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How scareware scumbags avoid getting flagged by banks

White hats infiltrate, monitor three networks

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A study of cybercrime economics shows that peddlers of rogue antivirus scams rely on legitimate banks to run their businesses, carefully ensuring that the volume of chargebacks they incur stay just on the right side of being flagged-up as obviously fraudulent.

Researchers from the University of California in Santa Barbara infiltrated three scareware affiliate networks in order to expose their inner workings. The sales networks punt software sold through fake security scans that warn of fictitious viral infections that the dodgy software can "fix".

This scareware racket has become a big and highly developed business, with support teams akin to those employed by legitimate security firms. The UCSB researchers estimate the three fake antivirus businesses they followed earned combined revenue of more than $130m, which is how they can support a highly developed sales and support structure.

Scareware "customer support agents" can be reached by victims either through online chat or via toll-free phone numbers.

Only a minority – estimated at one in 10 users – of the 2.3 million purchasers of fake antivirus software during the two-year study ever complained. An even smaller percentage tried to initiate a chargeback, according to data obtained by the researchers from the back-end servers of fake antivirus firms.

Excessive chargebacks (usually those amounting to more than 2 per cent of sales) generally get flagged-up by Visa and Mastercard. Punitive charges and possibly the suspension of merchant status might follow.

To avoid this, support personnel for scareware firms occasionally give refunds – but only up until the point their rate of chargebacks has dropped again, when they once again start ignoring refund requests. The practice results in an undulating and quite distinctive pattern of chargebacks.

All three scareware businesses featured in the study made use of ChronoPay, a credit card payment service based in Russia that also numbers rogue pharmacies among its clients. The fake antivirus companies also make use of the facilities of a number of banks across the world, named in the study as: FMBE Bank Limited, Cyprus; Bank Hapoalim, Israel; Ceska Sporitelna, Czech Republic; International Bank of Azerbaijan; and JSCB Bank Standard, Azerbaijan.

The researchers argue that credit card networks ought to do more to detect patterns of chargeback activity that are the hallmark of scareware firms, and to take action to protect both consumers and the overall integrity of financial service networks. Scareware outfits sometimes change the name of the product they are punting, but this alone ought not to foil attempts to root out bad eggs from the system, as a summary of the researchers' work explains:

We present an economic model that demonstrates that fake AV companies are actively monitoring the refunds (chargebacks) that customers demand from their credit card providers.

When the number of chargebacks increases in a short interval, the fake AV companies react to customer complaints by granting more refunds. This lowers the rate of chargebacks and ensures that a fake AV company can stay in business for a longer period of time. However, this behaviour also leads to unusual patterns in chargebacks, which can potentially be leveraged by vigilant payment processors and credit card companies to identify and ban fraudulent firms.

The unprecedented access to cybercrooks' back-end systems has allowed the researchers to develop an economic model that illustrates how the criminals are "very careful in performing refunds and chargebacks in order to maintain a balanced financial posture that does not immediately reveal their criminal nature", the UCSB team concludes. Nonetheless, these operations have distinct characteristics that are built into the DNA of cybercrime operations and are distinct from those of legitimate businesses.

The researchers hope to develop their work to develop tools that can be directly applied to payment data streams, automatically identifying scareware operations.

The University of California study can be found here. ®

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