD
PORNOGRAPHY, DENIAL OF SERVICE ATTACKS, INTRUSIONS, MONEY LAUNDERING, AND AS A
BUSINESS TOOL TO TRANSACT CRIMINAL ACTIVITY.
TO THIS POINT, WE
HAVE DISCUSSED IN GENERAL THE POTENTIAL THREAT POSED BY CYBER CRIME, WHY IT HAS
BECOME AND WILL CONTINUE TO BE ONE OF THE MOST SIGNIFICANT CRIME PROBLEMS , AND
BRIEFLY DESCRIBED SOME OF THE MYRIAD FACETS OF CYBER CRIME. I WOULD LIKE TO NOW
FOCUS THE DISCUSSION ON THE INTERNET FRAUD SCHEMES AND WHAT THE FBI IS DOING TO
ADDRESS THIS AREA OF CYBER CRIME.
INTERNET FRAUD
COMPLAINT CENTER (IFCC)
THE DEVELOPMENT
OF A PROACTIVE STRATEGY TO INVESTIGATE INTERNET FRAUD THROUGH THE ESTABLISHMENT
OF AN INTERNET FRAUD COMPLAINT CENTER (IFCC) AS A CENTRAL REPOSITORY FOR
COMPLAINTS WAS ESSENTIAL. THE IFCC WAS NECESSARY TO ADEQUATELY IDENTIFY, TRACK,
AND PROSECUTE NEW FRAUDULENT SCHEMES ON THE INTERNET ON A NATIONAL AND
INTERNATIONAL LEVEL. IT SERVES AS A CLEARINGHOUSE FOR THE RECEIPT, ANALYSIS, AND
DISSEMINATION OF COMPLAINTS CONCERNING FRAUDS PERPETRATED OVER THE INTERNET.
IFCC PERSONNEL COLLECT, ANALYZE, EVALUATE, AND DISSEMINATE INTERNET FRAUD
COMPLAINTS TO THE APPROPRIATE LAW ENFORCEMENT AGENCY. THE IFCC PROVIDES A
MECHANISM BY WHICH THE MOST EGREGIOUS SCHEMES ARE IDENTIFIED AND ADDRESSED
THROUGH A CRIMINAL INVESTIGATIVE EFFORT.
THE IFCC PROVIDES A
CENTRAL ANALYTICAL REPOSITORY FOR COMPLAINTS REGARDING INTERNET FRAUD, AND IT
ACTS AS A RESOURCE FOR ENFORCEMENT AGENCIES AT ALL LEVELS OF GOVERNMENT TO
INCLUDE REGULATORY AGENCIES. IT PROVIDES ANALYTICAL SUPPORT, AND AIDS IN THE
DEVELOPMENT AND PROVIDES TRAINING MODULES TO ADDRESS INTERNET FRAUD. THE FBI AND
THE NATIONAL WHITE COLLAR CRIME CENTER (NW3C) COSPONSOR THE IFCC . THIS
PARTNERSHIP IS MUTUALLY BENEFICIAL FOR BOTH ENTITIES IN THAT IT ALLOWS BOTH
AGENCIES TO SHARE STAFFING RESPONSIBILITIES AND, BY FORWARDING COMPLAINTS TO FBI
FIELD DIVISIONS, UTILIZE THE FBI'S INVESTIGATIVE RESOURCES TO ADDRESS THIS NEW
TECHNO CRIME.
THE IFCC IDENTIFIES
CURRENT CRIME PROBLEMS, AND DEVELOPS INVESTIGATIVE TECHNIQUES TO ADDRESS NEWLY
IDENTIFIED CRIME TRENDS. THE INFORMATION OBTAINED FROM THE DATA COLLECTED IS
PROVIDING THE FOUNDATION FOR THE DEVELOPMENT OF A NATIONAL STRATEGIC PLAN TO
ADDRESS INTERNET FRAUD.
IFCC'S MISSION IS TO
DEVELOP A NATIONAL STRATEGIC PLAN TO ADDRESS FRAUD OVER THE INTERNET, AND TO
PROVIDE SUPPORT TO LAW ENFORCEMENT AND REGULATORY AGENCIES AT ALL LEVELS OF
GOVERNMENT FOR FRAUD THAT OCCURS OVER THE INTERNET. IFCC'S PURPOSE IS THE
FOLLOWING:
• TO DEVELOP A
NATIONAL STRATEGY TO ADDRESS INTERNET FRAUD;
• TO DEVELOP
CRIMINAL INTERNET FRAUD CASES AND REFER FOR CRIMINAL PROSECUTIONS COMPANIES
AND INDIVIDUALS RESPONSIBLE;
• TO REDUCE THE
AMOUNT OF ECONOMIC LOSS BY INTERNET FRAUD THROUGHOUT THE UNITED STATES;
• TO PROVIDE AN
ANALYTICAL REPOSITORY FOR INTERNET FRAUD COMPLAINTS;
• TO RECEIVE,
ANALYZE AND REFER ALL FRAUDULENT ACTIVITY IDENTIFIED ON THE INTERNET;
• TO IDENTIFY
CURRENT CRIME TRENDS OVER THE INTERNET;
• TO DEVELOP
INVESTIGATIVE TECHNIQUES TO ADDRESS THOSE IDENTIFIED CRIME PROBLEMS;
• TO TRACK FRAUD
FACILITATED BY THE INTERNET AND PROVIDE ANALYTICAL SUPPORT OF INTERNET CRIME
TRENDS;
• TO ACT AS AN
INVESTIGATIVE RESOURCE FOR INTERNET FRAUD;
• TO DEVELOP
TRAINING MODULES TO INVESTIGATE INTERNET FRAUD;
• TO DEVELOP
INFORMATION PACKETS FROM COMPLAINTS GENERATED AND FORWARD THAT INFORMATION TO
THE APPROPRIATE LAW ENFORCEMENT AGENCIES.
PUBLIC AWARENESS OF
THE EXISTENCE AND PURPOSE OF THE IFCC IS PARAMOUNT TO THE SUCCESS OF THIS
EFFORT. THE IFCC PROVIDES A CONVENIENT AND EASY WAY FOR THE PUBLIC TO ALERT
AUTHORITIES OF A SUSPECTED CRIMINAL ACTIVITY OR CIVIL VIOLATION. VICTIMS OF
INTERNET CRIME ARE ABLE TO GO DIRECTLY TO THE IFCC WEB SITE (
WWW.IFCCFBI.GOV)
TO SUBMIT THEIR COMPLAINT
INFORMATION, RELIEVING CONSIDERABLE FRUSTRATION FOR THE VICTIM IN TRYING TO
DECIDE WHICH LAW ENFORCEMENT AGENCY SHOULD RECEIVE THE COMPLAINT. THE FBI WEB
PAGE ALSO AIDS IN THIS EFFORT. A DETAILED EXPLANATION OF THE COMPLAINT CENTER,
ITS PURPOSE AND CONTACT NUMBERS, IS PROVIDED SO THAT CONSUMERS CAN REPORT
INTERNET FRAUD. THE FBI WEB PAGE PROVIDES VICTIMS WITH A HYPERLINK TO THE IFCC
WEB PAGE. MANY OTHER CONSUMER PROTECTION WEB SITES WHICH PROVIDE INFORMATION ON
FRAUD MATTERS CONTAIN LINKS TO THE IFCC WEB SITE.
THE FBI HAS ALSO
ESTABLISHED AN INTERNET FRAUD COUNCIL WORKING GROUP CONSISTING OF FEDERAL AND
STATE LAW ENFORCEMENT AGENCIES, INTERNATIONAL LAW ENFORCEMENT AGENCIES, FEDERAL
AND STATE ENFORCEMENT AGENCIES, AND REPRESENTATIVES OF THE PRIVATE BUSINESS
SECTOR. THE GROUP'S PURPOSE IS TO CREATE A NETWORK TO SHARE INFORMATION, DISCUSS
PERTINENT ISSUES, RECOMMEND LEGISLATIVE SOLUTIONS, AND OBTAIN THE MAXIMUM
BENEFIT FOR ALL PARTICIPATING MEMBERS.
DURING THE START-UP
PHASE OF IFCC, THE ENTIRE STAFF PROCESSED INCOMING COMPLAINTS AND FORWARDED THEM
TO LAW ENFORCEMENT AGENCIES. IN ITS FIRST YEAR OF OPERATION, THE IFCC RECEIVED
36,410 COMPLAINTS, OF THOSE COMPLAINTS, 5,907 WERE INVALID, INCOMPLETE OR
DUPLICATIVE, RESULTING IN 30,503 VALID CRIMINAL COMPLAINTS. THOSE COMPLAINTS
WERE REFERRED TO AN AVERAGE OF TWO TO THREE LAW ENFORCEMENT AGENCIES. THIS
REFERRAL PROCESS HAS SPAWNED HUNDREDS OF CRIMINAL INVESTIGATIONS THROUGHOUT THE
COUNTRY. THE FBI STAFF AT THE IFCC HAVE BEGUN TO USE THE DATA TO IDENTIFY
MULTIPLE VICTIMS,
VARIOUS CRIME TRENDS AND SAME SUBJECT CASES THUS INITIATING THE INVESTIGATIVE
PHASE OF THE CENTER'S OPERATIONS. THIS PROCESS WASN'T FULLY FUNCTIONAL UNTIL
JANUARY 1, 2001. UTILIZING THIS PROCESS IN WHICH THE IFCC STAFF DRAFT INTERNET
INVESTIGATIVE REPORTS AND FORWARDS THOSE REPORTS TO MULTIPLE LAW ENFORCEMENT
AGENCIES, THE IFCC HAS INVESTIGATED AND REFERRED 545 INVESTIGATIVE REPORTS
ENCOMPASSING OVER 3,000 COMPLAINTS TO 51 0F 56 FBI FIELD DIVISIONS AND 1,507
LOCAL AND STATE LAW ENFORCEMENT AGENCIES. IFCC HAS ALSO REFERRED 41 CASES
ENCOMPASSING OVER 200 COMPLAINTS TO INTERNATIONAL LAW ENFORCEMENT AGENCIES. THE
IFCC HAS RECEIVED COMPLAINTS OF VICTIMS FROM 89 DIFFERENT COUNTRIES.
AUCTION FRAUD IS BY
FAR THE MOST REPORTED INTERNET FRAUD, COMPRISING NEARLY TWO-THIRDS OF ALL
COMPLAINTS. PAYMENT FOR MERCHANDISE THAT WAS NEVER DELIVERED ACCOUNTS FOR 22% OF
COMPLAINTS, AND CREDIT AND DEBIT CARD FRAUD MAKEUP ALMOST 5% OF COMPLAINTS.
ANOTHER 5% OF COMPLAINTS STEM FROM VARIOUS TYPES OF INVESTMENT FRAUDS AND
CONFIDENCE FRAUD SCHEMES SUCH AS HOME IMPROVEMENT SCAMS AND MULTI-LEVEL
MARKETING SCHEMES. IT HAS BEEN THE EXPERIENCE OF THE FBI THAT FURTHER
INVESTIGATION INTO THESE COMPLAINTS OFTEN REVEALS A VARIETY OF FRAUDS BEING
PERPETRATED BY SUBJECTS. SUBJECTS ENGAGED IN ONE TYPE OF FRAUD SCHEME SUCH AS
ON-LINE AUCTION FRAUD ARE FREQUENTLY INVOLVED IN OTHER TYPES OF FRAUD SCHEMES
SUCH AS BANK FRAUD, INVESTMENT FRAUDS AND/OR PONZI/PYRAMID SCHEMES.
BUSINESSES THAT
CONDUCT A SIGNIFICANT AMOUNT OF COMMERCE OVER THE INTERNET ARE EXPOSED TO LOSSES
IN THE MILLIONS OF DOLLARS DUE TO VARIOUS FRAUD SCHEMES. WITH ASSISTANCE FROM
THE PRIVATE SECTOR, THE IFCC IS DEVELOPING A BUSINESS- FRIENDLY SYSTEM FOR RAPID
DATA TRANSFER OF MULTIPLE COMPLAINTS IN AN EFFORT TO BETTER SERVE THESE CRIME
VICTIM-COMPANIES' NEEDS. THIS PROCESS WILL PERMIT THE INTERNET COMPANIES THAT
ARE EXPERIENCING THESE LOSSES TO FILE BULK COMPLAINTS AND THOSE COMPLAINTS WILL
THEN BE DISTRIBUTED BY IFCC TO THE APPROPRIATE LAW ENFORCEMENT AGENCIES.
IN EFFECT, THE IFCC
OPERATES AS PART OF A CYBER COMMUNITY WATCH IN WHICH THE SELF POLICING EFFORTS
OF HONEST AND VIGILANT INTERNET USERS AND INTERNET SERVICE PROVIDERS RESULT IN
POTENTIAL FRAUDULENT ACTIVITY OVER THE INTERNET BEING BROUGHT TO THE ATTENTION
OF LAW ENFORCEMENT THROUGH THE IFCC. THE IFCC DOES MUCH MORE THAN JUST COLLECT
COMPLAINT INFORMATION. IT ENSURES THAT THE INFORMATION, ALONG WITH ADDITIONAL
INVESTIGATIVE INFORMATION DEVELOPED BY IFCC PERSONNEL, IS DISSEMINATED TO THE
APPROPRIATE AGENCIES, AND THAT IDENTIFIED FRAUD SCHEMES CAN BE PREVENTED OR
MITIGATED. THE IFCC PROCESSES ALL COMPLAINTS IT RECEIVES REGARDLESS OF THE
ALLEGED DOLLAR LOSS. MANY OF THE COMPLAINTS RECEIVED DO NOT ALLEGE LOSSES WHICH
MEET MINIMUM DOLLAR THRESHOLDS FOR FEDERAL PROSECUTION, BUT THEY CAN OFTEN BE
SUCCESSFULLY WORKED BY LOCAL LAW ENFORCEMENT AGENCIES. AT A MINIMUM, THEY FORM
PART OF A DATABASE WHICH ENABLES IFCC TO POTENTIALLY CONNECT THEM WITH A
WIDESPREAD FRAUD SCHEME AND/OR ORGANIZED CRIMINAL GROUP. IN THIS LIGHT, ALL
COMPLAINTS ALLEGING FRAUD OVER THE INTERNET ARE IMPORTANT. NO VICTIM SHOULD FEEL
LIKE ANY LOSS THEY SUFFERED IS TOO INSIGNIFICANT TO REPORT. IT IS ONLY BY
VICTIMS AND BUSINESSES REPORTING POTENTIALLY FRAUDULENT ACTIVITY THAT LAW
ENFORCEMENT BECOMES AWARE OF IT AND CAN TAKE ACTION. THIS POINT IS MADE CLEAR BY
ACTION TAKEN TODAY BY THE FBI AND OTHER LAW ENFORCEMENT AGENCIES.
OPERATION
CYBER-LOSS
THE SUCCESS OF THE
IFCC WAS DEMONSTRATED THROUGH IFCC'S KEY ROLE IN OPERATION CYBER-LOSS.
THE FBI RECOGNIZES
THAT THE IFCC AND INITIATIVES SUCH AS OPERATION CYBER LOSS, WHILE IMPORTANT
FIRST STEPS IN ADDRESSING INTERNET FRAUD, REPRESENT MERELY THE TIP OF THE
ICEBERG WHEN IT COMES TO THE THREAT POSED BY CYBER CRIME. THEY ARE A PIECE OF A
DEVELOPING COMPREHENSIVE FBI STRATEGIC PLAN ADDRESSING ALL ASPECTS OF CYBER
CRIME WHICH WILL ALLOW THE FBI AND LAW ENFORCEMENT TO EFFECTIVELY AND
EFFICIENTLY MAINTAIN A HIGH LEVEL RESPONSE CAPABILITY AND PROSECUTORIAL SUCCESS
IN AREAS WHERE EITHER: (1) A COMPUTER SYSTEM AND/OR THE INTERNET ARE USED IN
FURTHERANCE OF A CRIME; OR (2) A COMPUTER SYSTEM IS THE VICTIM OF A CRIME. THE
USE OF A COMPUTER SYSTEM OR THE INTERNET IN FURTHERANCE OF CRIME IS NOT LIMITED
TO ONE FBI PROGRAM AREA BUT IS INCREASINGLY FOUND IN CRIMINAL INVESTIGATIVE
DIVISION AND NATIONAL INFRASTRUCTURE PROTECTION CENTER CASES. IN MANY INSTANCES
WHERE A COMPUTER SYSTEM IS SERIOUSLY TARGETED, THE PURPOSE OF THE ATTACK IS TO
FACILITATE ONGOING CRIMINAL ACTIVITY.
THE FBI IS COMMITTED
TO ENSURING THE SAFETY AND SECURITY OF THOSE WHO USE THE INTERNET WHILE
MAINTAINING AN APPRECIATION OF THE INTERNET AS AN IMPORTANT MEDIUM FOR COMMERCE
AND COMMUNICATION. FOCUSED LAW ENFORCEMENT EFFORTS WILL PROMOTE GREATER CONSUMER
CONFIDENCE AND TRUST IN THE INTERNET AS A SAFE AND SECURE MEDIUM OF COMMERCE AND
COMMUNICATION. THE IFCC SERVES AS AN EXAMPLE OF AN INNOVATIVE APPROACH TO AN
EMERGING CRIME PROBLEM. IT PROVIDES THE BENEFITS OF COMMUNITY POLICING, FORGING
AN EFFECTIVE PARTNERSHIP BETWEEN LAW ENFORCEMENT AT ALL LEVELS, ORDINARY
CITIZENS, CONSUMER PROTECTION ORGANIZATIONS SUCH AS THE NW3C, AND THE BUSINESS
COMMUNITY. ADDRESSING THE EMERGING AND DYNAMIC THREAT OF INTERNET FRAUD REQUIRES
CONTRIBUTIONS FROM ALL SEGMENTS OF OUR SOCIETY. THE FBI SERVES TO FACILITATE AND
COORDINATE THIS COLLABORATIVE EFFORT. THANK YOU.
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