The Morning Risk Report: ‘Virtual Kidnapping’ Is On The Rise

Cybercrime has prospered because it’s often easier to perpetrate than physical crime, and the tools and information behind such crimes have become easy to obtain. An offshoot of cybercrime is known as “virtual kidnap,” and, as with more run-of-the-mill forms of cybercrime, companies are now being affected, in addition to individual households.

Virtual kidnap occurs when criminals use information about a person’s absence to claim they have been kidnapped, and then turn around to extort money from other family members. Denise Balan, crisis management head for the Americas for insurance company XL Catlin, provides a real example of such a scheme in an article on her company’s website. An executive from a Fortune 500 company traveled to Mexico City and, upon checking into his hotel, received a call saying his family back in the U.S. would be harmed unless he followed instructions to move to another hotel and turn off his cellphone. The executive’s wife then received a call saying her husband was kidnapped, and a demand for a $600 wire transfer to secure his release. It turned out the virtual kidnappers were in no position to carry out an actual abduction, as they were themselves in prison. Ms. Balan provides a list of indications of a virtual kidnapping attempt and pointers on how to respond.

The incidence of virtual kidnapping is on the rise, according to the Threat Forecast 2017 report from risk management firm red24. “Virtual kidnappings, synonymous with Latin America, may increase in geographical scope and scale in Europe in 2017,” it said, while also noting a rise in reports of the crime in the U.S. The report also contains a cautionary note for executives who publicize their movements via social media. “There is potential for an evolution in tactics in 2017, which may include an increasing cybercrime element, with pre-incident surveillance of potential victims via social networking platforms,” it says.

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EXCLUSIVE ON RISK AND COMPLIANCE JOURNAL

>The year in the FCPA

. Kristen Savelle of The Foreign Corrupt Practices Act Clearinghouse, a database operated by Stanford Law School, analyzes the data for enforcement of the FCPA in 2016. It was a notable year, with some of the largest monetary sanctions in FCPA history, the launch of an FCPA pilot program and deployment of a new category of FCPA resolution.

>How to respond to fake news

. Fake news stories and websites proliferated in 2016, and more of the same is expected this year. We asked several crisis management executives to offer some tips on what companies should be thinking about when weighing their response options.

This image provided April 19, 2011, by the U.S. Federal Trade Commission shows a screen shot of a web site using a fake news site to promote acai berry weight-loss products.
Associated Press/Federal Trade Commission

COMPLIANCE

SocGen to pay over mortgages. Société Générale, SA has agreed to pay a $50 million civil fine to settle federal claims that it defrauded investors, including financial institutions, in the marketing and sale of a residential mortgage-backed security, the Brooklyn U.S. attorney’s office said Friday, the WSJ reports. As part of the settlement, the French bank admitted that it didn’t tell investors that loans underlying the security were underwritten outside of the loan originators’ underwriting guidelines. The bank also falsely told investors that the value of any mortgage on a property within the security didn’t exceed the value of that property, according to the agreement.

>Australia to tighten up on foreign deals

. The Australian government said it would give greater scrutiny to overseas deals, joining counterparts in the U.S. and Europe in signaling resistance to Chinese investment in sensitive assets, the WSJ reports. Australia’s center-right government said it would establish a new body to assess security risks tied to foreign investment in electricity and water and port assets. Since 2011, cash-strapped state governments in Australia have sold more than $50 billion worth of assets. Some of those deals—like a Chinese purchase of a port used by U.S. defense forces—proved controversial at home and abroad.

>Germany set to close corporate tax loophole

. Reuters reports the German cabinet is set to approve a measure to close a tax loophole used by foreign companies operating in Germany, under which companies can deduct certain internal expenses.

>Philippines tightens regulation of MSBs

. Regulation Asia reports the Philippines approved proposals to put all remittance and transfer companies, money changers and electronic money issuers under the regulation of the central bank. Under this change, cash transactions of a certain size can only be made through a cheque or direct credit.

>China fund manager jailed

. A leading Chinese fund manager has been sentenced to prison for 5½ years for stock manipulation and insider trading, following the most high-profile case connected with the Chinese stock-market bubble and crash of 2015, the WSJ reports. The Qingdao Intermediate People’s Court handed down the sentence on Monday to Xu Xiang, the billionaire founder of Zexi Investments, saying the 40-year old had admitted guilt and wouldn’t appeal. Mr. Xu was earlier tried and convicted of the crimes during a two-day trial in December.

DATA SECURITY

SEC probes Yahoo over hack. U.S. authorities are investigating whether Yahoo Inc.’s two massive data breaches should have been reported sooner to investors, according to people familiar with the matter, in what could prove to be a major test in defining when a company is required to disclose a hack, the WSJ reports. The Securities and Exchange Commission has opened an investigation, and in December issued requests for documents, as it looks into whether the tech company’s disclosures about the cyberattacks complied with civil securities laws, the people said. The SEC requires companies to disclose cybersecurity risks as soon as they are determined to have an effect on investors.

Yahoo’s headquarters in Sunnyvale, Calif.
Marcio Jose Sanchez/Associated Press

>EU considers cyber stress tests

. Reuters reports the European Union is considering stress tests of banks’ readiness for cyber-attacks, a European Commission official said.”

Lloyds was hit by cyber attack. Reuters reports Lloyds Banking Group is working with law enforcement agencies to identify those behind a cyberattack that affected customers using its personal banking websites recently.

GOVERNANCE

Morgan Stanley CEO gets raise. Morgan Stanley gave its chairman and CEO, James Gorman, a 7% raise for 2016, while Goldman Sachs Group cut stock awards for several executives but didn’t disclose compensation for its top executive Lloyd Blankfein, the WSJ reports. Mr. Gorman received a pay package valued at $22.5 million for his work in 2016, up from $21 million the previous year, according to a spokesman for the New York firm. The 2016 haul included a $5 million stock award disclosed in a filing Friday afternoon and a salary of $1.5 million. The details of the remainder of Mr. Gorman’s incentive-based compensation are expected to be disclosed in coming months.

REPUTATION

Samsung blames batteries for overheating. Samsung Electronics Co. blamed the overheating of its Galaxy Note 7 smartphones on manufacturing and design problems but acknowledged that it hadn’t determined the “root cause” of the failure, in the company’s most comprehensive attempt to explain the a massive recall of more than 2.5 million devices last year, the WSJ reports. At an event on Monday at its offices in Seoul, Samsung said “batteries were found to be the cause.” The company, citing the results of an investigation that included about 700 Samsung researchers, three outside firms and more than 30,000 batteries, said that in the case of one supplier, the battery casing wasn’t big enough, causing deformations in the upper corner of the battery. The WSJ’s Geoffrey Fowler and Joanna Stern give the company a C grade for its efforts to deal with the fallout from the crisis, saying “its explanation sometimes left us scratching our heads.”

Samsung Electronics Galaxy Note 7 smartphones are displayed at the company’s service center in Seoul.
Associated Press

United resolves computer problem. United Continental Holdings had a computer issue Sunday evening that caused it to ask the Federal Aviation Administration to put into effect a “ground stop” for its arriving and departing flights, the WSJ reports. The airline said at around 9 p.m. ET Sunday that the issue had been resolved and flights were set to resume but warned that “customers may experience continued delays as we work through this.”

RISK

Takata shares tumble amid bankruptcy fears. Takata Corp. shares fell sharply Monday as investors rushed to sell ahead of a possible bankruptcy filing for the company, which faces a potential multibillion-dollar bill for recalls related to its faulty air bags, the WSJ reports. The company’s share price closed down 18% at 467 yen, the third consecutive day of double-digit declines and the sixth straight day of declines overall. Trading volume was thin as buyers of the stock were scarce, accelerating the declines. A bankruptcy is one of several possibilities being presented by companies bidding to take over Takata, including air-bag giant Autoliv and Key Safety Systems Inc.

>U.S. companies plan for outsourcing clampdown

. Leaders of U.S. companies with offshore operations are privately worrying that they will come under the scrutiny of a president who has blasted firms for moving production outside American borders, the WSJ reports. Donald Trump in recent months has used his Twitter account to criticize Ford Motor, United Technologies’s Carrier division and General Motors, for outsourcing jobs. The attacks are reverberating at companies with production and IT operations in countries like India, China and the Philippines, outsourcing executives say. Some companies are looking for U.S.-based alternatives, while vendors that provide outsourced services are pushing automation as a cost-effective way to re-shore work—but not necessarily jobs.

Apple sues Qualcomm, alleging monopoly tactics. Apple Inc. sued Qualcomm Inc. alleging the chip supplier demanded unfair terms for its technology, escalating long-simmering tension between companies at the heart of the global smartphone industry, the WSJ reports. The suit, filed Friday in federal district court in the Southern District of California, claims that Qualcomm leveraged its monopoly position as a manufacturer of baseband chips, a critical component used in cellphones, to seek “onerous, unreasonable and costly” terms for patents, and that Qualcomm blocked Apple’s ability to choose another supplier for chipsets. Qualcomm General Counsel Don Rosenberg called Apple’s claims “baseless.”

Source : https://blogs.wsj.com/riskandcompliance/2017/01/23/the-morning-risk-report-virtual-kidnapping-is-on-the-rise/

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