What Is Inheritance Theft (and How Can You Protect Your Money)

If you have money, property, or other assets to pass down when you die—or if you’re a beneficiary expecting an inheritance from a relative—you want to make sure all gets distributed according to plan.

But it’s not unheard of for family conflict to complicate or completely derail the allocation of an inheritance—and this can even devolve into a type of theft known as “inheritance theft,” or “inheritance hijacking,” which could be charged as a misdemeanor or a felony. So what exactly does it involve, and how can you protect your money?

What is inheritance hijacking?

Inheritance theft may occur in a variety of ways:

  • Stealing, destroying, or forging trust or will documents.
  • Coercing or using undue influence (part of which involves “excessive persuasion”) to convince someone to change their will or trust.
  • Stealing, hiding, or diverting assets from an estate or for personal gain.
  • Abusing power of attorney authority.
  • Charging excessive fees for services related to executor or trustee duties.
  • Marrying under false pretenses for the purpose of benefiting from an inheritance.

While inheritance theft can be perpetrated by professionals aiding in estate planning or execution, it’s more likely to occur within a family or among close caretakers. Emotional manipulation is one common tactic, and usually involves a family member who is after someone’s assets trying to get closer to that person, often by doing them favors. Similarly, family members may bad mouth each other to convince the person to reallocate their inheritance.

Note that stealing assets from an older adult or forging documents related to finances is considered a form of elder abuse.

How to protect your assets from hijacking

First and foremost, start your estate planning process early, and with the help of a lawyer who specializes in this area. An experienced attorney can help you draft a sound estate planning agreement. Keep multiple sets of extensive records of anything related to your estate, and discuss your wishes clearly with those involved.

You may also consider distributing assets early so they are dispersed the way you want, says Jason Porter, a UK-based senior investment manager with Scottish Heritage SG. This could prevent coercion or diversion, though you’ll want to work with a tax prep expert to understand the impact of large gifts.

Again, because emotional manipulation among relatives is a more likely scenario than any sort of professional theft or fraud, employing legal and financial professionals who specialize in estate planning can be your best protection. You may also consider having multiple executors who are accountable for distributing your assets according to your estate plan.

How to protect your inheritance

Let’s say you’re an heir, and we’ll assume you have the best intentions to honor a relative’s wishes and be above board legally. You can watch for family members acting weird or cozying up to a relative they’ve had a lot of conflict with. Financial abuse and exploitation—mismanagement or misuse of money—can be difficult to spot, but warning signs may also include sudden changes in banking, large or unexplained withdrawals or asset transfers, and unpaid bills.

The laws governing inheritance theft and the penalties for violations vary by state, but if you suspect this is occurring, an estate planning attorney or forensic accountant can help you pursue these concerns. You can also report elder abuse to your state agency.

By: Emily Long

Source: How to Stop Someone From Stealing Your Inheritance

Critics:

The reason we create estate plans and wills is that we want to feel assured that our assets will pass on to the intended recipients. Unfortunately, our best-laid plans can go awry when Inheritance Hijacking occurs. One of the most frustrating things about inheritance theft is that it is often committed by relatives. This not only means that their actions can ruin family relations, but also that they are likely to get away with it if no proper measures are in place.

You can increase the odds that your assets reach the intended parties after you die if you take certain steps now. For example, it can be useful to discuss your estate plan with all your intended heirs present at the same time. This way, you can ensure that everyone is on the same page, making it much more difficult for the various forms of will hijacking to occur.

Ensuring that you have an attorney involved who will also be able to assist the family can help keep conversations consistent, and diminish the ability for anyone to fabricate what was said or what was intended. 

You may also want to appoint two executors to your estate. This can reduce the chances that anyone will abuse their position. It can be especially helpful to nominate a non-family professional as one of the two executors.

It is also worth considering giving assets to your heirs before you die. Not only will this keep family members from fighting over them after you are gone, but you will also get to witness your heirs enjoying your gifts while you are still around.

It can be quite difficult to prove your case if you don’t know when the theft happened or aren’t sure who is to blame. You will need to do some detective work to get the evidence you require to prove your claim in court.

If you suspect something has been stolen but aren’t sure what it is, you’ll need to conduct your own inventory of the decedent’s estate. You may notice large withdrawals from bank accounts or changes in beneficiaries with life insurance policies, retirement accounts, or of other assets. If someone else is named as the beneficiary instead of the family member or if a title was transferred to another person, you will likely need to prove that the decedent was coerced into making those changes or manipulated by someone stealing your rightful inheritance.

If the theft was of money from a business or other fraudulent activity, you may need a forensic accountant to go through the records. Of course, you won’t need to take care of all this yourself. Your probate attorney will hire someone with experience in this area.

For physical items, you may have difficulty proving the person has possession of it. If the theft is of real property or large items, such as their classic cars, the title or deed would have to be changed. You would need to prove that the decedent was manipulated or threatened into giving them the property.

For smaller missing items, you may have difficulty proving they exist. If they have significant value, these items may have been insured, such as with expensive jewelry or artwork. Many times, the thief will sell these assets quickly to get the money and remove the item from their possession.

An estate plan that is prepared in collaboration with an experienced Santa Cruz will and trust attorney is much less susceptible to inheritance hijacking than one that you prepare yourself. A seasoned lawyer can help you arrange your estate plan in a way that protects your interests and those of your heirs, leaving far less room for confusion and making it much less likely that your will could be successfully contested.

If you would like professional assistance with this process, we invite you to contact our Santa Cruz office or one of our offices located throughout the state of California by calling (800) 244-8814.

Related contents:

what-is-inheritance-hijacking

Inheritance Hijacking Defined

Inheritance Hijackers: Who Wants to Steal Your Inheritance and How to Protect It

Blood & Money: Why Families Fight Over Inheritance and What To Do About It

Inheritance Theft: Coping With Family Betrayal

Protecting Yourself From Inheritance Theft

How to Stop Inheritance Theft and Protect Your Rights

How to Recover Stolen Inheritance – Probate Advance

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How Digital Currencies Went From Boom To Collapse

Yuri Popovich had watched his neighbours’ houses burn down to the ground in Kyiv and he needed a safe place to put his money. So he did what millions of amateur investors have done in recent years: he turned to cryptocurrency. “It was impossible and unsafe to store funds in the form of banknotes. There was a big risk of theft, we also had cases of looting. Therefore, I trusted a ‘stable and reliable’ cryptocurrency. Not for the purpose of speculating, but simply to save,” he says.

The digital asset that Popovich chose in April was terra, a “stablecoin” whose value was supposed to be pegged to the dollar. It collapsed in May, sparking a rout in the cryptocurrency market whose victims include Popovich. He lost $10,000 (£8,200). Popovich says his losses were “devastating”, although donations from sympathetic onlookers on social media have helped make up some of the shortfall. He says: “I stopped sleeping normally, lost 4kg, I often have headaches and anxiety.”

Popovich is one of many experiencing the deep chill of the current crypto winter, more than four years after the market’s cornerstone, bitcoin, marked the first digital freeze by tumbling from its then peak. It went on a long tear after that but it has come to a juddering halt, with bitcoin falling below the $20,000 mark at one point this month – far below its peak of nearly $69,000, which it hit last November.

The fall has been sharp and spectacular: an overall market that was estimated to be worth more than $3tn barely six months ago is now worth less than $1tn.

Crypto boom: a new digital economy

The beginnings of the latest crypto boom held all the hallmarks of being another instance of the “Robinhood economy”, named after the popular American stock trading app. Bored white collar workers, stuck at home because of pandemic lockdowns but awash with disposable income, turned to day trading as a way to pass the time. Subscribers to the r/WallStreetBets forum on the popular online discussion site Reddit doubled over the course of 2020 and then quadrupled in the first month of 2021, as a small army of retail investors flooded into assets as varied as the then bankrupt car rental company Hertz, the troubled video game retailer GameStop and the electric car manufacturer Tesla, pushing the latter from $85 at the beginning of the pandemic to a high of $1,243 towards the end of 2021.

Cryptocurrencies also benefited from the surge in day trading. Bitcoin soared from a low of $5,000 in March 2020 to more than $60,000 a year later. The currency has had that sort of precipitous increase before: in 2017, it had risen 20-fold, to its then peak of $19,000. But in the latest boom, ethereum, the number two cryptocurrency, had an even more impressive climb, from just $120 to a high of almost $5,000 in 2021.

Cryptocurrency is the name for any digital asset that works like bitcoin, the original cryptocurrency, which was invented in 2009. There is a “decentralised ledger”, which records who owns what, built into a “blockchain”, which secures the whole network by ensuring transactions are irreversible once made. In the years since then, a dizzying amount of variations have arisen, but the core – the blockchain concept – is remarkably stable, in part because of the social implications of truly decentralised networks being immune to government oversight or regulation.

Where, 10 years ago, people simply spoke of trading in bitcoin, the space has ballooned. As well as cryptocurrencies themselves, , the sector has developed in a complex ecosystem. It encompasses Web3, a broader selection of apps and services built on top of cryptocurrencies, DeFi, an attempt to bootstrap an entire financial sector out of code rather than contracts, and non-fungible tokens (NFTs), which use the same technology as cryptocurrencies to trade in objects rather than money.

The flood of money washing into the world of crypto did more than simply inflate the paper wealth of pre-existing shareholders. Instead, it led to a surge of interest in, and funding for, the vast array of projects that aimed to capitalise on the underlying technology of cryptocurrencies. For a generation of new investors, the “decentralised finance” opportunities of the sector were appealing. Built on top of the “programmable money” of the ethereum cryptocurrency, the “DeFi” [decentralised finance] sector is an attempt to expand bitcoin’s anti-establishment ethos to cover the entire economy.

Take the comparatively small sector of the crypto market known as NFTs. A product dating back to 2014, NFTs take the tech used to create cryptocurrencies, but let creators link unique assets to the blockchain, instead of money-like currencies. That means NFTs can be traded that represent works of art, virtual collectibles, or even function as tickets to events or membership of clubs. And like cryptocurrencies, they can be bought or sold in open exchanges, held pseudonymously, and packaged up or securitised in complex financial instruments.

One token, representing years of work by the digital artist Beeple, sold for $69m; another, linked to the first tweet sent by the Twitter founder Jack Dorsey, was bought for $2.9m. Individual NFTs in the Bored Ape Yacht Club collection – the most consistently desired examples of “profile pic” NFTs, designed to be used as pre-packaged online identity – regularly sold for $1m-$3m apiece. But by the beginning of 2022, the NFT bubble appeared to have already popped. “Floor” prices for large NFT collections had plummeted, and, while many large NFT acquisitions have stayed in private collection, those that have been put back on the market have fared poorly: the Dorsey tweet was withdrawn from sale after achieving a top bid of just $14,000.

And then: the crash

The crypto crisis has played out against the backdrop of wider market problems, as fears over the Ukraine conflict, rising inflation and higher borrowing costs stalk investors. Some market watchers play down the prospect of a crypto crash triggering serious problems elsewhere in the financial markets or the global economy. The total value of all cryptocurrencies is about $1tn currently (with bitcoin accounting for about 40% of the total), which compares with approximately $100tn for the world’s stock markets.

Since November the value of all cryptocurrencies has fallen from $3tn, meaning that $2tn worth of wealth has been wiped out, with no serious knock-on effects to the broader stock market – so far. Teunis Brosens, the head economist for digital finance at the Dutch bank ING, says the traditional financial system is relatively well shielded because established banks – the cornerstones of the financial world that buckled in 2008 – are not exposed to cryptocurrencies because they do not hold digital assets on their balance sheets, unlike during the financial crisis when they held toxic debt products related to the housing market.

“What has happened in the crypto market has caused great losses for some investors and it’s all very painful and not something I want to downplay,” he says. “But it would be overplaying the role that crypto currently has in the economic and financial system if you were to think there could be systemic consequences for the wider financial system or even a global recession directly caused by crypto assets.” To date, the turmoil has been limited to the crypto sector. Digital assets have been hit by some of the same economic issues that have affected the wider global economy and stock markets. Bitcoin and other cryptocurrencies have been affected by concerns over rising inflation and the ensuing increases in interest rates by central banks, which has made risky assets less attractive to investors. This meant that as stock markets declined, so too did crypto assets.

But the collapse last month of terra also hit confidence in cryptocurrencies. In June, a cryptocurrency lender, Celsius, was forced to stop customer withdrawals. And a hedge fund that made big bets on the crypto markets slid towards liquidation. Crypto investors and firms that had made bets on the crypto market using digital assets as collateral were forced into a selling spree. Kim Grauer, the head of research at the cryptocurrency data firm Chainalysis, says: “It was a combination of the stock market plus the kind of excessive reaction that is typical of crypto markets because of these cascading liquidations. In this case the key event was terra.”

She added: “Crypto is not going away. And it has experienced crashes more severe than this crash.” Regulators and various government agencies are looking closely. Harry Eddis, the global co-head of fintech at Linklaters, a London-based law firm, says recent events in the crypto asset market will strengthen regulators’ determination to rein in the industry.“nI think it will certainly stiffen the sinews of the regulators in saying that they’re more than justified in regulating the industry, because of the obvious risks with a lot of the crypto assets out there,” he says.

In the UK, the financial watchdog continues to expand safeguards on crypto products. Its latest proposals on marketing crypto products to consumers could lead to significant restrictions on crypto exchanges operating in the UK. Consumers reported 4,300 potential crypto scams to the Financial Conduct Authority’s website over a six-month period last year, far ahead of the second place category, pension transfers, which had 1,600 reports. The FCA has 50 live investigations, including criminal inquiries, into companies in the sector.

The terra collapse has also heightened regulatory concerns about stablecoins, because they are backed by traditional assets and therefore could pose a risk to the wider financial system. In the UK, the Treasury wants a regime in place for dealing with a stablecoin collapse, saying in May that a terra-like failure could endanger the “continuity of services critical to the operation of the economy and access of individuals to their funds or assets”.

“Even just the top three stablecoins hold reserves totalling $140bn in traditional assets, much of this being in commercial paper and US treasuries. A run on redemptions of the largest coin (tether) could destabilise the entire crypto asset system and spill over into other markets,” says Carol Alexander, the professor of finance at University of Sussex Business School.

Elsewhere, the EU is drawing up a regulatory framework for crypto assets with the aim of introducing it by 2024, while in the US Joe Biden has signed an executive order directing the federal government to coordinate a regulatory plan for cryptocurrencies including ensuring “sufficient oversight and safeguard against any systemic financial risks posed by digital assets”. The Federal Trade Commission, the US consumer watchdog, says 46,000 people have lost more than $1bn to crypto scams since the start of 2021.

In general, regulators have been talking tough about cryptocurrencies. The chair of the FCA has called for “strong safeguards” to be put in place for the crypto market, while the head of the US financial regulator has warned consumers about crypto products promising returns that are “too good to be true”, while Singapore has said it will be “brutal and unrelentingly hard” on misbehaviour in the crypto market.

‘I’m sure crypto will bubble again

Where crypto goes from here is an unanswerable question. For proponents, such as Changpeng Zhao, the multibillionaire owner of the Binance cryptocurrency exchange, the sector is sure to recover – though it might take some time. “I think given this price drop … it will probably take a while to get back,” he told the Guardian last week. “It probably will take a few months or a couple of years.”

For sceptics, however, the plummet could be a lasting wound. “Bitcoin will be around for decades,” says David Gerard, author of Attack of the 50-Foot Blockchain. “All you need is the software, the blockchain and two or more enthusiasts. Unless there’s new stringent regulation, I’m sure crypto will bubble again. But if there’s a genuine consumer bubble, it may not reach the heights of this one. The 2021-22 bubble made it to the Super Bowl. As many a dotcom found out 20 years ago, there’s nowhere to go from there – you’ve reached every consumer in America.”

But one thing both sides agree on is that the dividing line between “survivable downturn” and “cryptoapocalypse” is likely to involve neither bitcoin nor ethereum, but the third biggest cryptocurrency: a stablecoin called tether. Stablecoins are a foundational part of the crypto ecosystem. Their value is fixed to that of a conventional currency, allowing users to cash out of risky positions without going through the rigamarole of a bank transfer, and enabling crypto-native banks and DeFi establishments to work without taking on a currency risk.

In essence, stablecoins function like the banks of the crypto economy, allowing people to park their money safely in the knowledge that it is not exposed to wider risk. Which means that when a stablecoin collapses, it has a very similar effect to a bank failure: money disappears across the ecosystem, liquidity dries up, and other institutions begin to fail in a domino effect. The beginning of the latest crisis in crypto was sparked by exactly that: the failure of the terra/luna stablecoin. The algorithmic checks and balances put in place to keep it stable broke – triggering a death spiral.

And so on 9 May, a stablecoin called UST “depegged”, dropping from $1 to $0.75 in a day, and then falling further, and further and further. Within four days, the luna blockchain was turned off entirely, the project declared dead. A domino effect took out other crypto establishments. Some of the “contagion” has been prevented, in part through huge loans made by Alameda Ventures, the investment arm of 30-year-old crypto billionaire Sam Bankman-Fried’s empire. Drawing comparisons to JP Morgan in the panic of 1907, “SBF” has stepped in to support the crypto bank Voyager and the embattled exchange BlockFi, and been loudly calling for support from others.

Unlike terra, tether is a “centralised” stablecoin, maintaining its value through reserves which, the company says, are always redeemable one-to-one for a tether token. The model means it cannot enter a “death spiral” like terra, but also means the stability of the token is entirely a function of how much one trusts tether to actually maintain its reserves. That trust is not a sure thing. Tether once claimed to hold all its reserves in “US dollars”, a claim that the New York attorney general’s office concluded in 2021 was “a lie”.

Tether, and Bitfinex – a bitcoin exchange that shares an executive team with, but is legally distinct from, Tether – “recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines”, Letitia James, the New York attorney general, said at the time. The two companies had transferred money back and forth to cover up insolvency, she said, and had failed to ensure tether was “fully backed at all times”, the investigation concluded.“Te ther has been the timebomb under the market since 2017,” says Gerard.

“It has reduced its market cap by 15bn USDT in the last month, and has claimed that these are redemptions, or a reduction in their holdings of ‘commercial paper’,” she says, referring to one of the key assets that Tether uses on its balance sheet: commercial paper, short-term debt issued by banks and corporations to cover immediate funding needs. Tether, for its part, remains extremely bullish – and has even suggested it may publish a formal audit of its reserves, something it said was “months away” in August 2021.

In late June, Tether announced another expansion: the introduction of the first GBP stablecoin. “We believe that the UK is the next frontier for blockchain innovation and the wider implementation of cryptocurrency for financial markets,” says Paolo Ardoino, the chief technology officer of Tether and Bitfinex. “Tether is ready and willing to work with UK regulators to make this goal a reality.” More regulation, and further market volatility, are a given. Popovich says he is still receiving donations. “I’m extremely embarrassed. Yesterday an anonymous person sent me $50 in the form of cryptocurrency. And I’ve never borrowed anything from anyone in my life. I’m scared and restless.”

Source: Crypto crisis: how digital currencies went from boom to collapse | Cryptocurrencies | The Guardian

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Scammers Have a New Way to Phish for Bank Account Information, Banker Says

A new phishing scam is hitting banking customers—and this time, the scammers make it seem like their messages are coming from the real customer service line or fraud prevention hotline.

The scam was revealed by wrestling announcer Lenny Leonard, who says that when he’s not calling body slams and sleeper holds, he’s a “mid-level executive with a very large financial institution.” In a Twitter thread, he details the new scam and how not to fall for it.

Leonard warned on Thursday that he had been called by a scammer who had spoofed the legitimate phone number to his bank. The scammer then sent a fraud alert using this number, asking if he recognized a certain charge.

In Leonard’s case, he says that when he told the scammer that he’d have to call them back, the scammer told him to look at the back of his debit card to confirm that they were calling from the same number. After telling off the scammer, Leonard says he called his bank and, sure enough, no legitimate alert had been sent, nor had any unusual activity been seen on his account.

Leonard told his followers how to not fall for the scam.

“If you EVER have someone CALL YOU and say they are your bank, do NOT provide any information like that over the phone on an INBOUND CALL,” he wrote. “Tell them you need to call them back & make sure you are dialing the number on the back of your card NOT a # they give you”.

“I would just urge everyone to make sure they are sharing this with their less tech savvy friends and family because the text I got looked EXACTLY like a prior text I had gotten from the bank my account is with,” Leonard told Newsweek.

A representative from Chase also confirmed that the company was familiar with the scam.

“Unfortunately, scammers target consumers from many banks. We urge all consumers to never share their banking passwords or send money to someone who tells them that doing so will prevent fraud on their account. Bank employees won’t call, text or email consumers asking for this information, but scammers will,” Amy Bonitatibus, Chase’s chief communications officer, told Newsweek.

While spoofing a phone number is common with scammers, often it’s a fake number as well, though Western Bank warns their customers that fake calls can come from a number they recognize.

The bank also lists a variation on the scam Leonard warns of. In the version Western Bank describes, a scammer spoofs the legitimate customer service number of the bank, like before. But this time, anticipating a response like Leonard’s, the scammer will ask the victim to call them back using the same number that’s on the back of the debit card—which is the same as the one they’re spoofing.

In this variation, though, they’ll leave the phone connection active, fooling the victim with a fake dial tone. Once the victim dials, the scammer “answers,” in hopes that the victim will be fooled into thinking the scammer is indeed a legitimate employee.

One way to thwart this is to remember that a real bank employee will already have your information. Never offer up important information like a bank account number. Instead, ask the bank employee if you can confirm their information by asking them to read off what they have.

In addition, banks will never ask for a PIN, a full Social Security number or a customer’s online banking username and password. Banks already have access to customers’ accounts, and when it comes to Social Security numbers, a legit bank employee will only ask for the last four digits to confirm.

By

Source: Scammers Have a New Way to Phish for Bank Account Information, Banker Says

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Phishing for phishing awareness”. Behaviour & Information Technology. 32 (6): 584–593. doi:10.1080/0144929X.2011.632650. ISSN 0144-929X. S2CID 5472217.

Phishing attacks and countermeasures”. In Stamp, Mark; Stavroulakis, Peter (eds.). Handbook of Information and Communication Security. Springer. ISBN 978-3-642-04117-4.

Internet Crime Report 2020″ (PDF). FBI Internet Crime Complaint Centre. U.S. Federal Bureau of Investigation. Retrieved 21 March 2021.

The Phishing Guide: Understanding and Preventing Phishing Attacks”. Technical Info. Archived from the original on 2011-01-31. Retrieved 2006-07-10.

The Big Phish: Cyberattacks Against U.S. Healthcare Systems”. Journal of General Internal Medicine. 31 (10): 1115–8. 2005). “A Leet Primer”. TechNewsWorld.

Security Usability Principles for Vulnerability Analysis and Risk Assessment”. Proceedings of the Annual Computer Security Applications Conference 2007 (ACSAC’07). Archived from the original on 2021-03-21. Retrieved 2020-11-11.

Susceptibility to Spear-Phishing Emails: Effects of Internet User Demographics and Email Content”. ACM Transactions on Computer-Human Interaction. 26 (5): 32.

Data Breach Investigations Report” (PDF). PhishingBox. Verizon Communications. Retrieved 21 March 2021.

Fifteen years of phishing: can technology save us?”. Computer Fraud & Security. 2019 (7): 11–16. doi:10.1016/S1361-3723(19)30074-0. S2CID 199578115. Retrieved 21 March 2021.

The Black Market for Netflix Accounts”. The Atlantic. Retrieved 21 March 2021.

Spear Phishing: Who’s Getting Caught?”. Firmex. Archived from the original on 2014-08-11. Retrieved July 27, 2014.

Hacking Gets Personal: Belgian Cryptographer Targeted”. Info Security magazine. 3 February 2018. Retrieved 10 September 2018.

RSA explains how attackers breached its systems”. The Register. Retrieved 10 September 2018.

Epsilon breach used four-month-old attack”. itnews.com.au. Retrieved 10 September 2018.

What Phishing E-mails Reveal: An Exploratory Analysis of Phishing Attempts Using Text Analyzes”. SSRN Electronic Journal. doi:10.2139/ssrn.3427436. ISSN 1556-5068. S2CID 239250225. Archived from the original on 2021-03-21. Retrieved 2020-11-02.

Threat Group-4127 Targets Google Accounts”. secureworks.com. Archived from the original on 2019-08-11. Retrieved 2017-10-12.

How the Russians hacked the DNC and passed its emails to WikiLeaks”

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Fighting Identity Theft With The Red Flags Rule

1

An estimated nine million Americans have their identities stolen each year. Identity thieves may drain accounts, damage credit, and even put medical treatment at risk. The cost to business — left with unpaid bills racked up by scam artists — can be staggering, too.

The Red Flags Rule1 requires many businesses and organizations to implement a written identity theft prevention program designed to detect the “red flags” of identity theft in their day-to-day operations, take steps to prevent the crime, and mitigate its damage. The bottom line is that a program can help businesses spot suspicious patterns and prevent the costly consequences of identity theft.

The Federal Trade Commission (FTC) enforces the Red Flags Rule with several other agencies. This article has tips for organizations under FTC jurisdiction to determine whether they need to design an identity theft prevention program.

An Overview

The Red Flags Rule tells you how to develop, implement, and administer an identity theft prevention program. A program must include four basic elements that create a framework to deal with the threat of identity theft.2

  1. A program must include reasonable policies and procedures to identify the red flags of identity theft that may occur in your day-to-day operations. Red Flags are suspicious patterns or practices, or specific activities that indicate the possibility of identity theft.3 For example, if a customer has to provide some form of identification to open an account with your company, an ID that doesn’t look genuine is a “red flag” for your business.
  2. A program must be designed to detect the red flags you’ve identified. If you have identified fake IDs as a red flag, for example, you must have procedures to detect possible fake, forged, or altered identification.
  3. A program must spell out appropriate actions you’ll take take when you detect red flags.
  4. A program must detail how you’ll keep it current to reflect new threats.

Just getting something down on paper won’t reduce the risk of identity theft. That’s why the Red Flags Rule has requirements on how to incorporate your program into the daily operations of your business. Fortunately, the Rule also gives you the flexibility to design a program appropriate for your company — its size and potential risks of identity theft. While some businesses and organizations may need a comprehensive program to address a high risk of identity theft, a streamlined program may be appropriate for businesses facing a low risk.

Securing the data you collect and maintain about customers is important in reducing identity theft. The Red Flags Rule seeks to prevent identity theft, too, by ensuring that your business or organization is on the lookout for the signs that a crook is using someone else’s information, typically to get products or services from you without paying for them.

That’s why it’s important to use a one-two punch in the battle against identity theft: implement data security practices that make it harder for crooks to get access to the personal information they use to open or access accounts, and pay attention to the red flags that suggest that fraud may be afoot.

Who Must Comply with the Red Flags Rule: A Two-Part Analysis

The Red Flags Rule requires “financial institutions” and some “creditors” to conduct a periodic risk assessment to determine if they have “covered accounts.” The determination isn’t based on the industry or sector, but rather on whether a business’ activities fall within the relevant definitions. A business must implement a written program only if it has covered accounts.

Financial Institution

The Red Flags Rule defines a “financial institution” as a state or national bank, a state or federal savings and loan association, a mutual savings bank, a state or federal credit union, or a person that, directly or indirectly, holds a transaction account belonging to a consumer.4 While many financial institutions are under the jurisdiction of the federal bank regulatory agencies or other federal agencies, state-chartered credit unions are one category of financial institution under the FTC’s jurisdiction.

Creditor

The Red Flags Rule defines “creditor” based on conduct.5

To determine if your business is a creditor under the Red Flags Rule, ask these questions:

Does my business or organization regularly:

  • defer payment for goods and services or bill customers?
  • grant or arrange credit?
  • participate in the decision to extend, renew, or set the terms of credit?

If you answer:

  • No to all, the Rule does not apply.
  • Yes to one or more, ask:

Does my business or organization regularly and in the ordinary course of business:

  • get or use consumer reports in connection with a credit transaction?
  • give information to credit reporting companies in connection with a credit transaction?
  • advance funds to — or for — someone who must repay them, either with funds or pledged property (excluding incidental expenses in connection with the services you provide to them)?

If you answer:

  • No to all, the Rule does not apply.
  • Yes to one or more, you are a creditor covered by the Rule.

Covered Accounts

If you conclude that your business or organization is a financial institution or a creditor covered by the Rule, you must determine if you have any “covered accounts,” as the Red Flags Rule defines that term. You’ll need to look at existing accounts and new ones6.  Two categories of accounts are covered:

  1. A consumer account for your customers for personal, family, or household purposes that involves or allows multiple payments or transactions.7 Examples are credit card accounts, mortgage loans, automobile loans, checking accounts, and savings accounts.
  2.  “Any other account that a financial institution or creditor offers or maintains for which there is a reasonably foreseeable risk to customers or to the safety and soundness of the financial institution or creditor from identity theft, including financial, operational, compliance, reputation, or litigation risks.”8 Examples include small business accounts, sole proprietorship accounts, or single transaction consumer accounts that may be vulnerable to identity theft. Unlike consumer accounts designed to allow multiple payments or transactions — always considered “covered accounts” under the Rule — other types of accounts are “covered” only if the risk of identity theft is reasonably foreseeable.

In determining if accounts are covered under the second category, consider how they’re opened and accessed. For example, there may be a reasonably foreseeable risk of identity theft in connection with business accounts that can be accessed remotely — say, through the Internet or the telephone. Your risk analysis must consider any actual incidents of identity theft involving accounts like these.

If you don’t have any covered accounts, you don’t need a written program. But business models and services change. You may acquire covered accounts through changes to your business structure, process, or organization. That’s why it’s good policy and practice to conduct a periodic risk assessment.

FAQs

  1. I review credit reports to screen job applicants. Does the Rule apply to my business on this basis alone? No, the Rule does not apply because the use is not “in connection with a credit transaction.”
  2. What if I occasionally get credit reports in connection with credit transactions?According to the Rule, these activities must be done “regularly and in the ordinary course of business.” Isolated conduct does not trigger application of the Rule, but if your business regularly furnishes delinquent account information to a consumer reporting company but no other credit information, that satisfies the “regularly and in the ordinary course of business” prerequisite.What is deemed “regularly and in the ordinary course of business” is specific to individual companies. If you get consumer reports or furnish information to a consumer reporting company regularly and in the ordinary course of your particular business, the Rule applies, even if for others in your industry it isn’t a regular practice or part of the ordinary course of business.
  3. I am a professional who bills my clients for services at the end of the month. Am I a creditor just because I allow clients to pay later?No. Deferring payment for goods or services, payment of debt, or the purchase of property or services alone doesn’t constitute “advancing funds” under the Rule.
  4. In my business, I lend money to customers for their purchases. The loans are backed by title to their car. Is this considered “advancing funds”?Yes. Anyone who lends money — like a payday lender or automobile title lender — is covered by the Rule. Their lending activities may make their business attractive targets for identity theft. But deferring the payment of debt or the purchase of property or services alone doesn’t constitute “advancing funds.”
  5. I offer instant credit to my customers and contract with another company to pull credit reports to determine their creditworthiness. No one in our organization ever sees the credit reports. Is my business covered by the Rule?Yes. Your business is — regularly and in the ordinary course of business — using credit reports in connection with a credit transaction. The Rule applies whether your business uses the reports directly or whether a third-party evaluates them for you.
  6. I operate a finance company that helps people buy furniture. Does the Rule apply to my business?Yes. Your company’s financing agreements are considered to be “advancing funds on behalf of a person.”
  7. In my legal practice, I often make copies and pay filing, court, or expert fees for my clients. Am I “advancing funds”?No. This is not the same as a commercial lender making a loan; “advancing funds” does not include paying in advance for fees, materials, or services that are incidental to providing another service that someone requested.
  8. Our company is a “creditor” under the Rule and we have credit and non-credit accounts. Do we have to determine if both types of accounts are “covered accounts”? Yes. You must examine all your accounts to determine which are “covered accounts” that must be included in your written identity theft prevention program.
  9. My business accepts credit cards for payments. Are we covered by the Red Flags Rule on this basis alone?No. Just accepting credit cards as a form of payment does not make you a “creditor” under the Red Flags Rule.
  10. My business isn’t subject to much of a risk that a crook is going to misuse someone’s identity to steal from me, but it does have covered accounts. How should I structure my program?If identity theft isn’t a big risk in your business, complying with the Rule is simple and straightforward. For example, if the risk of identity theft is low, your program might focus on how to respond if you are notified — say, by a customer or a law enforcement officer — that someone’s identity was misused at your business. The Guidelines to the Rule have examples of possible responses. But even a business at low risk needs a written program that is approved either by its board of directors or an appropriate senior employee.

How To Comply: A Four-Step Process

Many companies already have plans and policies to combat identity theft and related fraud. If that’s the case for your business, you’re already on your way to full compliance.

1. Identify Relevant Red Flags

What are “red flags”? They’re the potential patterns, practices, or specific activities indicating the possibility of identity theft.9 Consider:

Risk Factors. Different types of accounts pose different kinds of risk. For example, red flags for deposit accounts may differ from red flags for credit accounts, and those for consumer accounts may differ from those for business accounts. When you are identifying key red flags, think about the types of accounts you offer or maintain; the ways you open covered accounts; how you provide access to those accounts; and what you know about identity theft in your business.

Sources of Red Flags. Consider other sources of information, including the experience of other members of your industry. Technology and criminal techniques change constantly, so it’s important to keep up-to-date on new threats.

Categories of Common Red Flags. Supplement A to the Red Flags Rule lists specific categories of warning signs to consider including in your program. The examples here are one way to think about relevant red flags in the context of your own business.

  • Alerts, Notifications, and Warnings from a Credit Reporting Company. Changes in a credit report or a consumer’s credit activity might signal identity theft:
    • a fraud or active duty alert on a credit report
    • a notice of credit freeze in response to a request for a credit report
    • a notice of address discrepancy provided by a credit reporting company
    • a credit report indicating a pattern inconsistent with the person’s history B for example, an increase in the volume of inquiries or the use of credit, especially on new accounts; an unusual number of recently established credit relationships; or an account that was closed because of an abuse of account privileges
  • Suspicious Documents. Documents can offer hints of identity theft:
    • identification looks altered or forged
    • the person presenting the identification doesn’t look like the photo or match the physical description
    • information on the identification differs from what the person with identification is telling you or doesn’t match a signature card or recent check
    • an application looks like it’s been altered, forged, or torn up and reassembled
  • Personal Identifying Information. Personal identifying information can indicate identity theft:
    • inconsistencies with what you know — for example, an address that doesn’t match the credit report or the use of a Social Security number that’s listed on the Social Security Administration Death Master File
    • inconsistencies in the information a customer has submitted to you
    • an address, phone number, or other personal information already used on an account you know to be fraudulent
    • a bogus address, an address for a mail drop or prison, a phone number that’s invalid, or one that’s associated with a pager or answering service
    • a Social Security number used by someone else opening an account
    • an address or telephone number used by several people opening accounts
    • a person who omits required information on an application and doesn’t respond to notices that the application is incomplete
    • a person who can’t provide authenticating information beyond what’s generally available from a wallet or credit report — for example, someone who can’t answer a challenge question
  • Account Activity. How the account is being used can be a tip-off to identity theft:
    • shortly after you’re notified of a change of address, you’re asked for new or additional credit cards, or to add users to the account
    • a new account used in ways associated with fraud — for example, the customer doesn’t make the first payment, or makes only an initial payment; or most of the available credit is used for cash advances or for jewelry, electronics, or other merchandise easily convertible to cash
    • an account used outside of established patterns — for example, nonpayment when there’s no history of missed payments, a big increase in the use of available credit, or a major change in buying or spending patterns or electronic fund transfers
    • an account that is inactive is used again
    • mail sent to the customer that is returned repeatedly as undeliverable although transactions continue to be conducted on the account
    • information that the customer isn’t receiving an account statement by mail or email
    • information about unauthorized charges on the account
  • Notice from Other Sources. A customer, a victim of identity theft, a law enforcement authority, or someone else may be trying to tell you that an account has been opened or used fraudulently.

2. Detect Red Flags

Sometimes, using identity verification and authentication methods can help you detect red flags. Consider whether your procedures should differ if an identity verification or authentication is taking place in person, by telephone, mail, or online.

  • New accounts. When verifying the identity of the person who is opening a new account, reasonable procedures may include getting a name, address, and identification number and, for in-person verification, checking a current government-issued identification card, like a driver’s license or passport.
  • Depending on the circumstances, you may want to compare that to information you can find out from other sources, like a credit reporting company or data broker, or the Social Security Number Death Master File.10 Asking questions based on information from other sources can be a helpful way to verify someone’s identity.
  • Existing accounts. To detect red flags for existing accounts, your program may include reasonable procedures to confirm the identity of the person you’re dealing with, to monitor transactions, and to verify the validity of change-of-address requests. For online authentication, consider the Federal Financial Institutions Examination Council’s guidance on authentication as a starting point.11
  • It explores the application of multi-factor authentication techniques in high-risk environments, including using passwords, PINs, smart cards, tokens, and biometric identification. Certain types of personal information — like a Social Security number, date of birth, mother’s maiden name, or mailing address — are not reliable authenticators because they’re so easily accessible.

You may be using programs to monitor transactions, identify behavior that indicates the possibility of fraud and identity theft, or validate changes of address. If so, incorporate these tools into your program.

3. Prevent And Mitigate Identity Theft

When you spot a red flag, be prepared to respond appropriately. Your response will depend on the degree of risk posed. It may need to accommodate other legal obligations, like laws about providing and terminating service.

The Guidelines in the Red Flags Rule offer examples of some appropriate responses, including:

  • monitoring a covered account for evidence of identity theft
  • contacting the customer
  • changing passwords, security codes, or other ways to access a covered account
  • closing an existing account
  • reopening an account with a new account number
  • not opening a new account
  • not trying to collect on an account or not selling an account to a debt collector
  • notifying law enforcement
  • determining that no response is warranted under the particular circumstances

The facts of a particular case may warrant using one of these options, several of them, or another response altogether. Consider whether any aggravating factors raise the risk of identity theft. For example, a recent breach that resulted in unauthorized access to a customer’s account records would call for a stepped-up response because the risk of identity theft rises, too.

4. Update The Program

The Rule recognizes that new red flags emerge as technology changes or identity thieves change their tactics, and requires periodic updates to your program. Factor in your own experience with identity theft; changes in how identity thieves operate; new methods to detect, prevent, and mitigate identity theft; changes in the accounts you offer; and changes in your business, like mergers, acquisitions, alliances, joint ventures, and arrangements with service providers.

Administering Your Program

Your Board of Directors — or an appropriate committee of the Board — must approve your initial plan.  If you don’t have a board, someone in senior management must approve it.  The Board may oversee, develop, implement, and administer the program — or it may designate a senior employee to do the job. Responsibilities include assigning specific responsibility for the program’s implementation, reviewing staff reports about compliance with the Rule, and approving important changes to your program.

The Rule requires that you train relevant staff only as “necessary.” Staff who have taken fraud prevention training may not need to be re-trained. Remember that employees at many levels of your organization can play a key role in identity theft deterrence and detection.

In administering your program, monitor the activities of your service providers. If they’re conducting activities covered by the Rule — for example, opening or managing accounts, billing customers, providing customer service, or collecting debts — they must apply the same standards you would if you were performing the tasks yourself. One way to make sure your service providers are taking reasonable steps is to add a provision to your contracts that they have procedures in place to detect red flags and either report them to you or respond appropriately to prevent or mitigate the crime. Other ways to monitor your service providers include giving them a copy of your program, reviewing the red flag policies, or requiring periodic reports about red flags they have detected and their response.

It’s likely that service providers offer the same services to a number of client companies. As a result, the Guidelines are flexible about service providers using their own programs as long as they meet the requirements of the Rule.

The person responsible for your program should report at least annually to your Board of Directors or a designated senior manager. The report should evaluate how effective your program has been in addressing the risk of identity theft; how you’re monitoring the practices of your service providers; significant incidents of identity theft and your response; and recommendations for major changes to the program.12

Source: Fighting Identity Theft with the Red Flags Rule: A How-To Guide for Business | Federal Trade Commission

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‘Market Is Not Quite Ready’—Bitcoin Billionaire Issues A Serious Crypto Warning As The Price Of Ethereum, BNB, Solana, Cardano, XRP And Luna Suddenly Crash

Bitcoin and cryptocurrency prices have bounced back this week, riding a wave of positive news even as researchers warn of crypto thefts.

The bitcoin price came within touching distance of $50,000 per bitcoin but has today dropped back, losing more than $2,000 per bitcoin in a matter of hours. Ethereum has also erased its latest gains, despite traders eagerly eyeing a long-awaited upgrade.

Now, after El Salvador last week postponed its controversial $1 billion bitcoin-backed bond, outspoken bitcoin billionaire Michael Saylor has warned the market perhaps isn’t “quite ready” for bitcoin bonds.

“I’d love to see a day where people eventually sell bitcoin-backed bonds like mortgage-backed securities,” Saylor, the chief executive of business intelligence software company MicroStrategy, which has pivoted to become a bitcoin acquisition vehicle over the last two years, told Bloomberg in an interview. “The market is not quite ready for that right now. The next best idea was a term loan from a major bank.”

Last week, El Salvador, which became the world’s first country to adopt bitcoin as legal tender last year, revealed it had postponed its planned $1 billion bitcoin bond offering with the country’s finance minister Alejandro Zelaya blaming unfavorable market conditions—but El Salvador’s president Nayib Bukele blaming the delay on necessary pension reforms.

“I think this is not the time,” Zelaya said in comments reported by Reuters, with Russia’s invasion of Ukraine unsettling markets in recent weeks. “In May and June sometimes you can, but the market variables get different. After September, it is difficult to raise, unless you are previously funded, as in the case of bitcoin bond.”

The hotly-anticipated bitcoin bond, designed to fund the creation of an ultra-low tax bitcoin city in El Salvador, will have a “substantial oversubscription” that could reach $1.5 billion, according to Zelaya. Half of the funds raised will be used by the country to buy more bitcoin and the rest earmarked to develop bitcoin mining infrastructure powered by a volcano.

Earlier this week, MicroStrategy announced it’s bitcoin-focused subsidiary MacroStrategy had taken on a $205 million loan to buy more bitcoin, adding to its 125,000 bitcoin hoard. MicroStrategy stock price, up some three-fold since it first began buying bitcoin, has slide 6% this week.

The loan will give MicroStrategy “an opportunity to further our position” as the largest publicly-traded bitcoin investor, Saylor said in a statement.

I am a journalist with significant experience covering technology, finance, economics, and business around the world. As the founding editor of Verdict.co.uk

Source: ‘Market Is Not Quite Ready’—Bitcoin Billionaire Issues A Serious Crypto Warning As The Price Of Ethereum, BNB, Solana, Cardano, XRP And Luna Suddenly Crash

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Critics:

MicroStrategy CEO and Bitcoin permabull, Michael Saylor believes that traditional financial markets aren’t quite ready for Bitcoin-backed bonds. Saylor told Bloomberg on Tuesday, that he’d love to see the day come where Bitcoin-backed bonds are sold like mortgage-backed securities, but warned that, “the market is not quite ready for that right now. The next best idea was a term loan from a major bank.”

The remarks come two days after MicroStrategy’s (MSTR) Bitcoin-specific subsidiary MacroStrategy, announced that it had taken out a $205 million Bitcoin-collateralized loan to purchase even more Bitcoin. This loan was unique, as it marked MicroStrategy’s first time borrowing against its own Bitcoin reserves — which are currently valued at approximately $6 billion — to buy more of the cryptocurrency.

Saylor’s comments also follow El Salvador’s recent decision to postpone the issuance of its $1 billion dollar Bitcoin-backed “Volcano Bond” on March 23rd. According to El Salvador’s Finance Minister Alejandro Zelaya, the decision to delay the bond was due to general financial uncertainty in the global market driven by conflict in Ukraine.

In a potential warning to El Salvador, Saylor said that the country’s Volcano Bond was somewhat more risky than his company’s Bitcoin-collateralized loan,Saylor added that he remains extremely bullish on the long-term potential for Bitcoin-based bonds, going as far to say that it would be a good idea for cities like New York to use Bitcoin as a debt instrument.

Related: MicroStrategy CEO won’t sell $5B BTC stash despite crypto winterSince its initial $250-million Bitcoin investment in August 2020, MicroStrategy has now amassed a substantial 125,051 BTC — which at the current price of $44,547 equates to $5.5 billion. MicroStrategy has made a series of separate BTC purchases using the company’s cash on hand as well as the proceeds of sales of convertible senior notes in private offerings to institutional buyers.

Saylor’s actions have gradually transformed MicroStrategy into a partly leveraged Bitcoin holdings company, with MSTR shares closely correlated with the price of Bitcoin.

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