Wednesday, June 27, 2007

Romania a global hotspot for eBay fraud

Source: apcmag.com

eBay has taken the extraordinary step of calling a press conference in Australia to discuss the problem posed by Romanian fraudsters. eBay said it was shocked to discover that many Romanian police stations, prosecutors and magistrates had never used a computer. This lack of access to cyber crime fighting tools was allowing internet crime to go unchecked.

The company found law enforcement agencies had been trying to investigate online fraud at the same internet cafes being used by the fraudsters, "which was a huge concern to us", said Mat Henley, of the eBay global fraud investigation team. Although eBay does not have a Romanian office, the problem was so large for eBay and other companies like Visa and Mastercard, that the company has since established a dedicated fraud team in Romania.

"We discovered that Romania had a huge technology gap between generations," said Henley. "It was enormous: 25-30 year old criminals were some of the brightest people we’ve dealt with, but when you mix in the prosecutors, law enforcement and magistrates, some of them had never been on a computer - period," he said. eBay was forced to purchase computers and internet access for Romanian law enforcement agencies and train them on prosecuting internet fraud. The company also supplied digital cameras so agencies could more easily collaborate on photos of the scammers. Incredibly, eBay even involved the US Secret Service (which plays a dual role alongside protecting the President in investigating US treasury fraud).

The USSS provided intelligence from agents in Romania who were able to help Romanian law enforcement unpick the criminal internet fraud networks.

According to Henley, the Romanian scammers' preferred mode of operation is to try to lure people off the eBay site to complete transactions outside of eBay's framework. "They do a very specific attack, and they've gotten really good at it as we've tightened our platform: their number one goal is to pull users off eBay. "If an auction goes through all the way, they will not touch that auction. They know that we have all the details of that auction. They want to pull them away from our security cameras. "They're also kind of famous for the second-chance offer scams - those are 100% off the site. They look at people who bid on auctions but didn't win the item; they know that for example, eBay user Banana123 is interested in an item and willing to pay $140 for it." "Then they'll start trying to blindly guess the person's email address - banana123@gmail.com, banana123@hotmail.com, for example. That's where we have to work with Romanian law enforcement - it's entirely off the eBay system. They're just using eBay to find and target users," Henley said. eBay has since implemented a system whereby once bids for an item reach over $AU200, the bidders' names are concealed.

According to Henley, the Romanian scammers had concocted elaborate stories to convince their victims to send money via unrecoverable methods such as Western Union - even though Western Union asks every customer as a matter of policy whether the payment is for an eBay auction, and advises of the risk. "Romanian fraudsters will ask for certain payment methods – generally they aren’t PayPal or credit card. Generally it’ll be Western Union. They tailor their scam to instruct people not to be honest with Western Union that the payment is for an eBay transaction - they'll claim Western Union will charge them an eBay surcharge of 10% more, so they just say they're sending money to their Romanian cousin," Henley said.

The auction house has recently removed the administration fees involved in making claims through the PayPal buyer protection program, meaning that shoppers are covered against fraud even for smaller purchases. However, eBay also admitted it has simultaneously cancelled the eBay buyer protection program, meaning that shoppers are only protected against fraud if they pay through PayPal. eBay's Henley said "hundreds" of internet fraudsters had been arrested since the company had put its operation into play with Romanian law enforcement.

Though he repeatedly refused to provide any firm numbers on the actual impact on internet fraud, eBay Australia Trust and Safety Director Alastair MacGibbon said that overall fraud on eBay was now less than the "one hundredth of one per cent" figure the company used to tout frequently. The company now uses a large number of proactive measures to try to honeypot scammers, and is "constantly watching for the next Romania," according to Henley.

No comments: