Avivah Litan, research director at Gartner, explained that because US banks are so keen to recruit new customers they will open up accounts on the basis of identification from only a pay-as-you-go mobile phone bill (a type of account that is even easier to open) without checks on the validity of supplied social security numbers.
Once a bank account is open crooks will pay bills religiously, eventually earning enough trust to obtain credit cards with higher and higher limits. After around 18 months fraudsters will obtain cash advances on these cards and disappear, a process know as busting out. Losses of around $50K are typical, according to Litan. Banks will pursue these funds and call in collection agencies but in the end the majority will write-off the debt without understanding the root cause of the fraudulent loss.
Litan said that banks in Britain were far better at sharing information and working with each other to minimise exposure to this kind of fraud. The incentive to sign up new customers is great in Europe but in the US it’s even more pronounced because banks send out 1,937 pieces of marketing information for every new sign-up.
“The goal is getting new customers and banks are not that hungry about eating into fraud,” she said.
Litan made his comments during a presentation at the Gartner IT Security Summit in London.
http://www.securityfocus.com/news/11320