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Special Alerts

July 31, 2003

TO: CHIEF EXECUTIVE OFFICER (also of interest to Security Officer)
SUBJECT: Fraud Alert on Advance Payments/Identity Theft
Summary: Fraudulent advertisements for loans are being placed in newspapers using official financial institution logos to induce consumers to wire advance payments.

The Federal Deposit Insurance Corporation (FDIC) has recently become aware of fraudulent activities using official financial institution logos in newspaper advertisements. This practice is believed to affect as many as 50 financial institutions. The following outlines the scam.

The scam, which is believed to originate in Canada, begins with a fraudulent advertisement for mortgage, small business, debt consolidation or other loans placed in smaller-market or community newspapers. The advertisements include representations of official financial institution logos and are paid for with stolen credit cards. Contact with the newspaper is through prepaid cell phones obtained in Canada. The phone numbers in the advertisements are for the prepaid cell phones. The consumer (victim) provides application information, including his or her Social Security number, over the phone to a "third-party consultant" and is told that a loan is "granted." A loan package is faxed to the victim and includes a request for bank account information. Many customers have also been asked to fax copies of their driver's licenses and Social Security cards.

The victim is asked to make an advance payment or deposit before the loan is advanced by wire transfer through Western Union. The deposit is wired to the "third-party consultant." Basically, the consumer in this scheme does not obtain a loan; rather, this is a method to obtain advance payments from the victim.

Financial institutions are learning about this scheme from newspapers that have contacted them for payment for the placement of the fraudulent advertisements and from consumers who have wired funds. The FDIC has received reports that a number of unsuspecting consumers have applied for loans and wired advance loan payments.

Financial institutions should encourage their customers to view with extreme caution any proposed transactions requiring them to wire funds outside of the banking system. Additionally, financial institutions should alert victims of the potential for identity theft in this scheme and ask them to contact the Federal Trade Commission and the credit bureaus. Affected financial institutions should also consider filing Suspicious Activity Reports.

Information concerning this practice may be forwarded to the FDIC's Special Activities Section, 550 17th Street, NW, Room F-4040, Washington, DC 20429, or transmitted electronically to alert@fdic.gov.

For your reference, FDIC Special Alerts may be accessed from the FDIC's Web site at www.fdic.gov/news/news/SpecialAlert/2003/index.html. To learn how to automatically receive FDIC Special Alerts, Financial Institution Letters and other announcements through e-mail, please visit www.fdic.gov/news/news/announcements/index.html.

Michael J. Zamorski

Distribution: FDIC-Supervised Banks (Commercial and Savings)

NOTE: Paper copies of FDIC Special Alerts may be obtained through the FDIC's Public Information Center, 801 17th Street, NW, Room 100, Washington, DC 20434 (1-877-275-3342, option 5, or (703) 562-2200).

Last Updated 07/31/2003 communications@fdic.gov