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Online Fraud Museum details CC hacking techniques

How e-merchants get shanked by kiddiots

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On-line merchants sick of rampant Web credit card fraud and its attendant confiscatory charge-back fees and fines can learn the most popular scams tricksters use and keep abreast of new developments thanks to the AdCops Web site, which presents it all in vivid detail.

Included on the Web site is a members'-only 'Fraud Museum', exhibiting numerous materials related to successful on-line CC tricks. Here one will see examples of malicious CGI (Common Gateway Interface) log-in forms which look like those at popular e-commerce sites but forward one's details to a trickster's e-mail account, and the spam messages designed to lure trusting Netizens to them.

We were quite simply amazed by how badly written such a spam message can be and still work on the innocent, or the inattentive.

Other offerings include a simple program which generates valid Luhn numbers for carders to use ordering goods on line. Many e-commerce sites merely verify that a proffered CC number conforms to the Luhn Algorithm, meaning that doubling every other digit and then adding all the digits produces a sum divisible by ten, so this alone can yield a fair amount of free merchandise. (Note to carder wannabes: we left out an important detail.)

Another item demonstrates the ease with which a spammer can conceal the URL to which he is referring a potential victim. DNS will resolve Web addresses in binary, octal or hex expressions, which makes it easy to lure the unsuspecting to a malicious Web site.

For example, the URL
http://%77%77%77%2E%74%68%65%72%65%67%69%73%74%65%72%2E%63%6F%2E%75%6B
is in fact The Register's home page. With similar tricks one can refer surfers to, say, www.MaliciousCarder.com with a URL that looks like this:
http://www.TheRegister.co.uk@%77%77%77%2E%6D%61%6C%69%63%69%6F%75%73%63%61%72%64%65%72%2E%63%6F%6D

DNS will ignore everything between http:// and @. The only active bit is the obscured URL for MaliciousCarder.com. Full details on URL obfuscation can be found here.

Another Fraud Museum exhibit we enjoyed was the reproduction of a carder's drop box with the details of over 150 victims. This shows the convenient format in which a malicious CGI forwards a victim's CC details to an anonymous e-mail account set up on a free service like HotMail or Yahoo for future retrieval.

The Other Scam

It's no secret that when carders succeed, it's the merchant who first picks up the tab, and the consumer who finally gets shanked in the end with higher retail costs. But perhaps the biggest scam of all is the way credit associations like Visa and MasterCard, and the banks which administer the accounts, skate from liability and even profit from CC fraud.

That's because the issuers have the game rigged to keep themselves and consumers fat, dumb and happy. But whenever there's CC fraud, there's a charge-back; and whenever there's a charge-back, the merchant pays it up front.

The merchant loses both the merchandise and the sale, and on top of that pays a penalty, AdCops President Daniel Clements told The Register.

Charge-back fees typically range from $15 to $50 per transaction. There are also 'document retrieval' fees associated, generally at $10 or $20 a pop.

Beyond that, merchants have to limit their charge-back total to below three per cent of a month's transactions. If they step over the line, monstrous penalties begin to accumulate.

Visa requires merchants to keep charge-backs below 2.5 per cent of monthly CC sales volume or fewer than 50 instances per month. Otherwise, there's a $5,000 "review fee" (read 'fine') during the first five months of excessive charge-backs, swelling to $25,000 after six months.

MasterCard also requires charge-backs to be held below 2.5 per cent. Merchants get a two-month grace period, but a $25,000 fee kicks in for months three, four and five. It then increases to $50,000 for months six and seven; $75,000 for months eight and nine; and finally -- assuming the merchant is overcharging customers so rapaciously that he can actually afford it -- swells to $100,000 per month thereafter.

As for why the credit associations do so little to fight on-line fraud, Clements is more than a bit cynical. "They're not the ones losing money," he told us. "They have no incentive to stop fraud on the Web."

Their primary concern, he says, is the safety of their retail customers, the card-holders themselves.

When a scam involves millions of dollars, then the associations get involved, along with the banks and the Feds. The Federal Trade Commission (FTC) Sentinel database, for example, which among other things tracks credit fraud, is open to all law-enforcement bodies; but in these cases, "they're looking for patterns of widespread fraud," Clements says. "If it's just a few people, they don't really care."

Hence AdCops, which caters to the immediate needs of merchants, not big business. It has a growing database of fraudsters and their scams, which merchants can download, and, equally importantly, contribute to. In time, Clements hopes, it will become the resource of choice for on-line merchants to share information, and so protect themselves by protecting each other.

Meanwhile, there's little going on at the national level which offers hope for individual merchants struggling with credit fraud. Big banks are loath to share relevant data with anyone outside their own circle, and federal law enforcement organizations often work at cross purposes due to jurisdictional confusion and competition.

"Everybody's got their hand in it, but no one's doing a very good job," Clements observed.

We'll second that. ®

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