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Phone Fraud Up 30 Percent

Nine out of 10 of the largest U.S. banks have been impersonated by phone fraudsters looking to steal money
An oft-forgotten or dismissed attack vector is becoming one of the weakest links for fraud in the U.S., a new study found: There are now more than five phone fraud calls placed per minute, and the volume of these scams increased by 29 percent in the first half of this year.

Meanwhile, nine out of 10 of the largest banks have been impersonated in these attacks, according to startup Pindrop Security’s State of Phone Fraud Report, 1H 2012, which was released today. Pindrop found some 1.3 million phone fraud incidents during that six-month period. The cities with the highest volume of phone fraud were Los Angeles, New York City, Chicago, Dallas, and Phoenix.

Phone fraud encompasses fraudsters posing as banks or other trusted organizations in order to gather personal information from victims and steal money from their bank accounts or pilfer their credit cards.

Fraudsters are moving to phone fraud because banks have increased physical security, as well as their network security, says Paul Judge, chairman of Pindrop. "The phone channel has become the weakest link," Judge says. "A lot of the community has overlooked the traditional phone channel" as an attack vector, he says.

These attackers typically employ a hybrid approach with a little e-crime as well: "If they break into a website and get only so far, they need to talk with the phone channel to get the rest, or vice versa," Judge says.

"It's easier to trick a call center rep than a firewall," he says.

Banks' two-factor authentication has led some attackers to employ a little phone hijacking to gather the user's password or other information, using call-forwarding attacks. Some 34 of the top 50 U.S. banks either had their brand spoofed in Caller ID, or fraudsters claimed to be them on a call.

Nearly 50 percent of fraud calls originate from voice-over-IP (VoIP) phones, while use of cell phones jumped from 5 percent last year to 14 percent this year. Google Voice was the top-abused VoIP provider, and Verizon the top-abused cell provider in these scams.

VoIP is especially popular because it's cheap, easily accessible, mobile, and difficult to trace because it allows caller ID-spoofing and provides some anonymity. "You can take it with you on your laptop ... when you travel," Judge says. "There's a combination of mobile and VoIP: You can find dozens of free apps to install on iPhone or Android that spoof CallerID and even change your voice for you. You can playback prerecorded audio, too. It's easy for anyone to set up shop" with phone fraud, Judge says.

Fraudsters also purchase multiple phone numbers for their "businesses": Pindrop found one scammer had more than 7,100 different phone numbers to carry out his attack. "They buy up phone numbers like IP addresses are purchased in the IP world. You see a fraud ring call from a call center and spoof numbers from across the country," Judge says.

Meanwhile, the criminals behind these fraud scams are typically either individuals or well-funded groups from around the world. They often cast a wide net for their victims, with a series of robo-calls that alternate between different banks. And they're after the same information a cyberscammer is after in order to make money.

How do you protect yourself? Hang up. "If someone claiming to be your bank or other company asks for sensitive information, hang up and call them back" on their verified phone number, Judge says. "Caller ID is not trustworthy."

The full report is available here for download.

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