Businesses fall prey to cyberthieves' cunning

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Among the growing ranks of consumers, business owners and others being lured by the convenience of online banking are legions of cybercrooks who have found the technology a convenient way to steal from unsuspecting victims.


More than 72 million households now manage their money online - up from about 12 million a decade ago, according to the financial services firm Fiserv. It's unclear how many of them have been targeted by crooks, but the FBI and a consortium of other government agencies reported in October that "thousands of businesses, small and large, have reportedly fallen victims to this type of fraud" with municipalities and nonprofit organizations increasingly coming under attack. And unlike individuals, they lack legal protections for their losses.

Ann Talbot learned of the danger four years ago when nearly $21,000 was taken from the bank account of her general contracting firm, Golden State Bridge. Then in May last year, cybercrooks struck her Martinez, Calif., company again, making off with about $100,000 from another account.

By then, Golden State had taken out an online-theft insurance policy, which limited its liability to about $10,000, according to Talbot, the company's chief financial officer. Even so, she is wary of the outlaws preying increasingly on those who bank via the Web.

"It's a huge problem," she said, adding that many people "have no idea of the threat out there."

It's just not lay people, either. FBI Director Robert Mueller told the Commonwealth Club of California in 2009 that he stopped online banking after getting an email that appeared to be from his bank, but that he realized was bogus after answering a couple of its questions.

After that, Mueller said, his wife told him, "no more Internet banking for you."

-In September last year, federal prosecutors in New York announced criminal charges against 37 people in a global online scheme that allegedly netted the crooks more than $3 million, including $130,000 from an unidentified hospital's California bank account.


-In October 2009, lawbreakers tried to abscond with $87,000 from a Danville, Calif., church, according to the Washington Post. Luckily, the transfers were blocked by the church's bank. Last August, the Catholic Diocese in Des Moines, Iowa lost several hundred thousand dollars in an online banking breach.

-In April last year, Aleksey Volynskiy was sentenced to 37 months in prison for plotting with hackers in the U.S. and Russia to loot individual Charles Schwab brokerage accounts.

Sarah Bulgatz, a spokeswoman for Charles Schwab, said the accounts were accessed through the victims' computers and not those of her company, adding that Schwab reimburses individuals for such losses. Under the federal Electronic Fund Transfers law, the liability of consumers who report an online bank loss within two days of discovering it is limited to $50 and only after 60 days are they liable for the entire amount.

But the law doesn't protect commercial, governmental or nonprofit enterprises. And the sizable sums those entities often maintain in their financial accounts make them attractive quarry for criminals. Of 504 small and medium-size businesses recently surveyed by Guardian Analytics, which helps banks and credit unions prevent theft, 32 percent said they had experienced an online-banking scam during the previous year.

While some banks have taken steps to prevent such larceny, many others have left themselves easy prey to hackers, who are becoming highly organized and using increasingly sophisticated tactics, said Guardian CEO Terry Austin. With more and more people banking online, he added, "the banking industry in general needs to step up to provide a higher level of security."

Some people - including Talbot of Golden State Bridge - also are urging lawmakers to give commercial ventures the same reimbursements afforded individuals. They have formed an online organization - Cyber Looting Awareness & Security Project - to lobby for the change.

That worries the American Bankers Association. It fears that if a company was shielded from liability the way a consumer is, "the business would be less inclined to take the protection measures necessary to protect their online accounts," which might prompt banks to stop offering online services, said the group's spokesman Doug Johnson.

He added that banks are working with law enforcement authorities to try to limit such crimes but that the problem is increasing because more people are banking online.

Still, many others are reluctant to send their financial information across the Internet. Of the more than 3,000 respondents to a survey by German security software firm Avira in November, 31 percent - nearly one out of three - said they avoid online banking entirely for fear of being ripped off.

Even a security expert can get hoodwinked, said Larry Ponemon of the Ponemon Institute, a data-protection research outfit in Michigan. After recently receiving an email that seemed to be from his bank, "I came really close to doing something silly" that might have compromised his finances, he said. "The bad guys are getting really smart."

One of the crooks' methods is to send a person a "spear phishing" email containing a malicious attachment. Once the person opens it, their computer is infected with malware that snaps up their bank-account login information, allowing the thief to masquerade as the person and steal their money.

Another common scam is to create websites that look just like those of real banks. When people mistakenly give the sites their financial information, criminals use it to make withdrawals.

The increasing numbers of people who bank via their cell phones face another threat, according to a report in November by viaForensics, a Chicago information security firm. It discovered that some phones stored the owner's financial data, making the information vulnerable if the phone is lost. Bogus banking applications for phones also have been designed to steal money from anyone using them.

Although banks are working to fix some of the phone vulnerabilities, "it's still pretty bad out there," said Andrew Hoag, viaForensics' chief investigative officer.

Unfortunately, by the time many people realize their savings have been hijacked, there's little they can do to get it back, said David Johnston, whose Modesto, Calif., electric sign business, Sign Designs, lost about $20,000 two years ago when thieves broke into its online account and transferred the money overseas.

"I was very angry," he said. "Your money should be safe in the bank."

(c) 2011, San Jose Mercury News (San Jose, Calif.).
Distributed by McClatchy-Tribune Information Services.
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US defense: $1 million soldier war budget!

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The $1 million soldier: What's wrong with how we budget war?U.S. soldiers stand guard before the opening ceremony for a newly completed mosque in a village in southern Kandahar province, Afghanistan. By Lawrence Korb and Laura Conle

Lawrence Korb, a former assistant secretary of defense in the Reagan administration, is a senior fellow at the Center for American Progress. Laura Conley is a research associate at the center.
The two-week-old military action in Libya has prompted a frenzy of headlines and sound bites about the operation's cost.

Can the United States afford it?

The short answer is "yes." The defense budget exceeds $500 billion a year, so the Pentagon has money on hand to pay for Libya.

But that's not the whole story. The recent events in Libya have opened up a long-standing and important debate about how we pay for our wars and military endeavors around the world.

The crux of the problem is that in recent years, Congress has paid for wars through emergency supplemental bills. At the same time, other defense costs were allowed to spin out of control.

And the costs have added up: The total bill for the wars in Iraq and Afghanistan has reached $1.5 trillion to date.

Estimates of the cost for boots on the ground in Iraq and Afghanistan vary, but some researchers place the average bill as high as $1 million per troop per year in Afghanistan and more than $600,000 in Iraq. Therefore, the cost of deploying 100,000 troops in Afghanistan this year will amount to over $100 billion.

These estimates depend on a wide range of factors, including transportation costs, the need to build facilities to handle an influx of personnel, and whether troops deployed are primarily active duty or activated reservists. (The latter lead to additional personnel costs, as they are not regularly paid a full-time salary.)

Can seized Libyan assets pay for the war?

Congress hasn't always funded wars through separate supplemental budgets. The costs for the conflicts in Vietnam and Korea for the most part were folded into the regular budgets that were submitted to Congress. And while the overall size of the budgets rose during those years, they did not rise to fully reflect the total cost of the war.

In order to keep the total federal budget in balance, the Pentagon eliminated some marginal programs not connected to the war.

Thus from 1964, the last year before the buildup, to 1969, the height of the buildup in Vietnam, the overall defense budget increased $27 billion to $79 billion. But when the actual war costs were subtracted, the 1969 defense budget declined in real terms by $15 billion, or 29%.

Similarly, in the Korean War, the Defense Department received a supplemental war budget only in 1951, the first year of the conflict. By 1953, the overall defense budget was actually lower than it was in 1951.

The Bush administration adopted a completely opposite approach to funding its wars.

Not only did it provide the Pentagon with more than $1 trillion in supplementals, it allowed the base budget to grow from $290 billion in fiscal year 2001 to over $500 billion by the time Bush left office.

Moreover, President Bush allowed the Pentagon to shift items like the F-22 fighter plane and V-22 aircraft, which belonged in the base budget, into the supplemental.

Military health costs up 300%

The majority of the costs for Libya, especially since the president has said he won't order ground forces, can be funded through the regular defense budget.

For example, some fuel, maintenance and personnel costs for operating U.S. B-2 bombers over Libya will be partially offset by the regular defense budget because those planes would be flown periodically, in any case, for training purposes.

Similarly, planes and ships used in the operation are normally deployed to the Mediterranean on a routine basis. In other words, we do not have to pay extra to have them there.

Finally, even after firing some 160 Tomahawk missiles, the U.S. still has over 3,000 in its inventory, more than enough to deal with any likely contingency.

Of course, it remains to be seen how much the Libyan operation will end up costing U.S. taxpayers.
But if Congress and the administration choose to go outside the regular defense budget to fund it, they should learn the lessons of the past decade and offset the full amount of the supplemental through cuts in the regular defense budget for fiscal year 2012. 

War in an age of deficits

Obama's defense costs not what they seem

Slaying the sacred cow

What the budget looks like in 2020

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Corrupted Customs racket busted: gold bars, cash seized from dirty Customs officers!

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Customs racket busted 
 New Straits Times

PUTRAJAYA - A nationwide swoop on Customs officers has resulted in 62 staff being arrested so far, with 17 of them to be remanded soon.

Of the total, 48were from Port Klang, one of five Customs premises raided over theweek by a high-powered task force led by the Malaysian Anti- Corruption Commission. The other premises were in Kuantan, Penang and the Tanjung Pelepas and Pasir Gudang ports in Johor.

Those arrested were rank and file and senior officers, among them nine female staff.
The arrests were disclosed by MACC investigation division director Datuk Mustafar Ali here yesterday. He said some of the officers had been released on bail.

The task force, which on Monday had crippled a network involving Customs officers that had been siphoning billions of ringgit of the country's revenue, is investigating the smuggling of some RM10 billion(S$4.2bil) overseas.

The MACC said the amount was based on investigations and from questioning the 62 officers who had been arrested.

Following the arrest in the east coast of a state Customs director and his wife for their alleged involvement in the network earlier this week, Mustafar said 17 officers would be remanded soon under the ongoing Ops 3b.

The 17 are believed to be part of the network, which is alleged to have been asking and receiving gratification from forwarding agents, to reduce duties and to expedite processes involved in bringing in imports.

Mustafar said during the surveillance and probes into the officers' involvement, MACC had noted highflying lifestyles of not only some of the senior officers but also among the rank and file.
He said long before Ops 3b, which began on March 28, Customs officers at the ports, including junior officers, were seen driving posh cars.

Investigations revealed that many of them had hundreds of thousands of ringgit in their bank accounts.
Checks also revealed that one officer had RM10,000 credited into his account seven times.

At the home of an officer, the task force found at least RM12,000, while others had invested RM200,000 in Amanah Saham Bumiputera. Among other items believed to be illicitly obtained were a luxury gold watch and two fake guns with 241 bullets, as well as flashy cars.

Mustafar said the officers also revealed that they were receiving between RM100 and RM500 for each Customs declaration form in which the importer had under-declared the value of the items brought in.

It was also disclosed that in one raid on Friday, a Customs officer was found with three bags of cash, totalling about RM625,000, and five gold bars worth RM50,000.

"One of these officers had half-amillion ringgit in his account and another had RM850,000.

"We are going all out to plug the gaps for these dirty hands, which results in billions of ringgit in losses to the country," he said, adding that investigations would also determine the source of the money and items that were in their possession.

On the case of the state director, Mustafar said initial findings revealed that the director had several accounts and one of it had RM2.1 million.

He added that the remand of the director had been extended but his wife had been released.

-New Straits Times

Gold bars and bags of cash among items seized from dirty Customs officers

By LESTER KONG and LOURDES CHARLES newsdesk@thestar.com.my

PUTRAJAYA: Gold bars and bags of cash containing up to RM600,000 have been discovered in the homes of several Customs officers during raids by the Malaysian Anti-Corruption Commission (MACC).

Other ill-gotten stash included luxury watches and posh cars.

The MACC seized millions of ringgit from at least five of the 62 Customs officers arrested to date in a series of raids over under-declaration of duties and tax evasion.

MACC investigation director Datuk Mustafar Ali said a Customs director arrested last Tuesday had millions of ringgit spread over several bank accounts.

Another officer had almost RM1mil in his bank acount. Two others had between RM500,000 and RM850,000, he told a press conference yesterday.

It is learnt that investigations by a task force estimated that about RM10bil had been smuggled out or remitted overseas.

Last week, the MACC revealed that the raids were carried out as part of investigations into organisations believed to be involved in under-declaration of duties, tax evasion and money laundering.

Yesterday, Mustafar said that several officers had admitted to collecting “fees” ranging from RM100 to RM500 for every Customs declaration K1 form submitted and approved. (K1 forms are meant for imported goods.)

Up to RM10,000 is believed to have been collected for the K1 forms, which contained details of shipments and their dutiable value.

Such crimes, he said, accounted for RM108bil annually in unpaid duties and income tax.
On the MACC raids, Mustafar said: “Our officers found gold bars in the home of one officer.
“Another one had more than RM600,000 in several bags in his house.

“A senior officer had two imitation pistols with more than 200 bullets, besides fireworks and cigarettes,” he said, adding that the raiding team also seized high-end watches and posh cars from the officers concerned.

It is learnt that nine of the 62 arrested to assist in investigations are women. Those caught are aged between 24 and 56.

Mustafar said investigations were still ongoing and that more people would be picked up. He hinted that at least 100 forwarding agents were also being investigated for bribery.

To a question, he said the Customs unit based in Port Klang was the most corrupt with 48 officers arrested.

Malaysian gutter politics: sex video, like a blast from the past to end up as Three Stooges?

It's like a blast from the past
On The Beat By Wong Chun Wai

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There is a sense of déjà vu in the sex video case but this time, public expectations seem to have changed.

IT’S now called a sex video and the footage is probably only contained in a thumb drive. But 22 years ago, during the analogue days, they came in the form of the bulky VHS (video home system) tapes.

The visual on tape was often poor and grainy, especially if taken with a hidden camera and in bad lighting. But if they involved political figures, the intrigue and curiosity created would have been no less strong.

There would be the typical open declaration of disgust and anger over such intrusion of privacy but most would want to know more, especially the identities of the people involved.

The controversy over the sex video involving a man resembling Opposition Leader Datuk Seri Anwar Ibrahim is like a replay of an old video, or “rewind” as it used to be called.


Twenty-two years ago, DAP’s Karpal Singh walked into the Dewan Rakyat with an expose of a sex video implicating then Dewan Rakyat deputy speaker D.P. Vijandran. The press was tipped off earlier about this tape, which purportedly featured the bachelor politician and a woman in a yellow saree.

Karpal told Parliament then that he was exposing the MIC leader in “public interest” while then Prime Minister Dr Mahathir Mohamad expressed regret that the issue had been exploited so much that those allegedly involved were being “persecuted”.

At the height of the issue, this writer received a call from Vijandran who pleaded for the story not to be reported. He also called reporter K.P. Waran at the New Straits Times, hoping for the same thing. But we both told him that it would not be possible.

He then issued a statement criticising the Opposition’s call for the setting up of a Special Tribunal or Royal Commission of Inquiry.

There is certainly a sense of déjà vu among veteran journalists today.

Karpal Singh was regarded as quite a hero for his expose then, and even MIC boss S. Samy Vellu was asked by DAP to resign because of the controversy.

Vijandran, who was then the MIC secretary-general, denied he was the man in the video. In fact, when the issue went to court, he maintained that it was not him.

Political enemies would be blamed but, like most sex videos, they are often the work of people closest to the politician. Blaming the former is often a political reaction.

In Vijandran’s case, he blamed his nephew, S. Ravindran, for using a hidden camera to film him in a compromising situation. In his affidavit, he accused Ravindran of “splicing and superimposing his (Vijandran) image onto the pornographic tape portraying him as an actor”. In short, the tape was doctored. It wasn’t him, he maintained.

Fast forward to the present. No one would claim credit for such gutter politics but the Datuk Trio of Tan Sri Rahim Tamby Chik, Datuk Shazryl Eskay Abdullah and Datuk Shuaib Lazim have unprecedentedly taken responsibility for their action. They are also claiming “public interest” as grounds for doing what they did.

Eskay, a former physiotherapist to Anwar and who is said to be the closest to the Opposition Leader, even signed off a press release as “the insider” and dropped hints that he knew more.

Rahim has rebutted allegations that he had an old political score to settle with Anwar. Not many political analysts, however, are convinced.

Umno leaders have said Rahim has not done the party a favour and they are privately saying he lacks credibility. Many have said they are being blamed for something they had no hand in and that they are nervous over how the drama would end.

In 1998, Umno Youth leader Ruslan Kassim, who was aligned to Anwar, alleged that Rahim was the publisher of the book 50 Reasons Why Anwar Cannot Be PM.

Rahim retaliated by suing him for RM15mil. The case only ended in 2004 with Ruslan, who had by then joined PKR, making an open apology to the former Malacca Chief Minister.

Old soldiers may fade away but in Malaysia it would appear that old political enemies will stay on to renew their fights. Anwar certainly has plenty of old enemies both inside and outside his party.

The trio has called for foreign experts to verify the identity of the man in the video.

Interestingly, during Vijandran’s trial, Dr Alfred David Linney, a University College of London specialist in planning and assessment of facial reconstruction, said the actor in the tape was a different person.

In fact, the defence witness testified that “if both the men were the same person, then their facial angles will not differ very much”.

Another defence witness, Japanese forensic anthropologist Masatsugu Hashimoto, testified: “It is wrong to state that the two earlobes of the man are the same because at least 14 points of similarities should have been found. In this case, not even a single point of similarity was found.”

Another defence witness, a lawyer, said he viewed the tape for 75 minutes and did not recognise the actor. When asked if he was sure, he replied: “I am positively sure it wasn’t Vijandran.”

The point is: in a court case, the prosecution and defence can always get witnesses, even so-called experts, to testify in support of their case.

In that instance, with the tapes freely available, the public had formed their own conclusion. In the People’s Court, Vijandran was the actor. Forget about the foreign experts.

In 1994, the Sessions Court sentenced him to a month’s jail and a fine of RM2,000 for fabricating evidence and making a false declaration. He took his appeals to the various upper courts and finally in 1998, he was acquitted by the Court of Appeal, which also set aside his conviction and sentence. But his political career was dead and public opinion of him and the tape remains unchanged.

This time around, however, public expectations seemed to have changed. Most Malay­sians do not believe Anwar is the man in the video even though they haven’t seen it. And even if they did, the die-hard Anwar supporters would regard the use of the video as gutter politics.

If the Datuk Trio had thought they could play heroes, they have found out that the psychological battle has become more complicated. Un­like Vijandran’s tape, only 10-odd journalists, some policemen and a few local film experts have seen the video, not 20 million people. The police have said the video is genuine, so the three Datuks had better plan their next steps carefully if they do not want to end up as the Three Stooges.

Reliable audit opinions don’t come cheap

OPTIMISTICALLY CAUTIOUS By ERROL OH

A lot is riding on the sturdiness of the Audit Oversight Board framework
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WHOSE fault is it if the quality and reliability of audited financial statements in Malaysia suffer because the audit fees don't correspond to the amount and nature of work required to do a good job? This mismatch is a common complaint among the auditors. We often hear them lamenting that the fees in Malaysia are on the low side. For an example of this, read our Up Close & Personal interview with KPMG Malaysia managing partner Mohamed Raslan Abdul Rahman.

The maiden annual report of the Audit Oversight Board (AOB), issued on Thursday, has amplified the issue. When highlighting the key findings from its inspections of the six largest audit firms in the country, the board points out that auditors need to price their services at levels that will ensure that they can comply with the requirements of auditing and ethical standards. The worry here is that firms may decide on the resources to be deployed for audit engagements based on the fees they will earn rather than on the risks that need to be addressed when auditing the accounts.

In its annual report, the AOB relays the grouse of audit firms that “due to the relatively low audit fees in Malaysia, it is a big challenge for them to secure adequate resources”. Considering that the AOB was set up to assist the Securities Commission in regulating auditors of public interest entities (PIEs), it's telling that the board saw this matter as worthy of a mention. But does this mean that the authorities agree that the auditors are not being paid enough for their services?

If you're bent on getting an unambiguous answer to that, good luck to you. The board will only go as far as to emphasise that the fees should be properly tied to the audit work that ought to be done. It says in the annual report: “The AOB is mindful that the global economy is still in a recovery stage. This will continue to place pressure on PIEs to contain their operating costs, including audit fees. Nevertheless, the AOB expects auditors to price their fees to commensurate with the risks undertaken so as not to compromise on audit quality.”

PIEs include listed companies, banking and financial institutions (including Islamic banks and development financial institutions), insurance companies and takaful operators, and holders of Capital Market Services Licences (such as securities and futures trading firms, and fund management companies).

When fielding questions from reporters after releasing the report, AOB executive chairman Mohamed Nik Hasyudeen Yusoff stopped short of endorsing the view that companies in Malaysia should get used to the idea of paying higher audit fees. He said the board would not tell the firms what to charge clients and would leave this to the market forces to decide. Instead, he urged companies to look at audit fees as an investment rather than as a cost, because the work of auditors supports the enhancement of a company's value.

To help audit firms in determining fees, the Malaysian Institute of Accountants have something called A Guide To Charging For Professional Assurance Services. It says: “Fee arrangement is a matter for commercial negotiation by practitioners. The Institute does not prescribe the mandatory basis for calculating fees, nor does it ordinarily investigate complaints relating solely to the quantum of fees charged.

“The level of fee is to be mutually agreed between the auditor and his client, which largely depends upon the skill and knowledge required, level of training and experience of the staff involved, the time necessarily occupied and the degree of responsibility and urgency of work involved.

“However, this RPG (recommended practice guide) is useful as a benchmark to establish the reasonable level of remuneration, commensurate with the provision of professional services of an acceptable and recognised standard in the absence of other more sophisticated billing methodology.”

The problem is, not many firms make full use of the RPG. Hence, we continue to hear the auditors' grumbling about the fees. Perhaps their best hope is that the AOB framework will bring about desirable changes.

The strategy here is that the AOB inspections will compel the firms to improve their compliance with the standards, and consequently, the firms will turn to their clients and say: “Look, we'll get into trouble with the regulators if our audit work falls short of the requirements of the standards. We won't cut corners and we won't reduce the scope of the work. Our fees have to be right-sized. If you don't want to pay that much, find auditors who are willing to risk being slapped with sanctions by the AOB.”

Of course, such a transition in mindset will take time. Meanwhile, let's see how the AOB handles the errant firms that has no qualms about bending the rules to fit the fees. The annual report has this to say: “It has been a known area of concern that the provision of non-audit services by audit firms to their listed audit clients may result in auditors low-balling their audit fees to gain more consulting jobs at clients and this may compromise independence. The AOB will be reviewing the safeguards in place to understand how the threats are mitigated.” Again, who should we blame for low-quality audits?

Deputy executive editor Errol Oh believes that many people don't understand what is it that auditors really do.