Fraud, Intermediation, and Personal Security

Who do you trust? Well, these days it is hard to judge. That is partly because we so often deal with people we do not know personally. We rarely see the same checkout clerk at the supermarket, unlike the old corner grocery. Supermarkets encourage us to use the “self-checkout” line where we interact with another human minimally if at all. Usually, some system intermediates between the institution and ourselves.

In most cases, although our economic transactions (buying and selling online or in-person) and institutional transactions (with doctors’ offices or driver’s license renewal offices, etc.) may be alienating, they are usually reliable. We can trust the operations of most institutions even if we hate the bureaucracy, the wait times, or the cold indifference of those persons who are our contact points. However, it is not always easy to verify who we are really dealing with, especially when communication is through websites, texts, or email.

Fraud Grows Up

Remember those emails you used to get from some Nigerian “official” who informed you that he would transfer a great deal of money to you if only you would give him all your banking information? The scam had numerous variations. Only the most gullible fell for those obvious frauds. We don’t see those much anymore.

However, today, email fraud has gotten much more sophisticated. One gambit involves first hacking the email account of a business. The fraudster then tracks the email traffic in search of information on an imminent money transfer to another business or person. The fraudster sends an email to the party about to do a wire transfer to the recipient business, making it appear that s/he is the receiving party. The swindler provides wire-transfer information to another account at the same bank. As soon as the wire transfer is completed, the fraudster transfers the money to some other bank, often overseas. Some businesses now communicate banking information on a piece of paper transported by currier to avoid the dangers of fraudulent electronic intermediation.

Electronic Sleight of Hand

The commission of fraud usually involves some form of enticement. In another scheme, the criminal pretends to be a potential buyer of the products of a small business such as an artist or craftsperson who sells through their own website. The target actually becomes an intermediary for credit-card fraud. The fraudster says s/he wants to buy several of the seller’s more expensive items totaling a large sum. Naturally, the seller is happy to have such a large sale.

The fraudster pays for the items and shipping costs using a stolen credit card but insists on using his/her own shipper, claiming long-term reliable experience with the shipper. The fraudster’s location for delivery is at a significant distance, such as Hawaii, when the seller may be located, say, in New Jersey. The shipping cost is included in the fraudster’s payment via the stolen credit card and asks the mark to pay the shipper, say $1,000- or more, with the shipping funds included in the credit card payment.

The victim has the money deposited in her/his account and therefore feels safe, so s/he wire transfers the quoted shipping cost to the shipper at the bank (in yet another city) specified by the fraudster. The fraudster emails the mark that his/her shipper will contact the seller to arrange pick up and shipping of the products sold.

Who Holds the Bag?

In fact, the fraudster has no interest in the seller’s products; they are only a means to cause the mark to transfer money to the fraudster’s phony shipper’s account with funds from the stolen credit card. Some “delays” in the shipping arrangement occur while the fraudster captures the funds transferred from the seller to the phony shipper’s account, which may be the account of a “money mule” who is paid for the use of his/her account. In effect, the seller becomes a funnel to transfer stolen money, which s/he can immediately transfer to some other account, often overseas. The thief makes off with the thousand dollars leaving the seller with say six thousand dollars in stolen credit card funds, which s/he must ultimately return to the credit card company. I wonder how many such schemes a fraudster initiates each day.

Fraud grows increasingly sophisticated as the opportunities for deceit multiply in the context of growing electronic intermediation of human transactions. The normal means we use to determine legitimacy and to build trust are not adequate here. Criminals hatch any number of similar fraudulent schemes every day. Seller and buyer beware!


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