Scammers Posing as Lenders to Snatch Info

There is no Golden 1 Credit Union in Arizona, no matter what Canadian mobsters running an elaborate financial scam might have hoped their victims would believe.

The real Golden 1 found out the hard way about a new wrinkle in identity theft, in which highly mobile criminals bilk consumers by using technology and stolen credit cards to impersonate banks and credit unions. The Golden 1 case fits a pattern of crimes that police say are being committed by organized gangs in Canada.

The bunko Canadian call centers, posing as financial institutions, dupe customers into providing account numbers, Social Security numbers and other sensitive data while they think they're applying for loans. When no loans materialize, the customers often complain to the real bank or credit union that the thieves mimicked.

Sacramento-based Golden 1 is far from alone. CitiGroup, the largest bank holding company in the country, has also had its identity abused by criminals who placed ads locally for a fake company. Two such classified ads appeared in this newspaper, paid for with a bad credit card, and several others were caught before they ran.

"People are becoming more sophisticated in defending themselves from identity theft, and unfortunately the fraud artists are becoming more sophisticated in developing scams; they are tapping into the good will and good names of these other companies," said agent Nick Rossi, spokesman with the Sacramento FBI office.

The scam works like this: A dummy organization advertises using a name similar to a well-known bank, credit union or mortgage company and lists a phone number. The ads make big promises, offering money for people with no credit, bad credit or bankruptcy.

When would-be customers call and leave a message, they get a return call from a representative happy to make any loan or debt consolidation. The consumer is asked to send a check for application, appraisal or insurance fees. The victim also gives out all the private information necessary for a credit application.

They never see the loan, they never hear back from the company, and there's a good chance their credit card numbers will be used to further the scam.

When outraged consumers call to complain to the company they thought they were dealing with, they learn that they've just been added to the ranks of victims.

Concealing the tracks: The trail is hard to find. The toll-free telephone numbers go out of the country. The credit card numbers used to place the ads are stolen, as are the credit cards used to buy the cell phones and satellite phones. A whole operation can be run from one room one day and a different one the next.

"We've taken down major operations, and they just spring up again," said detective Staff Sgt. Barry Elliott of the Ontario Provincial Police in Toronto. "This is very serious stuff. In the Toronto area, at any given time, we probably have 200 rooms working. In all of Canada, it's 500 to 1,000 rooms. That means there are 5,000 to 10,000 criminals calling out every day. It is astronomical how much money they are bringing in with this."

A Canadian task force set up to combat the scams lists at least a quarter-million dollars in reported U.S. losses from about 30 cases through last August, and U.S. activity by the groups has stepped up since then. That figure doesn't include the lost time and reputation of businesses that unwillingly become false fronts for the scam.

The operations are sophisticated and highly mobile. They use wireless satellite phones and laptop computers, he said. "They have the money sent to Western Union in Canada, and the way Western Union works, they can pick up the money at any Western Union in Canada. It's really hard to catch them."

When an operation is caught and shut down in Canada, the perpetrators get two years of probation for a first offense, and perhaps a few days of jail for a second offense, Elliott said. "The Canadian justice system is just not scaring them away."

There have been cases where suspects extradited to the United States were found guilty and sentenced to long prison terms. "You'd have to kill four or five people (in Canada) to get that kind of time up here," he said.

Through education campaigns in Canada, the public has largely stopped falling for the fraud come-ons. That has left the crime groups shifting to international efforts. Canadian police have had complaints from people in 140 countries.

Repairing damage from false fronts: The crooks use names that resemble real financial institutions, ranks that include Wells Fargo, CitiGroup and Golden 1.

"They will say anything and fax anything you want to see," said Lynda Hamby, investigator with CitiFinancial Investigations. CitiGroup is working with the FBI and constable detectives in Canada to close the operations, she said.

"When they do get shut down, they just pop up somewhere else. It could be a boiler room operation somewhere, or from someone's home or from a car," she said. The scams ask for payment via Western Union, and once that wire is picked up, she said, "It's gone."

Then the consumer complains to CitiGroup, where they find out they've been cheated. "We've had complaints from customers in every state," Hamby said.

In Arizona, some company was advertising consumer loans, debt-consolidation loans and home loans under a name "Golden One International."

The Golden 1 Credit Union eventually got calls from collection agents trying to collect bills run up by Golden One International.

"We don't know who they are or what they are doing. They are definitely trying to come off as us," said Teresa Halleck, chief executive of The Golden 1 Credit Union. "They used an address similar to ours, which is how the collection agency found us, and that's how we found out about it."

The fake company offered loans, and sought to collect appraisal fees and other fees before the loan could be made. The victims sent off the checks and the company vanished.

"It is very unfortunate. The people who were victims tried to do research. They went out on the Web, and they found us. But they weren't dealing with us on the phone," Halleck said.

In some cases, said the FBI's Rossi, the criminals add insult to injury. In one scam working now, callers who claim to be attorneys are contacting people who have been swindled and asking if they want to be part of a large class-action lawsuit. They ask for a reservation fee to be included in the case, he said, in another scam to glean whatever the victims might still have.

Education efforts: The ad placements are typically ordered by fax, with the letterhead of a financial institution and a credit card number for the billing. Chances are, the credit card number is invalid, having likely been taken from one of the previous call-in victims.

The Federal Trade Commission this month asked a federal court for a restraining order against Canada-based telemarketing fraud. The FBI is also working on the case, and the joint efforts of law enforcement on both sides of the border are able to shut some telephone numbers down. But new numbers replace them.

"Enforcement and arrests are not going to stop this. It is not going to go away until the market goes away, and that means that people have to understand it," Ontario's Sgt. Elliott said. "It is a major problem and we haven't come up with a simple solution."

"Part of it is common sense," Elliott said. "If you can't get a loan where you live, you can't get a loan anywhere."

Source: Sacramento Business Journals