Massive Fraud Ring Parlayed Small Charges Into Millions

August 13th, 2010 | by Beau C. Babb |

Having your credit card stolen is one thing but having your credit card subject to a slow bleed of petty card fees is another scam altogether. The Federal Trade Commission has uncovered a massive credit card fraud ring that parlayed small individual charges of $10 or less into millions of dollars in fraudulent charges.

The latest in a well developed scheme of cyber crimes, the fraudsters would set up fake companies and put small charges, usually under $10, to legitimate credit cards. The FTC identified that more than a million consumers were the victims and had charges put on their cards and their payments were routed through fake companies in the US and then sent to bank accounts in Europe and Asia.

Using Fake Companies
In the elaborate scam, professionals used fake companies which resembled real company names and personal information stolen from identity theft victims in the US. This information was used to establish around 100 merchant accounts. These accounts would have the ability to charge consumers credit cards and debit cards for purchases over the internet. The merchant accounts were made to look authentic by providing an ‘office’ (fake) address, a telephone number, a home number for the ‘owner’ and a fake website pretending to sell product, a toll free number, and a tax number of a legitimate business found on line.

The wise fraudsters were savvy enough to know that the inexpensive charges would not be detected by any fraud detection system. Most of the consumers who were taken in by the scam either didn’t notice that the charges were added or did not request charge backs as the amounts were very small amounts. Some charges were as little as 20 cents. With such small amounts consumers were reluctant to pursue the charge or felt that it wasn’t worth the time. Also credit cards are being used for small purchases in everything from parking meters to soda machines so inexpensive purchases can go as an unauthorized charge. People who did try to contact the toll free number on the bill found that the line had been disconnected or received a recoded message that their call would be returned. No calls were returned.

The 16 companies are identified as: API Trade LLC, ARA Auto Parts Trading LLC, Bend Transfer Services LLC, B-Texas European LLC, CBTC LLC, CMG Global LLC, confident Incoporation, HDPL Trade LLC, Hometown Homebuyers LLC, IAS Group LLC, IHC Trade LLC, MZ Services LLC, New World Enterprizes LLC, Parts Imports LLC, SMI imports LLC, SVT Services LLC. The FTC has charged them with making unauthorized charges to consumer’s credit cards.

Dummy Corporations and Money Mules

Through an e-mail network, the scammers contacted people in the US to set up ‘dummy corporations’. The dummy corporations set up bank accounts to receive credit card payments and once payments were deposited, or stolen, the cash was transferred to overseas accounts. The money that was taken from legitimate accounts was paid to accounts in Lithuania, Estonia, Latvia, Bulgaria, Cyprus and Kyrgystan.

The FTC has yet to find out how the fraudsters obtained the credit card information and other personal banking numbers from its victims. One idea is that the numbers were bought from an online source that has stolen credit card information available for purchase. Credit card forums and black market web sites often provide criminals with stolen information regarding legitimate cards.

Although each charge was quite small the scam had been running for about four years and the fraudsters showed great patience in accumulating their wealth.

To prevent cyber crime from happening to you:

• Check your statement faithfully and carefully
• Be knowledgeable about current scams
• Do not ‘click’ on unknown emails and do not respond to email phishing scams
• Keep receipts

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