Mortgage Refinancing Shysters I

Yaacov Apelbaum-The Shysters

It may be true that David Hannum was the first to observe that “There’s a sucker born every minute” (ironically, he himself turned out to be a colossal sucker), but it took the marketing genius of P.T. Barnum, the man behind such novelties as the bearded lady to turn gullibility into fortune. The world has changed significantly since the days of Barnum’s traveling freak shows where access to a new audience required lengthy cross country trips. Today, the Internet provides a virtual big top circus ripe with new ways to reel in and deceive, complete with unlimited seating for millions of new victims.

Eberhart and Kennedy in their excellent treatise “Swarm Intelligence” suggest that deception is quite common in social populations and they point out that all of us regularly practice it to one degree or another.  In support of their argument, they discuss the well documented El Farol algorithm frequently used by individuals to effectively compete in social communities in order to gain material or social advantage.

I recently I had occasion to consider this maxim and even try it on for size.  A practical and logical individual, I am by no means naive, so I was surprised—even blindsighted!—to discover that a certain financial advisor that I know personally is in fact a grade A shyster.  This got me to thinking about the varying shades of dishonesty and gullibility and the gray area that exists between telling “the truth and nothing but the truth” and outright lying especially as it pertains to financial solicitations.

You may have noticed that over the last year as the economy has spiraled out of control, the number of mail offers for mortgage refinancing has increased significantly.  The banks—which in the past were the traditional providers of such services—are still hemorrhaging profusely from the blunt trauma inflicted on them by the collapse of subprime mortgages. (I certainly don’t get any more solicitations for HELOC.) In what is further proof of the principal of horror vacui, it seems that the legitimate banking mortgage industry has now given way to a new breed of entrepreneurial ventures.  These con-corporations have smelled the blood in the water and are aggressively following Mr. Bigweld’s motto: “See a need, fill a need”.

Yaacov Apelbaum-ICG Envelope

Realizing that many of these solicitations were probably rip-offs, I decided to test the waters to see if I could find out who was behind one of them. As it happens, I didn’t have to wait long before receiving another mortgage refinancing solicitation letter. This one was from the Intercontinental Capital Group (ICG) and instead of sending it directly to my circular bin, I opened and read.

On the surface, the language and content of the letters was drastically different from the one I’m accustomed to receiving from my bank.  Whereas previous solicitations were factual and down to business, these were laced with crafty and deceptive language.

Yaacov Apelbaum-Intercontinental Capital Group Letter 1
Intercontinental Capital Group Solicitation Letter 1

Yaacov Apelbaum-Intercontinental Capital Group Letter 2  
Intercontinental Capital Group Solicitation Letter 2

After examining the details I found the following noteworthy features:

  • Disingenuous Claims of Previous Communication—In order to lower suspicions and fake familiarity, the letter claims to be a follow up on an already established relationship and ongoing communication.
  • Design to Deceive—The letter contains what on the surface appears to be a legitimate application number, a “second notice” tag, a recognizable equal housing lender logo and acronyms of well known public and federal organizations.  In fact none of these details has any significance and are there simply to create the semblance of legitimacy.
  • Vague and Deliberately Confusing Language—The letter states that ICG is “unconditionally endorsed by the U.S Department of Housing and Urban Development”.  When I called the toll free number I heard: “Thank you for calling the FHA application processing center”. ICG is certainly not a Federal Housing Administration (FHA) application processing center as the FHA neither issues loans directly nor has an application processing center.
  • Skin Deep Corporate Internet Presence—On the surface the company web site appeared to be fully functional, but when I tried to use some of its key functionality (login, change password, etc.) I quickly discovered that none of it worked.

Being deceitful in marketing is not news (see Mortgage Refinancing Shysters II for more details), so I take it for granted that any marketing campaign will always be laced with a certain amount of dishonesty, Seth Godin event thinks that All Marketers are Lairs. But “ICG” takes this to a whole new level.  This shadowy organization not only stretched their marketing collateral, they actually had some serious run-ins with several state banking regulatory agencies.

It appears that the vacuum created by the retreating lending banks is being filled in by old style confidence and run of the mill Internet scam companies. Be mindful of this and remember that “there’s no such thing as free lunch”.  If the mortgage refinancing offer you received looks too good to be true, it probably is.

Caveat Emptor.

© Copyright 2009 Yaacov Apelbaum All Rights Reserved.

An Afternoon with a Fraudster

Yaacov Apelbaum-The Fraudster

Your Friends at “Account Services”

Having spent a significant amount of time developing fraud detection algorithms and security applications, I have become accustomed to envisioning the common would-be cyber attacker as an inanimate abstract entity completely devoid of human traits; a mere abstraction, a stick figure in my UML and Test Cases. This sterile view of mine however, changed recently when I actually got a chance to spend some time one-on-one with a flesh and blood fraudster.

It started with a seemingly innocuous automated call from “Account Services”. The message informed me that I qualified for a limited time offer to lower my monthly credit card payments. I ignored that first call but shortly afterwards I received a second one. This time I opted to accept the call and was routed to a live representative. I told her that I was not interested in their services and did not want to be contact by them again.

At the tail end of the conversation as I was about to hang up, I inquired about how they got my phone number (it’s both unlisted and on the DNC registry) and to my surprise, the representative said that it came from my bank. When I asked which one, she became evasive, telling me that her company serviced all major banks. That was the moment I realized that I was the target of Credit Card fraud actively in progress.

Suddenly, my stick figure cyber attacker was no longer virtual. Instead, it became a living and breathing human being, an arm’s reach away on the other side of the line. This, I realized, was a rare opportunity to interview an attacker. I asked the individual to call me back on another line and when the phone rang a few seconds later, I raised my foreign accent by a notch, plugged the phone into my MP3 player and hit the Record button.

The representative identified herself as “Michelle. She sounded young, in her twenties. She spoke in a monotonous but confident voice, clearly a veteran of many exploits. The sales pitch was entirely script-based. She inquired about my current balance and asked if I had any interest in lowering my monthly payments. When I said, “I sure do,” she asked me for my bank and credit card information in order to “qualify” me. At that point we began a stubborn cat and mouse game where I was trying to get more information about her whereabouts and identity (real-phone number, e-mail, web address) while she was trying to get my bank and account information. This lasted for approximately 10 minutes all told.

It was only after I played back the recording and listened to it several times that I realized how sophisticated the operation was (you can hear the recording below).

The perpetrators of this scam had thought of the minutest details and prepared for every scenario. Some of the more interesting elements of the call included:

  1. Psychological Usage of Ambient Sound—During the duration of the call, I could hear incoming phone calls and chatter in the background. This recording simulating a response hotline was designed to create the illusion that I was talking to a busy call center. The objective of this subliminal messaging is similar to that used during TV fundraisers where operators are filmed sitting behind desks of ringing phones. All of it is meant to convince us that many others have already taken the plunge and that the water is “fine”.
  2. Call Traceability and Legitimacy—When I asked the rep where her call center was located she successfully identified the state that corresponded to the area code that appeared on my caller ID. I decided to test the number from my cell phone. The phone rang several times but when it was finally answered, I was routed to voicemail and encouraged to leave a message. The fact that the number yielded a response at all certainly made it appear legitimate.
  3. Well Scripted Dialogs—During the conversation, the rep responded in a consistent manner to my questions, reminding me (4 times) that I was being given the opportunity to lower my monthly interest payments. When I voiced my concern about the possibility that this call could be fraudulent, she responded calmly by stating (4 times) that even if this was the case, I would be covered for any losses by my credit card issuer as well as the Federal Consumer Protection Act.
  4. Plausibility—When I asked if I could call her back on another line to verify her number, she explained that hers was an outbound only call center. She also insisted that this was merely a screening call and that I was only a step away from being transferred to an account executive who would be happy to provide me with complete contact information.
  5. Professional Composure and Manners—Even though I asked her the same questions a number of times, she remained polite and composed, always maintaining a businesslike demeanor and projecting a image of a legitimate customer service representative.
  6. Effective Use of Higher Authority—When I insisted that not getting a manned phone number for the representative would be a deal breaker for me, she finally offered to transfer me to her manager. I was placed on hold (listening to Beethoven’s Für Elise) and was soon connected to another individual who identified herself as “LaFonda”, the floor supervisor. She sounded a bit older and more mature. She reiterated the previous sales pitch. When I finally told her that without being able to validate their authenticity I would not be able to give her my credit card number, she gave me the impression that they might deviate from their ‘account information first’ protocol. I was placed on hold again but shortly afterwards my original sales associate was back pitching the same story all over again. Finally, after one last failed sales attempt she quickly wrapped up the call and hung up.

Even though the call only lasted a relatively short time, I could not have wished for a better and more illuminating lesson. My mental image of the on-line fraudster has changed irrevocably. Whereas before I viewed fraud as an opportunistic low tech effort executed by crafty individuals, I now view it as a commercial enterprise, in many ways similar to a legitimate telemarketing niche industry. It employs a well trained workforce, cutting edge BI, telecom technology and a large database of would-be “customers”.

In retrospect, the whole experience was both sobering and frustrating. It was sobering because I finally realized that at its core, fraud is propagated via subtle means and recognizing it requires the aggregation of many nuances which individually may appear inconsequential (note that until its collapse, each individual component of Bernard Madoff’s asset management operation appeared to be entirely legitimate). In my case, the red flag went up because of my experience in the financial industry. As a rule, the association between a specific “Credit Card Service” organization and all commercial banks is unlikely. For another individual however, this certainly could have been a plausible explanation and this applies to everything else that was said during the conversation.

The frustration, on the other hand, comes from the realization that my current toolbox of risk analysis and fraud detection routines (which are primarily based on triggers like transaction frequency, amount, location and history) cannot independently identify this type of fraud and will require for at least the foreseeable future some supplemental human supervision.

© Copyright 2009 Yaacov Apelbaum All Rights Reserved.

It’s All About Trust

Yaacov Apelbaum-Trust me

Mata Hari and her bridesmaids (Robert Hanssen and Aldrich Ames)

Over the years, I’ve had this recurring conversation\argument with security technologists regarding the trust lifecycle. The crux of it revolves around how you go about effectively assigning, monitoring and adjusting individual trust levels. Most of us when questioned about trust will tell you that it’s made up of behavioral elements like:

Indeed, these are all distinct and recognizable traits, but how can we use them to design complex security solutions? After all, how do you code a function that checks if a user has a hidden agenda.

In order for these social concepts to be of any use, we need to understand the nature of trust; we must go “Beyond good and evil”. Under the microscope, trust exhibits the following four characteristics:

  1. It’s transferable—We assign a higher degree of trust to individuals who come recommended by people we already trust
  2. It’s inheritable—we tend to trust a relative of a trusted friend
  3. It’s socially derived—We tend to trust individuals who share our cultural heritage and network
  4. It’s cumulative—We tend to increase our trust levels in individuals who previously have proved themselves trustworthy

These evaluation principals (which are essentially deterministic Turing tests) work very well in social relationships, but frequently fail in complex security environments. The source of the problem is that most of us instinctively tend to classify the world into a “friend”, “foe” or “unclassified TBD” categories. We also like to believe that once categorized, the subject in question will continue indefinitely to conform to our classifications and expectations. This tendency is hard wired into our evolutionary decision making process and to a large degree also forms the basis for many irrational behaviors like anti-Semitism.

After conducting quite a few security sweeps, pen tests, and post mortems on breaches, I have come to conclude that most individuals—given the right opportunity and motive—could spontaneously flip the color of their hat.

The concept of credential-based security (that is, non-expiring clearance) is reminiscent of cheese, especially the cheap Swiss variety, the one with too many holes. Now, don’t get me wrong, I have the same tolerance for curious mice as the next guy, but the text books are full of big rats that were—paradoxically—supposed to guard the cheesy comestibles, not eat or sell them! Recall that Aldrich Ames, Robert Hanssen and Kim Philby, just to name a few, each had the highest top-secret clearance and all the right personal and social attributes. Philby, actually wrote the chapter dedicated to Counter Espionage Methods in the SOE spy training manual used at Camp X.

So ultimately, it’s not the rogue, external, blood thirsty anarchists or money hungry crackers one needs to worry about. Rather they are the trusted senior employees responsible for the daily maintenance, administration and security of the corporate resources. This could run the gamut from as high as the CISO who spies on the CEO’s e-mail all the way down to DBA who is running Select statements on the HR compensation database.

The lesson that I have learned from all of this is that most people regardless of how trustworthy they seem, cannot be completely trusted at all times.

And you can trust me on this one.

© Copyright 2008 Yaacov Apelbaum All Rights Reserved.