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Background

During 2003 and early 2004, law enforcement authorities, businesses, and Internet users have seen a significant increase in the use of phishing. Phishing is a general term for criminals’ creation and use of e-mails and websites – designed to look like e-mails and websites of well known legitimate businesses, financial institutions, and government agencies – in order to deceive Internet users into disclosing their bank and financial account information or other personal data such as usernames and passwords. The phishers then take that information and use it for criminal purposes, such as identity theft and fraud.

A growing number of phishing schemes are using for illegal purposes the names and logos of legitimate financial institutions, businesses, and government agencies in North America, Europe, and the Asia-Pacific region. One industry organization, the Anti-Phishing Working Group has reported that in January 2004, there were 176 unique phishing attacks reported to it – an increase of more than 50 percent over the number of reported phishing attacks in December 2003.

The U.S.A. Department of Justice is issuing this Special Report to inform Internet users about the risks of responding to phishing e-mails and websites, whether phishing schemes violate federal criminal laws, and the steps that Internet users should take when they see possible phishing emails or websites.

What Are The Risks of Responding to Phishing E-Mails?

At first glance, phishing e-mails, and the websites associated with such e-mails, may appear completely legitimate. One recent phishing attempt falsely used the names of the Federal Deposit Insurance Corporation (FDIC) and two of its officials, as well as the Department of Homeland Security. What Internet users may not realize is that criminals can easily copy logos and other information from legitimate businesses’ websites and place them into phishing e-mails and websites.

In addition, if the e-mail recipient clicks on the link in the e-mail, even the window of the Internet browser he or she is using may contain what looks like the true Uniform Resource Locator (URL) of a legitimate business or financial institution. Unfortunately, some phishing schemes have exploited a vulnerability in the Internet Explorer browser. This vulnerability allows phishers to set up a fake website at one place on the Internet, but make it look like the Internet user is accessing a legitimate website at another place on the Internet.

Most phishing e-mails include false statements intended to create the impression that there is an immediate threat or risk to the bank, credit-card, or financial account of the person who receives that e-mail. In the case of the false FDIC e-mails mentioned above, the text of the e-mails falsely claimed that the Secretary of Homeland Security had advised the FDIC to suspend all federal deposit insurance on the recipients’ bank accounts. Other recent phishing e-mails have falsely claimed that the recipients’ Visa credit card was being used by another person, or that a recent credit-card transaction had been declined.

In some cases, phishing e-mails have promised the recipients a "prize" or other special benefit. Although the message sounds attractive rather than threatening, the object is the same: to trick recipients into disclosing their financial and personal data.

People who receive phishing e-mails also may not realize that the senders may have used “spamming” (mass e-mailing) techniques to send the e-mail to thousands and thousands of people. This means that many of the people who receive that spammed e-mail do not have accounts or customer relationships with the legitimate business or financial services company that the e-mails purport to come from. The people who create phishing e-mails count on the fact that some recipients of those e-mails will have an account or customer relationship with that legitimate business or company, and may be more likely to believe that the e-mail has come from a trusted source.

Ultimately, people who respond to phishing e-mails, and input the requested financial or personal information into e-mails, websites, or pop-up windows, may be putting their accounts and financial status at risk in three significant ways. First, phishers can use the data to access existing accounts of those Internet users, and withdraw money or buy expensive merchandise or services.Second, phishers can use the data to open new bank or credit-card accounts in the victims’ names, and use the new accounts to cash bogus checks or buy merchandise. If the phishers open those new accounts with the victims’ names, but use addresses other than the victims’, the Internet users may not realize that they have become victims of identity theft until they are contacted by creditors or they check their credit reports. Third, some recent phishing schemes have involved the use of computer viruses and worms to disseminate the phishing e-mails to still more people.

Can Phishing Violate Federal Criminal Laws in the U.S.A.?

Because they use false and fraudulent statements to deceive people into disclosing valuable personal data, phishing schemes may violate a variety of federal criminal statutes. In many phishing schemes, the participants in the scheme may be committing identity theft (18 U.S.C. §1028(a)(7)), wire fraud (18 U.S.C. § 1343), credit-card (or “access-device”) fraud (18 U.S.C. §1029), bank fraud (18 U.S.C. § 1344), computer fraud (18 U.S.C. § 1030(a)(4)), and the newly enacted criminal offenses in the CAN-SPAM Act (18 U.S.C. § 1037). When a phishing scheme also uses computer viruses or worms, participants in the scheme may also violate other provisions of the computer fraud and abuse statute relating to damage to computer systems and files (18 U.S.C. § 1028(a)(5)). Finally, phishing schemes may violate various state statutes on fraud and identity theft.

Each of the federal criminal offenses mentioned above carries substantial penalties. Sentences can range as high as 30 years imprisonment under the wire fraud and bank fraud statutes, 15 years imprisonment for identity theft and credit-card fraud, and 5 years imprisonment under the CAN-SPAM Act. In addition, federal judges can impose substantial fines, which can be as high as $250,000 for an individual, and require forfeiture of a defendant's property. The Department of Justice has successfully prosecuted a number of criminal cases involving phishing, and will vigorously prosecute phishing schemes in appropriate cases in the future.

What Should Internet Users Do About Phishing Schemes?

The U.S.A. Department of Justice recommends that Internet users follow three simple rules when they see e-mails or websites that may be part of a phishing scheme: Stop, Look, and Call.

1. Stop. Phishers typically include upsetting or exciting (but false) statements in their emails with one purpose in mind. They want people to react immediately to that false information, by clicking on the link and inputting the requested data before they take time to think through what they are doing. Internet users, however, need to resist that impulse to click immediately. No matter how upsetting or exciting the statements in the e-mail may be, there is always enough time to check out the information more closely.

2. Look. Internet users should look more closely at the claims made in the e-mail, think about whether those claims make sense, and be highly suspicious if the e-mail asks for numerous items of their personal information such as account numbers, usernames, or passwords. For example:

• If the e-mail indicates that it comes from a bank or other financial institution where you have a bank or credit-card account, but tells you that you have to enter your account information again, that makes no sense. Legitimate banks and financial institutions already have their customers' account numbers in their records. Even if the e-mail says a customer's account is being terminated, the real bank or financial institution will still have that customer's account number and identifying information.

• If the e-mail says that you have won a prize or are entitled to receive some special “deal,” but asks for financial or personal data, there is good reason to be highly suspicious. Legitimate companies that want to give you a real prize don’t ask you for extensive amounts of personal and financial information before you're entitled to receive it.

3. Call. If the e-mail or website purports to be from a legitimate company or financial institution, Internet users should call or e-mail that company directly and ask whether the e-mail or website is really from that company. To be sure that they are contacting the real company or institution where they have accounts, credit-card accountholders can call the toll-free customer numbers on the backs of their cards, and bank customers can call the telephone numbers on their bank statements.

Link to the complete REPORT

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