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FTC kills ingenious micro-payment scam

Steal little from lots of people

Internet Security Threat Report 2014

US consumer watchdogs have closed down a lucrative credit card scam that ran undetected for up to four years.

The con involves a series of low-value payments from compromised credit cards made in favour of a large number of dummy firms set up by fraudsters, the Federal Trade Commission alleges. The cybercrooks charge only $0.25 to $9 per transaction and escape detection largely because consumers took the loss rather than going through the hassle of disputing purchases with their credit card firm.

The crooks charged a total of $9.5m against 1.35 million compromised cards, but only 78,724 of these fraudulent charges were ever contested, according to the FTC. The consumer watchdog obtained court orders freezing the US assets of suspect firms and went after 14 suspected "money mules" - US residents duped into channelling money between the bogus firms - and the crooks masterminding the con, who used banks in Bulgaria, Cyprus, and Estonia.

The scam worked so well because the fraudsters were careful to establish fake businesses that had nearly identical names to legitimate business and were supposedly located near these genuine firms. The ploy - backed by the use of real federal tax ID numbers - allowed them to trick credit card processors into granting merchant accounts to bogus concerns. Of the 116 fake merchant accounts identified by the FTC, 110 were established with First Data. Legitimate mail forwarding and telecom service firms were abused to maintain the illusion that the bogus firms were real.

The crims exploited the increased use of credit cards to make micro payments for low-value items ranging from parking meters to vending machines. "It was a very patient scam," Steve Wernikoff, a lawyer at the FTC prosecuting the case, told IDG. "The people who are behind this are very meticulous." ®

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