Wtf? Where’s the Fraud?: How to Unmask and Stop Identity Fraud’s Drain on Our Government

Copyright © 2015 Larry Benson and Andy Bucholz.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

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ISBN: 978-1-4808-2560-4 (sc)

ISBN: 978-1-4808-2561-1 (hc)

ISBN: 978-1-4808-2562-8 (e)

Library of Congress Control Number: 2015920795

Archway Publishing rev. date: 12/22/2015

CONTENTS

List Of Commonly Used Acronyms

Foreword

Introduction

Chapter 1 Identity Theft: Why You Should Care And How Much It Costs Us

Chapter 2 How Fraudsters Fraud: The Information Gold Mine

Chapter 3 Benefits Gone Astray, And How The Government Deconstructed Our Security

Chapter 4 The Fraud Of The Future: Healthcare Fraud

Chapter 5 So, What Do We Do Now?

Conclusion

Bibliography

LIST OF COMMONLY USED ACRONYMS

FOREWORD

Lying, like dancing, takes two. Both rely on a strong leader, and a partner willing to follow. When lying, you must be both confident and determined. You have to steer the lie the exact way you need it to go, otherwise you could end up knocking over the punch bowl in the corner. Your dance partner must be able to follow the lie, and believe it.

I am no dance expert, but I am an expert at deception. For several years, telling quick lies and impersonating other people was my livelihood. I was effective, though unwise. Before I was 22 years old, I convinced people I was a doctor, a lawyer, a security guard, a professor, and even a pilot. At that time, the crucial part of the act was not mine, but my partner’s. For the lie to be successful, my partner had to believe the lie I was putting before their eyes.

Today, this particular kind of lying, identity theft, has changed. It is far simpler than it used to be: There is no couple dancing around each other. Today, you don’t have to rent a costume and walk with confidence. Today, there is no one you have to convince. The government agencies will dance with anyone, freely giving benefits, often more than once, to just about anyone who asks.

Today’s identity fraud allows for the convenience of sitting at home in your pajamas plugging numbers into a computer. Many government agencies rely on self-reported data that allows fraudsters to perpetrate identity fraud in bulk. When I was pulling scams, I could only do one at a time. I needed my dance partner to believe the lie I was telling. Now, self-reported data takes away one of the biggest blockades to identity fraud: that of an agency’s perception.

Self-reported data does not elicit doubts, as all the information these systems receive are perceived as true. Back in 2001, I authored a book called The Art of the Steal, where I noted that identity theft would be the crime of the future. Unfortunately, I was right. Over the last few years, we have watched identity theft explode into a booming criminal industry. In 2007, I published another book entirely dedicated to preventing identity theft.

Despite our best efforts, however, identity theft has only grown. Now, it is more prevalent than ever. Currently, there is a victim in the United States every two seconds. Identity theft is one of the most insidious crimes because it can truly wreck someone’s life. Unlike more violent crimes or physical robberies, identity theft steals you: your past, and your future. Identity theft allows criminals to cripple individuals, from college graduates trying to start their life with a first credit card to elderly people in nursing homes whose life savings suddenly evaporate. Identity theft acts as a doorway through which people have unlimited potential: with someone else’s identity, the options are almost limitless. Have money in the bank? It can disappear. Have good credit? It can dry up in minutes. If I can become you, what I can do is only limited by my imagination—buy a car in your name, get a mortgage in your name, obtain a job in your name, receive benefits in your name, and even commit a crime in your name.

Back when I was assuming different identities, I never took on the guise of one specific individual. My goal was always to portray myself as a type of person by taking on a specific occupation. Now, identity theft has become more targeted. When you steal a person’s identity, you take on their most personal aspects. You have to become that person in a myriad of ways, but most specifically through their Social Security number. When I was working on the other side of the law, I was most focused on using fraudulent checks to fund my adventures. Check fraud required a lot of work: the right tools such as a printing press, the correct paper and ink, an operating knowledge of the checks and banks you’re looking to defraud, and a winning personality to help smooth out any kinks in your performance. Technology certainly helped make check fraud more feasible by making high quality printers and embossing tools available to the public. Scanners and color copiers are a fraudster’s dream. Today it is still technology that is moving the fraud game forward. Now, though, the technology is almost entirely online, in code and programming, nonphysical tools that, in the wrong hands, can be used to amass huge amounts of money and wreck lives.

Even though the technology fraudsters use has changed, some of the same rules seem to apply. Whether someone is using a fake ATM machine simply to scan credit and debit cards (yes, this is an actual scam that people have pulled), or taking advantage of a long-term identity theft, such as stealing the identity of an infant and taking advantage of it for the next eighteen years, simplicity is always the key. The criminal mind works as if it’s always solving some sort of puzzle, and finding the easiest and quickest solution is the way to sort it out. Stealing someone’s identity requires almost daily attention. Being a fraudster is like having a full-time job (which is why I advise employers to be wary of employees who never take advantage of their vacation time, as they may be working for themselves on the side).

Streamlining these schemes is essential, especially since the current technology allows for so many different schemes to go on at once. Identity thefts are not usually elaborate criminal exploits, but are more likely to be connected with an administrator or employee pocketing a few forms and filling out tax returns with the stolen information on it. These schemes can be as simple as changing the address to a P.O. box from which you can collect the money. What I want to emphasize is that identity theft is easy. It’s easy to pull off, it’s easy to reconcile with yourself from a moral standpoint (much more so than mugging someone at knifepoint), and it’s easy not to get caught. What isn’t as easy, it seems, is stopping it.

Prevention of identity theft has come a long way since 2007, but we still have a long way to go. When there is a system in place, there is always someone out there who can defeat it, or who already has. Our world will always have criminals who are looking to beat the system, or to work around it. What we need to do is stay ahead of them, instead of having them stay ahead of us. By having technology work for us instead of the fraudsters, we have a chance of staying ahead of the criminal mind.

Identity theft and identity frauds are increasing every day. Crooks are finding new and inventive ways to bilk the system. Unfortunately, not everyone is taking this problem as seriously as they should. Government agencies often don’t realize the kind of strain fraud-related crimes put on our economy, and the more dangerous threats that fraud also poses. In my years of advising agencies on identity fraud, forgery, embezzlement, secure documents, and identity theft, I’ve seen million dollar losses turn into billion dollar losses. What we have not seen -- until now -- is the world of mass data breaches, where one hacker, with a single keystroke, can take down entire business customer files and government databases. The last three years have seen several companies that are household names lose credibility and customer trust. Our data is out there, and we are not taking the adequate steps to keep it secure. The book you are about to read tells a cautionary tale about the latest wave of fraud, this wave against our government, and why it is so dangerous. Unless we take proactive steps to cut down on fraud, it will only get worse. Take it from me, catching a fraudster is not as easy as it looks. Education is the key, and this book will help.

Frank Abagnale

Subject of the book, movie and Broadway musical, Catch Me If You Can.

INTRODUCTION

Government fraud tied to identity theft is the largest, fastest growing crime in America. Yet, most people don’t recognize the danger it poses to millions of Americans and our economy.

Remember that old story where Jacob literally pulls the wool over his father Isaac’s eyes? He uses a goat’s skin to fool his father into thinking that Jacob is his older brother Esau, in order to win a blessing from Isaac. Identity theft has always been with us, even from the time of the Old Testament.

Today, technology has opened the door to identity theft on an unprecedented scale. Millions of people are probably already affected, some seriously, and many without even realizing that their identities have been stolen.

Consider the story of Carter Andrushko. He was five years old when his mother applied for Medicaid -- and discovered that someone had been using his Social Security number. The assistant attorney general in Utah, where the family lives, told Jennifer Andrushko that thousands of Social Security numbers are sold on the streets daily. A large-scale study by Carnegie Mellon University done in 2009-2010 found that more than 10% of the 76 million children, 7.6 million kids, have likely been victims of identity theft. That’s a staggering number. If Carter and those other kids are lucky, they won’t have a problem later in life when they go to apply for their first job or credit card, or when they want to buy a house. But there’s no way to know. Once your identity is stolen, it can’t be returned.

You might be saying: This is old news. I’ve heard about banks and big stores coping with identity theft for years. But what’s new now, and the reason we’re writing this book, is how stolen identities are being used: to steal from the government in ways that affect all of us.

Identity theft for government benefits and payments is growing at an unprecedented rate. Two decades ago, you applied for government benefits, like Social Security or your driver’s license, with paper and often in person. Stealing someone’s identity using those old-fashioned systems was arduous: Thieves had to steal identities one person at a time, and there was a good chance they would be spotted. In-person human judgment and intuition on the part of the people behind the desks in the brick-and-mortar buildings kept many frauds from occurring.

Today, many government agencies have done away with in-person applications (one