Senate (Special Committee on) Aging Committee Hearing
Federal Information & News Dispatch, Inc. |
Chairman Nelson, Ranking Member Collins, and members of the Committee, I am
Phone scams are a scourge that have harmed millions of Americans, including many elderly citizens. Seniors, in particular, are a frequent target of many phone scams, including imposter scams where callers trick seniors into sending them money by pretending to be a friend or relative in distress or an employee or official of a government agency or well-known business.
The Commission dedicates significant resources to identify emerging phone scams, locate the culprits, and file enforcement actions to stop the fraud and return money to consumer victims. These efforts have stopped fraudsters responsible for billions of illegal calls, and the agency will continue to pursue aggressively those engaged in imposter and other types of phone scams.
The FTC also disseminates an array of educational materials to help consumers spot and avoid phone scams. Among these materials is our recently created Pass It On package - an innovative education effort that arms older people with information about phone scams that they can "pass on" to friends or family members who might need it.
Finally, the agency has embarked on an ambitious plan to catalyze technological innovation that will hopefully lead to a telephone network that will minimize phone scammers' ability to hide from law enforcement by using fake caller ID information.
The FTC is fighting phone scams with every tool at its disposal, and this testimony briefly describes those efforts, with a particular focus on imposter scams.
I. Law Enforcement
The FTC has aggressively combatted deceptive and abusive telemarketing for decades. In the past decade, the Commission has brought more than 130 cases involving telemarketing fraud against more than 800 defendants. Although some of these cases are still in litigation, the Commission has obtained judgments of more than
Despite the Commission's efforts, the prevalence of phone scams remains unacceptably high. The most recent report by the Commission's
Consumer complaints to the FTC tell a similar story: the FTC receives tens of thousands of complaints about illegal calls every week. A number of these complaints are about imposter scams that target seniors. In these scams, the caller pretends to be a friend or relative of the call recipient or someone who works for a government agency or well-known business. In 2013, 91 percent of consumers filing complaints about imposter scams reported that the fraudster initially made contact by phone. The economic impact of such schemes is severe. Consumers who complained to the FTC of imposter scams from the beginning of 2012 until
Product Service Description Number of Complaints Reported Amount Paid
Imposter: Family/Friend 30,441
Imposter: Government 145,835
Imposter: Business 82,293
Total 257,396
Set forth below are examples of each of the three categories of imposter fraud and the Commission's enforcement efforts in each area.
A. Impersonating Family and Friends
The FTC has worked diligently to combat scams in which fraudsters call consumers and claim to be a friend or family member in distress. A prevalent example is the "grandparent scam," in which an individual receives a call from someone claiming to be a grandchild in need of immediate financial help, such as money to get out of jail or to cover hospital costs. One difficulty in shutting down this scam is that many perpetrators are located overseas, and the vast majority of victims are told to send funds through wire transfers, which are very difficult to trace. Nonetheless, the FTC continues to do the work necessary to identify and bring cases against the perpetrators of these scams.
Our recent action in FTC v.
Complementing these enforcement actions against the fraudsters, the FTC also has taken steps to cut off access to the money transfer services commonly used by perpetrators of imposter phone scams to obtain payments from consumers. For example, in 2009 the Commission reached a settlement with
B. Impersonating Government Agencies
The FTC also has sued companies claiming false affiliation with the
In one such case, FTC v.
C. Impersonating Businesses
The FTC also targets fraudsters that impersonate legitimate companies in an attempt to steal consumers' money. n10 For example, the FTC brought a series of cases against telemarketers operating overseas whom the agency alleged were calling consumers and falsely claiming an affiliation with major computer or Internet security companies. n11 The FTC charged that the telemarketers in these cases falsely claimed that consumers' computers were riddled with viruses and malware and then offered to "fix" these non-existent problems for several hundred dollars.
The FTC's actions resulted in federal court orders permanently halting these schemes and freezing the perpetrators' assets.
D. Coordinating with Criminal Law Enforcement
The Commission, through its Criminal Liaison Unit ("CLU"), coordinates extensively with criminal law enforcement agencies in combatting phone scams, including referring perpetrators of phone scams to criminal law enforcement authorities for prosecution. n12 Since the creation of the CLU in 2003, hundreds of fraudulent telemarketers have faced criminal charges and prison time as a result of FTC referrals.
Given the cross-border nature of phone fraud, the Commission also partners with foreign agencies to combat phone scams. For example, the Commission is a member of the Centre of Operations Linked to Telemarketing Fraud ("Project COLT"), a joint operation involving U.S. and Canadian agencies to combat cross-border telemarketing fraud.Since its inception in 1998, Project COLT has recovered over
In addition, the FTC is also a member of the Jamaican Operations Linked to Telemarketing taskforce ("Project JOLT"). Project JOLT is a multi-agency task force consisting of U.S. and Jamaican law enforcement agencies working cooperatively to combat Jamaican-based fraudulent telemarketing operations that target U.S. consumers. n16 The FTC, through its involvement in Project JOLT, shares information, investigative resources, and complaint data with other JOLT members. The Commission has supported multiple prosecutions in partnership with Project JOLT, including prosecutions for phone scams that targeted the elderly and impersonated government agencies to promote fake lottery schemes. n17
The above examples provide snapshots of some of the numerous ways in which the FTC uses the tools at its disposal to enforce consumer protection laws against perpetrators of phone scams. Because of the ubiquity of and harm caused by these scams, the FTC continues to make phone fraud an enforcement priority.
II. Consumer Education and Outreach
Public outreach and education is an essential means to advance the FTC's consumer protection mission. The Commission's education and outreach programs reach tens of millions people a year through our website, the media, and partner organizations that disseminate consumer information on the agency's behalf. The FTC delivers actionable, practical, plain language materials on dozens of issues, and updates its consumer education whenever it has new information to share. For example, the Commission's library of articles in English and Spanish includes pieces specifically describing grandparent scams, n18 prize and lottery fraud, n19 medical alert system robocalls, n20 and government imposter fraud. n21
In addition to providing guidance about phone scams relevant to all consumers, the FTC recently created Pass It On, an innovative education effort aimed at active, older adults. Pass It On seeks to arm older people with information that they can "pass on" to family and friends who might need it. The materials and videos available at www.ftc.gov/PassItOn are direct and to the point, with a friendly and respectful tone informed by research about the target community's preferences. The materials cover topics such as imposter and health care scams, charity fraud, and identity theft, n22 all of which are available in print in both English and Spanish.
The Commission seeks to reach older adults through the facilities where they gather or live: libraries, social and civic clubs, senior centers, adult living communities, and veterans' facilities. The FTC recently mailed information to three thousand such facilities and within three days had orders from around the country for more than two thousand copies of the Pass It On printed materials. This confirmed the demand for clear, friendly, respectful education materials for older Americans. The Commission looks forward to sharing these materials with public and private sector organizations.
The Pass It On resource works hand-in-hand with other outreach and coordination activities that have been crucial to the FTC's efforts on behalf of older people. For instance, we work extensively with the
III. Policy and Technology Initiatives
In addition to the FTC's law enforcement and outreach efforts, the agency is heavily involved in exploring and addressing technological issues that have facilitated the proliferation of fraudulent calls. The convergence between our phone system and the Internet has made phone fraud easier and created significant challenges in the investigation of these scams. In today's world of Voice over Internet Protocol ("VoIP") technology, it is not only much cheaper to send fraudulent calls; it is also easier to hide one's identity when doing so. n26
First, the typical call now takes a complex path, traversing the networks of multiple different VoIP and legacy carriers before reaching the end user. Each of these carriers can identify which carrier passed a particular phone call onto its network, but likely knows little else about the origin of the call. Such a path makes it difficult to trace a call back to its inception. In fact, tracing the call often fails because one of the carriers in the chain has not retained the records that would further an investigation. Alternatively, the process often fails to identify a perpetrator because calls can be initiated using web-based dialing software using difficult to trace payment methods, or "burner" cell phones and SIM cards that are active only for a few days and then replaced.
Second, new technologies allow callers to manipulate the caller ID information that appears with an incoming phone call. Such "caller ID spoofing" allows scammers to deceive consumers by pretending to be an entity with a local phone number or a trusted institution such as a bank or government agency. In addition, fraudsters can change their phone numbers frequently in an attempt to avoid detection.
Finally, new technologies help fraudsters operate outside the jurisdiction where they are most likely to face prosecution and move around frequently to any location in the world with an Internet connection. Indeed, all of the many different entities and companies involved in the path of a call - including lead generators, telemarketers, dialing platforms, and phone service providers - can be located in different countries, making investigations even more challenging.
The FTC has responded directly to the new technological reality by working to identify and support a variety of short-, medium-, and long-term technical solutions to fight phone scams. As one example, the Commission held its first public contest to spur American innovators and entrepreneurs into developing short-term solutions that could help consumers block illegal calls. The 2012 "Robocall Challenge," hosted on the challenge.gov platform, offered a
The FTC received 798 eligible submissions, many of which were extremely sophisticated technical proposals. As a result of the Challenge, a wide array of people with technical expertise spent countless hours working on these issues; in fact, all of the winning proposals were submitted by people who had never previously worked on the problem of illegal calls. In addition, the Challenge received overwhelming public attention and interest, helping the FTC spread the word about the steps consumers can take to fight, and prevent, illegal calls. Finally, less than six months after the Commission announced the challenge winners, one of the winners launched a new product that reportedly has already blocked more than five million unwanted calls for U.S. consumers. n28 While the FTC does not endorse any products or services, we are gratified that the Challenge stimulated the marketplace to develop innovative solutions.
On the other end of the spectrum, the FTC encourages solutions that would fundamentally shift the playing field in the fight against phone scams. A working group of the
Finally, the FTC is pursuing potential medium-term solutions identified in coordination with our many expert partners. For example, FTC staff has spearheaded a new working group of the
One of the approaches of particular interest that has emerged from Commission staff's work with experts around the world is the development of honeypots. Intelligence about illegal calls is currently limited, and a phone honeypot - i.e., an information system consisting of phone lines that are designed to attract malicious callers - can help experts and authorities understand and combat their tactics. The FTC launched such a honeypot in the fall of 2012, and since then we have been working with academics, industry, and law enforcement partners who are in various stages of creating their own honeypots. To further this promising work, the FTC will hold a contest at DEF CON 22 in August of this year, n32 offering prizes for insights about the design of robust, cutting-edge telephony honeypots. Information security specialists have used honeypots extensively, but we have seen limited overlap between their expertise and the efforts to fight phone scams. The FTC hopes to inspire some of the experts at DEF CON to apply their knowledge and creativity to create a next-generation honeypot, or perhaps even to join the growing international community of experts fighting fraudulent and unwanted calls.
IV. Conclusion
The Commission will continue its battle to protect consumers from phone scams and looks forward to working with the Committee on this important issue.
n1 The views expressed in this statement represent the views of the Commission. My oral presentation and responses to questions are my own and do not necessarily reflect the views of the Commission or any individual Commissioner.
n2 Staff Report of the
n3 These figures exclude Do Not Call registry and identity theft complaints.
To put the numbers set forth in the table numbers in context, during the same time period, complaints about imposter scams made up 4.9% of the total number of complaints the FTC received (excluding Do Not Call Registry complaints), and the total amount consumers reported losing in imposter scams was 5.8% of the total amount consumers reported as having been paid to fraudsters. Nonetheless, it is important to note that most consumers who are victims of frauds do not file complaints with the FTC, so the actual numbers of consumer victims and amounts lost in imposter scams will be higher than the amounts reflected in the FTC's complaint data.
n4 FTC v.
n5 FTC v. MoneyGram Int'l, Inc., No. 1:09-cv-06576 (
The
n6 FTC v.
n7 See, e.g., FTC v. Fed.
n8 FTC v.
n9 The district court stayed the FTC's civil action in Broadway Global due to the subsequent criminal indictment of
n10 See, e.g., FTC v.
n11 FTC v.
n12 In the Broadway Global case, the CLU referred the principal of the scheme,
n13 Project COLT members include the
n14 See, e.g., U.S. v. Kirstein, Buchan, El Bernachawy, Iacino, & Kamaldin, No. CR 13 00469 (
n15 See, e.g., Press Release,
n16 JOLT members include the FTC,
n17 For example, on
n18 See Family Emergency Scams, FTC, http://www.consumer.ftc.gov/media/audio-0052-family-emergency-scams (last visited
n19 See Prize Scams, FTC, http://www.consumer.ftc.gov/articles/0199-prize-scams (last visited
n20
n21 See Government Imposter Scams, FTC, http://www.consumer.ftc.gov/articles/0048-government-imposter-scams (last visited
n22 The FTC's Pass It On materials include a folder containing one-page articles and bookmarks that explain, in easy-to-understand terminology, how six of the most popular scams work and steps consumers can take to avoid falling victim to these schemes.
n23 The Secretary of the
n24 The FTC only refers consumers who have consented to being contacted by the
n25 The consumers from whom the Foundation gathered data reported having lost more than
n26 See Prepared Statement of the
n27 See Press Release, FTC, FTC Challenges Innovators To Do Battle With Robocallers (
n28 See www.nomorobo.com.
n29 The STIR working group involves members from government, major carriers, technology companies, and other subject-matter experts. IETF working groups are open to all who want to participate, and hold discussions on an open mailing list or at IETF meetings.
n30 The London Action Plan is comprised of government and public agencies, and anti-spam technologists from 27 countries that cooperate through law enforcement, training, information sharing, and educational initiatives to combat email and text message spam, viruses, do not call violations, and malware.
n31 Participants in M3AAWG VTA SIG include academics, law enforcers and regulators from the U.S. and
n32 DEF CON is one of the largest annual conferences of experts in computer technology.
Read this original document at: http://www.aging.senate.gov/download/?id=9ea4062e-ebc8-47d3-9469-d88ae6b687f8&download=1
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