Retailers Need To Defend Themselves In Colorado

Written by Frank Hayes
July 19th, 2010

Corporate identity thieves are getting more ambitious by the month. In June, the FTC shut down a crime ring who created bogus companies with names that sounded similar to legitimate businesses, then opened merchant accounts to steal money from compromised payment-card accounts. Now the state of Colorado is warning that its official business-registration records are being changed by crooks who then use the forged data to get lines of credit and steal from other businesses.

Directly in the thieves’ sights: midsize retailers, whose cash flow makes them tempting fronts for anyone trying to get a fraudulent line of credit. Dozens of victims have been identified, including one retailer whose business registration was hijacked, after which more than $250,000 in merchandise was stolen using a line of credit issued to thieves posing as the retailer.

Wait, back up: Thieves are changing official state records? Yes. In Colorado’s wide-open approach to business registrations, not only can anyone view the public records on the Internet, but they can also change those records pretty much at will–no passwords or other authentication required.

Here’s how the elaborate scheme worked: Thieves identified likely target companies, mostly midsize businesses, then changed addresses, phone numbers and other contact information for each victim on the state’s business-registration Web site. Next, the thieves used the false information to apply for large lines of credit at big-box retailers. Once their credit was approved, the thieves ordered products including refrigerators, TVs and other electronic items, then took in-store delivery and carted away the merchandise charged to the hijacked business.

Changing the business-registration records without authorization is a felony in Colorado, but somehow that hasn’t deterred the thieves. And Colorado’s wide-open business-registration system remains a disaster waiting to happen, because the secretary of state’s office doesn’t have money in the budget this year to implement passwords and hire the half-dozen extra IT staffers who will be needed to handle the helpdesk load that 800,000 new passwords will bring.

That means the only people with a chance to stop the thieves are the potential victims–the businesses whose registrations can be changed on a moment’s notice.

And they can get notice the moment their registrations are changed. Colorado offers a free service in which any change to a registration automatically triggers an E-mail notification. That means business owners can know immediately when someone is stealing their corporate identities.

But not many businesses sign up for the service. And that’s ridiculous. It’s especially ridiculous because those midsize businesses–particularly midsize retailers–easily have enough IT capability to turn those E-mail notifications into full-fledged shotgun blasts.

It’s not hard to set up an E-mail account to handle just those notifications. It’s not hard to create a spam filter to eliminate everything except E-mail that actually comes from the state (which is necessary because the E-mail address would be a public record, too, and thus easily available to spammers). It’s not hard to forward those messages to everyone in the business who should be alerted when those state records change–they aren’t likely to change often, so when they do, the more people notified, the better.

It’s only slightly harder to set up a script that’s triggered when the E-mail arrives–a script that completely automates the handling of the E-mail notification, logging it, notifying legal and security departments that the company’s records have been changed at the state offices, and even parsing the E-mail to identify which fields have been changed.

This isn’t rocket science. It barely qualifies as computer science. This process is much easier than many of the tasks that retail IT shops routinely do. A little automation can let a business respond to this style of corporate identity theft at faster-than-human speed–and deal with the problem long before thieves can use the forged information.

All it requires is opting-in for those E-mail notifications. Well, that and a solid understanding that security isn’t something a retailer can leave for anyone on the outside to handle.

Colorado now says that, while it can’t afford passwords until the legislature gives the secretary of state’s office more money, it plans to set up an internal alert whenever a business’ address is changed in its records. That will make it a little harder for thieves next time around. And there will be a next time: The state says five members of one gang have been arrested in California, but other thieves using the same techniques are already at work.

Oh, and if you think you’re safe because you’re in some other state than Colorado, remember this: All it takes is one stolen password, one forged letter or one crooked state employee to put you in your own virtual Colorado.


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