by Samantha
Sun Aug 08, 2010 8:22 pm
News report from the Chicago Tribune
Shipping accounts are hijacked for scams and crimes
UPS and FedEx accounts can be used by third parties for scams, and account owners pay the way
Susan Williams spent two months last spring answering calls from angry people who thought her machinery repair company had shipped them fake checks and money orders as part of a scam.
In reality, the Ohio firm's United Parcel Service account had been hijacked, allowing someone to pile up $50,000 in shipping costs on the company's account.
In a similar case, at least 9,000 consumers throughout the country received UPS envelopes that appeared to be from Montana State University. The envelopes, which also contained fake checks, racked up $180,000 in fraudulent shipping costs on the school's UPS accounts.
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This sly form of theft, in which thieves swipe shipping account numbers, has become a key part of nationwide scams and criminal enterprises.
Scammers get free and undetectable ways to ship, while unsuspecting consumers receive legitimate-looking packages that lend credibility to scams. Stolen shipping accounts also are used to move drugs and stolen products throughout the country. Companies or agencies often just pay their bills and don't notice extra shipping charges posted to their account.
FedEx and UPS, the nation's two largest shipping carriers, say fraud is an industry problem but they work hard to stop it and refund customers' money.
However, the Tribune found that shipping carriers, law enforcement and customers themselves often make it easier to commit the crimes, leaving consumers and shipping account holders at risk.
Account numbers can be easy to steal and simple to use. UPS, for example, includes account numbers as part of the tracking number on some packages.
Customers also make the mistake of posting their account numbers online for vendors or employees to use. Online hackers have been known to steal account numbers too, or use stolen credit card numbers to create accounts. And anyone who gets an account number can then send packages from a local drop box with minimal account information.
"It's unbelievable how often (organizations) get their account number ripped off," said Bill Knasinski, vice president of GENCO Supply Chain Solutions, which manages companies' logistics and audits shipping accounts.
Law enforcement agencies often don't investigate the crimes because they're difficult to track and don't meet many agencies' threshold for lost cash. UPS and FedEx credit customers' accounts for fraudulent shipping, so there's not an actual loss for police to investigate anyway. Plus, the crimes aren't usually a high priority or are orchestrated out of the country, which makes investigations difficult.
The Chicago Police Department said it investigates cases where drugs or stolen products are mailed or shipped, sometimes with fraudulent or stolen accounts.
Fraud happens through the U.S. mail too, but the Postal Inspection Service investigates those cases.
Jason Boone, a research associate with the National White Collar Crime Center, said using the U.S. mail is riskier and carries stiffer penalties so scammers rely more on private carriers.
"The goal of all of this is to remain as anonymous as possible," Boone said. "(Scammers) get away with a lot."
Scammers send mass mailings, counting on at least a few consumers to fall for their tricks. The scams fit into many categories, but all have a general premise: A consumer receives a check or money order in the mail and is told to cash it and wire a portion of the money to a company or account.
There are different excuses for wiring the money: an overpayment for something that is being sold on Craigslist or for a donation made to a charity; a fee for a loan or "investment" check; money left over from a "secret shopping" trip where consumers think they are being paid to check in on a retailer's service. Consumers cash the check and wire the money but find out too late that the check was a fake.
Consumer advocates and local law enforcement agencies warn people repeatedly about these scams, as does UPS on its Web site.
UPS and FedEx said they investigate complaints and work with law enforcement and customers to stop fraud. The companies said the best way for customers to prevent fraud is to vigilantly guard their account numbers. Neither company would detail specific fraud prevention efforts or prosecutions for security reasons.
When asked about UPS' policy of printing account numbers as part of a tracking number, spokeswoman Susan Rosenberg said more information is needed to actually send a package. But that doesn't seem to be true in all cases.
The Tribune asked a business owner to ship a package to a reporter via UPS. When the package arrived, a reporter identified the company's account number, which was printed on the front of the box as part of another number. The Tribune then shipped a package to a Chicago apartment building and simply billed the business owner's account, with the understanding that the newspaper would reimburse the costs. The package arrived the next day.
The Tribune did the same thing with FedEx but needed to be given the actual account number because the company doesn't print those on its boxes. With just the account number, a reporter was able to ship a package across town.
Rosenberg said she still doesn't think it's easy to fraudulently ship packages. "You did it on an isolated incident," she said.
FedEx said the same thing, adding that multiple shipments would raise red flags.
Nonetheless, scam artists have been able steal numbers and make large shipments.
In 2008, the Montana Department of Justice received phone calls from consumers across the country that at least 100 envelopes with fake checks were being sent through the agency's UPS account. Similar fraud has occurred on the UPS shipping accounts of multibillion-dollar companies in Illinois and elsewhere. And in 2009, the California Department of Public Health experienced a hijacking of its shipping account that normally is used to send dead birds to be tested for the West Nile virus.
Many law enforcement agencies said they warned consumers about financial scams but didn't look at the crime from a shipping angle.
The shipping carriers said they often work with local, state and federal law enforcement, but Boone, with the National White Collar Crime Center, acknowledged that in these financial scams, consumers often don't lose enough money to cause concern.
"The dollar amount won't warrant an investigation," he said. "That's one of the reasons why these things persist."
The United States Secret Service, for example, tracks trends and tries to pick up on patterns, but the agency generally won't investigate cases unless people lose more than $40,000, which is much higher than the loss in a typical scam.
Terrill Caplan, chief security officer with the nonprofit Fraud Aid, said while fraud is a major issue for shipping carriers, he thinks the companies are aggressive in their investigations.
The companies have to balance customers' desire for easy shipping while minimizing fraud that cuts into profits, he said.
Joseph Hudson, an attorney in the consumer fraud unit of the Cook County state's attorney office, said it can be difficult to persuade private industries to tighten their controls.
"It's a concern to us and we would urge businesses to check this information," he said. "But as a prosecutor, I can't impose that on them."
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Types of scams
Secret or mystery shopping scam:
1. Consumers are asked to work as "secret" shoppers to check up on retailers. The consumer is sent a check in the mail, is told to cash it, shop for products and wire back a certain amount of leftover cash.
2. Consumers wire the cash but then find out the check was fake.
3. The consumer is on the hook for the money and can't recover the wired cash.
Overpayment fraud:
1. A consumer is selling a car, bike or something online or via classified ads.
2. A buyer contacts them, says he or she is interested in buying, and sends a check.
3. The check arrives but is for too much money.
4. The buyer apologizes for the confusion and asks the seller to cash the check, keep half for their trouble, and wire the rest back to the buyer.
5. The consumer wires the cash but finds out later the check was fake.
