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Back to Archives | Back to June 2013 Contents 

Combating Financial Fraud and ID Theft through Regional Partnerships

By Karen Lissy, MPH, Research Analyst, Crime, Violence, & Justice Unit, RTI International, Research Triangle Park, North Carolina; (former) Crime Analyst, Police Department, City of Redmond, Washington; and (former) Crime Analyst, Greater Puget Sound Financial Fraud and Identity Theft Task Force; and Tim Gately, Commander, Police Department, City of Redmond, Washington; and Board Member of the Greater Puget Sound Financial Fraud and Identity Theft Task Force


inancial fraud and identity theft (FIT) crimes have grown exponentially over the past decade. It has evolved from being narrow and limited, often affecting vulnerable or reckless victims and businesses, to being ubiquitous, affecting all of us. In 2010, FIT affected 1.3 million U.S. citizens with associated losses totaling more than $1.7 billion. 1 Victims experience a variety of negative effects: monetary loss, stress, inconvenience, frustration, possible impact on credit for individual victims, and tarnished brand reputation and decreased revenue for financial institutions and retailers. While some of these crimes continue to be low-tech (for example, stolen checks or credit cards from mailboxes, car prowls, residential burglaries, place of employment), some are becoming increasingly technologically sophisticated (for example, card skimming, network hacking, the sale and purchase of an individual’s personal information accessed through various means), and more frequently involve organized groups with schemes that are constantly shifting to stay one step ahead of detection.

The rise in FIT crimes can be attributed to the ease of committing the crime and the low risks of being caught or injured while committing it, in addition to the struggling economy. As a result of these increases, FIT cases require more resources. From the perspective of the consumer, it translates into additional costs at financial institutions and merchants, regardless of whether or not they have been directly victimized.

The purpose of this article is three-fold. First, it seeks to describe the problem of FIT as it has developed in western Washington. Second, it will detail the formation of a unique, regional public-private partnership (task force) that was launched in western Washington to combat growing concern among law enforcement, financial institutions, and prosecutors about FIT crimes. Finally, it will summarize lessons that Task Force partners have learned from their work in combatting FIT crimes.


Fraud and Identity Theft in Western Washington

According to the Consumer Sentinel, Washington state ranks seventh in the nation for fraud-related complaints, and seventeenth for ID theft complaints.2 While the western Washington region (Seattle-Tacoma metropolitan area encompassing King and Pierce counties) is divided into a fair number of jurisdictions to which local law enforcement is bound,3 criminals are not restricted by these arbitrary divisions. Rather, fraudsters will exploit these boundaries by perpetrating crimes in multiple jurisdictions, thereby making their group’s members and associations more difficult to identify and thereafter to prosecute. Limited resources translate into local police detectives being restricted to investigate primarily those crimes that occur within their agencies’ territorial boundaries. Finding a detective who is willing to work large-loss, multi-jurisdictional cases (though whose loss is not large enough to warrant federal attention) is challenging.

Criminals also know about monetary thresholds adopted by various law enforcement and financial institutions. In the Seattle-Tacoma metropolitan area, many mid- to large-sized financial institutions do not investigate fraud losses below certain levels, generally ranging from $1,000 to $5,000. Combined losses fewer than $100,000 generally will not be prosecuted at the federal level in western Washington. Criminals know about these thresholds and use them to their advantage.

As previously mentioned, the crime of FIT is infrequently a primary crime; it is more frequently related to an initial offense (such as, mail theft, purse theft, car prowl, burglary, and so forth), from which personal or financial information is obtained to commit FIT. It is therefore vital that investigators be cognizant of the crossover effect between these types of property crimes, and that investigators who track FIT crimes communicate with those individuals following these associated property crimes to efficiently identify repeat offenders and their patterns.

Recent cuts in the budgets of law enforcement, corrections agencies, and prosecutors’ offices have further complicated the FIT issue through reduced investigations and prosecutions. A lack of coordination between local jurisdictions can prevent prosecutors from knowing about and presenting multiple counts. Prison overcrowding further complicates the issue, allowing for the early release of nonviolent offenders, a group that includes FIT recidivists.

Traditionally, fraud losses suffered by financial institutions are reported to local police departments. The victim financial institution will also file the requisite Bank Secrecy Act (BSA) forms—for example, Suspicious Activity Reports (SARs or SAR-Fs) or Currency Transaction Reports (CTRs) pursuant to federal guidelines in the applicable situations. However, sometimes this suspected criminal activity or loss information is filed with BSA, but it is not reported to local law enforcement. If the loss is low (that is below the institution’s threshold) and BSA requirements do not apply, the financial institution may elect to do nothing; in other words, any loss is absorbed internally. In the cases when a police report is filed, police departments dispatch a patrol officer who collects pertinent information and files a routine report that might or might not be seen by detectives, depending on the loss amount and the ability to identify a crime. If the report is forwarded to the Investigations Division, screening to determine solvability can result in additional delays. Overall, the process of reporting to local police departments is fraught with problems: it can discourage financial institutions from reporting fraud

  • if the system is cumbersome,
  • if their cases infrequently receive further investigation and attention by law enforcement,
  • if their case involves multiple jurisdictions so it is not obvious where to file, or if financial institutions believe that filing requisite BSA forms is adequate reporting.4

As much as multi-jurisdictional cases are challenging for law enforcement, they can be even more frustrating for financial institutions: Where does one go if small losses are occurring all over, and how can it get law enforcement’s attention?


Task Force Formation and Activities

To fight the rise in FIT crimes, in 2006, regional financial institution investigators, in conjunction with local law enforcement jurisdictions and state prosecutors, lobbied the Washington state legislature to form a statewide task force. Funded by a state tax on banks’ Uniform Commercial Code (UCC) filings, the task force aggressively targets, arrests, and prosecutes financial crimes and ID theft through improved communication and coordination (that is improved partnerships). The state tax provided the funding base for two task forces: one in Seattle-Tacoma metro area (western Washington, also known as the Puget Sound region) and a second one in Spokane (eastern Washington).

In western Washington, representatives from six of the largest regional financial institutions, along with members of local law enforcement, state prosecutors from each county, and a representative from the State Attorney General’s Office, formed the board membership for the Greater Puget Sound Financial Fraud and Identity Theft Task Force (GPS FFIT TF).5 Investigators from different—in fact, competing—financial institutions partnered with law enforcement to identify and build financial fraud investigations and to prosecute cases against prolific FIT offenders. One agency represented on the board was selected as the fiduciary agent, while the entire board determines funding allocations for employees, equipment, and special projects. Currently comprising 15 members, the board is under the auspices of the Washington State Department of Commerce, to which it submits regular progress reports.6

With the resources given to it, the GPS FFIT TF hired a full-time detective, a part-time analyst, and a part-time state prosecutor. The detective primarily investigates cases in Pierce County, whereas the analyst mainly collects, tracks, and disseminates information about prolific FIT suspects and offenders; serves as a liaison between the task force’s entities, and helps to combine cases for state prosecution. The prosecutor focuses on multi-jurisdictional cases and aggressively prosecutes the FIT top offenders. The goal was that this 3-prong approach (detective-analyst-prosecutor) would help to keep multi-jurisdictional suspects with low monetary losses from being ignored by identifying similar cases across financial institutions, investigating them, and combining them for prosecution.

Once individuals were identified to fill the three prongs of the approach (detective-analyst-prosecutor), the GPS FFIT TF lobbied local police chief organizations in King and Pierce counties for support. Thereafter, its strategy was to facilitate annual regional trainings and seminars that bring together law enforcement officers, prosecutors, and financial institution fraud investigators. These popular trainings provide opportunities to share knowledge and skills, as well as facilitate multi-jurisdictional networking through the sharing of information about offenders.

An important component of this partnership is improved information and intelligence sharing between these law enforcement and private entities. Since the primary responsibility for public-private sharing rested on the shoulders of the agency that hosted the analyst, the agency initially consulted with its city attorney to gain clear interpretation of applicable federal, state, and local laws governing data-sharing as they relate to law enforcement investigations, including those associated with storing criminal intelligence data (such as, 28 CFR Part 23).7 This foundation of understanding of allowable sharing has been of paramount importance, and the attorney is consulted annually to ensure that the analyst, his or her supervisor, and the police department are clear on any updates to or new interpretations of applicable rules and regulations.

Redmond, Washington, Police Department serves a city of 55,000 and is located approximately 20 miles east of Seattle.

Based at the Redmond, Washington, Police Department, the GPS FFIT TF analyst is housed with other regional analysts who focus on complementary crimes, especially regional auto theft. The Redmond Police Department was one of the first local police jurisdictions to endorse the FIT initiative as it had previously recognized the value of regional collaboration while combating auto theft crimes. Indeed, its involvement in a regional auto theft partnership in early to mid-2000s led to significant reductions in auto theft.8

The part-time state prosecutor also serves a vital role. Prior to the formation of the GPS FFIT TF, detectives would file charges against suspects via the standard method: prepare the case and send it to the Filing Unit. The case would then be routed any number of directions, including to different prosecutors and different judges. With the formation of the GPS FFIT TF, the cases are now sent to one unit and handled by someone who is familiar with the type of case (and often familiar with the offender). Furthermore, state prosecutors in different counties communicate with one another prior to filing charges on a multi-jurisdictional offender to determine how to maximize the judicial effect. This streamlined process allows the criminal justice system to operate as it was intended: holistically. Instead of separating the work functions of law enforcement, financial institutions, prosecutors, and the courts, the systems are working in concert to produce convictions for multiple crimes even those committed in multiple jurisdictions. These bundled multiple offense cases are expected to result in lengthier prison sentences for offenders.

Another function of the GPS FFIT TF is to improve communication by offering opportunities for sharing, networking, and training among all levels of law enforcement and regional financial institution fraud investigators. In support of this goal, the GPS FFIT TF has sponsored and co-sponsored free or low-cost didactic trainings and networking events. Task force members have worked to identify gaps in knowledge for both law enforcement and financial institution fraud investigators and filled those gaps through sharing and cross-training. Past events have included an all-day financial investigations training sponsored by the U.S. Department of Treasury’s Financial Crimes Enforcement Network (FinCEN), training by local investigators to share information about emerging trends in FIT, and a course on improved open source intelligence (especially Internet) searches. Along the same lines, it has also compiled and disseminated key information on various topics, such as a summary chart of regional facial recognition and biometric identification resources that law enforcement can tap into to assist in identifying suspects.


Lessons Learned

Throughout the past six years that GPS FFIT TF has developed and evolved, it has generated a number of lessons that may assist other jurisdictions choosing to implement a similar program.

  1. Buy-in from upper management at financial institutions, within local law enforcement, and at prosecutor’s offices is paramount. Their support is necessary to make this effective and successful.

  2. Listen to the financial institutions, particularly those with fraud investigators who have a local or regional focus. Large, regional cases begin here with minor losses or mere suspicious activity. Seasoned financial institution fraud investigators often have acute instincts as to what events are concerning or troubling.

  3. Public-private partnerships involving two-way information and intelligence sharing are challenging. Due to laws restricting certain information and data systems to law enforcement, involve appropriate attorneys early in the process to identify potential pitfalls and provide support and guidance based on rules and regulations for the expected types of activities or sharing that will be performed. Provide training and access to attorneys for those in the position of sharing and his or her supervisors. Be aware that each jurisdiction may differ in its interpretation.

  4. Detectives who are willing to take on complex, multi-jurisdictional cases are greatly needed. Recruit detectives and their supervisors early (related to buy-in from local law enforcement leaders) if funds are not available to support a detective separately.

  5. Recognize that neither small nor midsized (<500 commissioned officers) local police departments are likely to have direct access to search BSA data, such as SARs and Currency Transaction Reports. Make sure there are adequate directives or memoranda of understanding in place to ensure access to these reports in a timely fashion, as they can greatly assist a department’s ability to identify and combine cases that might not have been reported to local police (that is local police detectives are otherwise unaware of their existence).

  6. Not all linking case information fits nicely into a database. Connecting cases frequently might involve similar names, dates of birth, social security numbers, business names, addresses, phone numbers, cars and license plates, and so forth, but FIT cases are also frequently combined based on similar surveillance photographs. Catalog unknown suspect photographs for ease of recall and summarize and disseminate local and regional resources for facial recognition and biometric identification to law enforcement.

  7. Providing opportunities for cross-training and networking has been a popular means to improve communication and foster understanding among all levels of law enforcement, financial institution fraud investigators, and prosecutors. It is possible to hold free or low-cost, high-impact events by simply tapping existing local resources and obtaining community donations and support.

  8. With the proliferation of merchants providing check-cashing services, issuing stored value cards (gift cards), and serving as money service businesses, consider including retailers in a FIT partnership.

  9. Consider creating a steady, self-replenishing funding stream. Currently, funding for the GPS FFIT TF is scheduled to sunset in 2015. If funding were to come from a more stable, recurring source (such as a surcharge or tax on driver’s licenses), the task force would have more solid footing.

  10. Identify the goals and objectives of any efforts from the beginning (ideally, before any changes are implemented) and use them to develop process and outcome measures for a rigorous evaluation. With limited budgets, continued funding will be more likely for initiatives that can measure and then demonstrate continued success.

While most experts anticipate that FIT crimes will continue to grow more complex, sophisticated, and organized, creative partnerships such as those formed by this Task Force become all the more worthwhile as a regional community investment. The GPS FFIT TF has tapped the best resources of both worlds (private and public sectors), and combined them together to combat financial crimes across the region. By assigning specific personnel to target financial crime cases, law enforcement, prosecutors, and financial institution fraud investigators are using all the data available to target criminals and disrupt their nefarious activities. ♦


Notes:

1Federal Trade Commission, Consumer Sentinel Network Data Book for January–December 2010 (Washington, D.C.: Federal Trade Commission, March 2011), www.ftc.gov/sentinel/reports/sentinel-annual-reports/sentinel-cy2010.pdf (accessed January 5, 2012). This figure is considered an underestimate of true loss, as 14 percent of the 1.3 million reporting these crimes failed to record the amount paid (or lost).
2Federal Trade Commission, Consumer Sentinel Network Data Book for January–December 2010.
3For example, King county comprises 39 law enforcement jurisdictions. King county encompasses 1.9 million residents including the city of Seattle, Washington. It is the most populous county in the state and the 14th most populous in the United States. U.S. Census Bureau, “State and County Quickfacts,” http://quickfacts.census.gov/qfd/states/53/53033.html(accessed May 1, 2012).
4While federal law enforcement has direct access to search BSA data (such as SARs), most mid-sized or small local police departments do not have direct access. Depending on access within the state, local police departments may have a cumbersome process or experience significant delays in obtaining requested information if the case has no direct nexus to a federal agency.
5GPS FFIT TF currently comprises representatives from Bank of America, BECU, JPMorgan Chase, KeyBank, US Bank, and Wells Fargo Bank; Auburn Police Department, Federal Way Police Department, Pierce County Sheriff’s Department, Redmond Police Department, Seattle Police Department, Tacoma Police Department, King and Pierce County Prosecuting Attorney’s Offices, and the Washington State Attorney General’s Office.
6An example of a progress report—Financial Fraud and Identity Theft Investigation and Prosecution Program: Report on Progress, Task Forces, and Recommendations RCW 43.330.300 (Olympia, Wash.: Washington State Department of Commerce, December 2009)—may be found online at www.leg.wa.gov/documents/legislature/ReportsToTheLegislature/Financial%20Fraud%20and%20ID%20Theft%20Report%202009_214aa74e-0d27-4e63-9166-1258d06ab535.pdf (accessed April 23, 2013).
728 CFR Part 23 (www.it.ojp.gov/documents/28cfr_part_23.pdf) relates to the storage of law enforcement sensitive intelligence data. For more information, please visit www.iir.com/28CFR_Program/~/Home/28CFR_Program/28CFR_FAQ/ (both accessed April 19, 2013).
8Doug Shepard, “ATTACKing Auto Theft in Washington State: The Redmond Initiative,” The Police Chief 76 (April 2009): 124–129, www.policechiefmagazine.org/magazine/index.cfm?fuseaction=display_arch&article_id=1777&issue_id=42009 (accessed January 12, 2012).


Please cite as:

Karen Lissy and Tim Gately, "Combating Financial Fraud and ID Theft through Regional Partnerships," The Police Chief 80 (June 2013): 64–68.

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From The Police Chief, vol. LXXX, no. 6, June 2013. Copyright held by the International Association of Chiefs of Police, 515 North Washington Street, Alexandria, VA 22314 USA.








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