Online financial services are both a convenient and
dangerous industry. While they have undoubtedly improved the availability of
personal financial tools for millions of Americans, they have also provided
anonymous tools for identity thieves and fraudsters to victimize both personal
and professional financial accounts. The U.S. Federal
Trade Commission (FTC), along with the entire financial security industry,
has been striving to keep up with the rate of financial cybercrime. This has
lead to the development of the Red Flags Rule, which will impose a nationwide
standard of fraud prevention in 2010. The
Red Flags Rule will insist that businesses, both retail and online, step up
to be more accountable in the fight against identity fraud.
Some businesses, though, have not jumped on board this
movement quite so thoroughly. An article by PC
World highlights a civil contempt complaint being filed by the FTC against
Thomas Villwock and James Danforth of G7 Productivity Systems. The defendants’
website, Qchex.com, issued electronic checks and delivered them without
verifying the identities of the people writing them.
PC World writes that criminals both domestic and
international used the check service to make illegal withdraws from victims’
accounts as part of wire transfer schemes. The FTC took legal action against
Qchex in January, which resulted in a $535,358 fine and a court order to
implement fraud
prevention securities, which Qchex “disregarded” according to the FTC. The
business continues to operate unsecured at FreeQuickWire.com.
Qchex appealed the court’s ruling in January, stating that it
cannot be held responsible for the actions of Qchex users. The company said, “The
Qchex system consisted of nothing more than software and a website, sitting
dumb and inactive unless and until a user chose to use it…. It is this unlawful
activity that is the cause of any consumer injury here.”
The defendants have been ordered to appear in court on
February 16.