Credit Card Fraud- A How To From 2002

I wrote this in 2002 when I was with the FBI as a primer for other law enforcement agencies to understand how cyber criminals were making money from stolen data.  

Whats scary is how in 12 years very little from this has changed!

Hacking for Profit:

Credit Card Fraud

A Beginners Guide

August 2002 

Revised Intro 2004

Introduction

This paper is intended to detail how financially motivated hacking groups convert stolen data to monetary instruments. The primary premise for this paper is based on Eastern European hacking groups but recently, the “financially motivated” hacker sub group has expanded to include hackers from the Far and Middle East Hackers as well as here in the States. What the individuals are doing with the illicit profits of their activities range from childish purchases to funding terrorist attacks as was detailed in the recent autobiography, “Aku Melawan Teroris” (Me, Fighting the Terrorists) by the Bali nightclub bomber. In the chapter “Hacking, Mengapa Tidak” (Hacking, Why not?), Iman Samura, a computer scientist provides a primer to Islamic Extremists of how to learn the trade of credit card fraud and hacking.

To quote BigBoss, from forum.Carderplanet.com, “Carding shouldn’t be something you do for fun; it is something you do to survive.”

Financially motivated hackers consider hacking and carding as their career. The employment opportunities are in their home countries, particularly those whose salaries are enough to pay for the life styles these individuals have become accustomed, are extremely limited. They come from a society where the average pay is $200 per month but Internet connectivity costs $40 per month. Thus, they are willing to spend one fifth of their monthly salary to be online. A $1000 profit is more money than most Eastern European hackers have ever seen at one time.

Though they understand the process of credit cards, most International hackers do not understand the impact of committing credit card fraud. Most come from cash economies and the use of a credit card by regular citizens is extremely uncommon. They feel the attack is directed at a big corporation and not an individual. The idea of rising interest rates, chargeback fees or economic instability are not concepts they cannot understand nor are they their concern. Money is the object of their actions. At the time of the first version of this paper in August 2003, many financially motivated hackers could be found chatting in the forums of the web sites carderplanet.com, shadowcrew.com and/or darkprofits.com. These sites are still referenced in this paper because the information provided on the sites is still relevant.

Since that time, many of the referenced sites have been shut down or taken over by script-kiddies and the real profiteers have moved deeper underground. Many have also become allied with organized crime groups or created their own hacking teams. Also at the time of original publication, EFnet and DALnet on IRC initiated a crackdown on channels dedicated to cybercrime. Since that time, the criminals have found loopholes in the crackdown, such as renaming the groups, attaching messages of the day (MOTD) forbidding criminal activity or making the channels private. Many of the channels have also gone native; meaning they are dedicated to a particular language group and all posts to the channel utilize that language and the corresponding slang for carding.

The point being, the groups have not gone away. They still exist and communicate on the Internet by adapting to the rules. Law Enforcement must adapt in kind. By no means is this paper intended to be the end-all authority on this crime. Comments, questions and revision are always welcome. In addition, this paper is not how-to, specific aspects of the schemes have been left out in order to ensure those who only use this information will fail in their attempts or more likely get caught trying.

Definitions, Concepts and Statistics

Since the readers of this paper will range from skilled investigators to neophytes, some basic terms and concepts need to be set forth. These are the definitions as they appeared online from the hackers/ carders and fraudsters.

Hacker - Individual who gains unauthorized access to computer networks and systems

Carder - Individual who uses stolen data, usually Credit cards, to fraudulently purchase items or convert the credit into cash.

Credit card - a monetary instrument, often referred to as plastic, used in place of cash to make purchases. Credit cards are assigned to entities and have specific monetary limits and an interest rate associated with payoff. Since credit cards do not have to be paid off each month, the available limit will fluctuate. Visa or MasterCard does not issue Visa and MasterCard credit cards. They are issued by an issuing bank in conjunction with a use agreement between the bank and Visa or MasterCard. This agreement is for the use of the Visanet or the MasterCard equivalent for verification and authorization of the card.

Charge card - same as credit card however, a charge card must be paid off each month or risk an extremely high interest rate or the card being shut down.

Debit Card - Card associated with a bank account and limited by the amount of money in said account, which resembles the credit card by the method of purchase. However, these cards may only be used with the owners Personalized Identification Number.

Hacker knowledge

Below is the “Beginning Carders Dictionary’” as posted online by the Russian hacker, KLYKVA on forum.carderplanet.com. It is presented in its original form to illustrate the level of knowledge from which these individuals are working.

Bank-emitent (Issuing bank) - bank which has issued the card

Billing address - the card owner address

Drop - innerman. His task is to receive the money or goods and accordingly, give the part of the earnings to you.

Drop/Pick-Up guy/Runner - person or location that is setup to accept packages or to receive the money. He should be paid nicely for this position.

Billing - office, which has agreement with a bank and assumes payments for the cards.

COB - Change of Billing address

Card bill - a Bank emitent card bill.

Bank-aquirer - bank, in which the store opens the account.

Merchant account - bank account for accepting credit cards.

Merchant Bank - bank, through which occur the payments between the buyer and the seller (frequently it is used as synonym “bankequirer”).

Cardholder - owner of the card.

Validity - suitability of card.

White plastic - a piece of pure plastic, where the information is plotted/printed.

CR-80 - rectangular piece of pure white plastic (without the drawing image) the size of a credit card with the magnetic strip.

Transaction - charge to the credit card

POS terminal (Point Of Sale terminal) - reading card device, which stands at commercial point.

PIN-code – (Personal Identification Number) the sequence, which consists of 4-12 numbers, known only to the owner of card. A simple word password for an ATM and so on.

AVS - the card owner address checking. It is used for the confirmation of the card belonging exactly to its holder.

“Globe” - card holographic gluing with the image of two hemispheres (MasterCard).

Pigeon (hen) - card holographic gluing with the image of the flying pigeon (VISA).

Reader - information reading device for the readout from the magnetic strip of card.

Encoder - read/write device for the magnetic track of the card.

Embosser - card symbol extrusion device.

Card printer - card information printing device.

Exp.date - card validity period.

Area code - the first of 3 or 6 digits of the card owner’s phone number.

CVV2, cvv, cvn - 3 or 4 additional numbers, which stand at the end of the number of card.

ePlus - program for checking the cards.

BIN - first 6 numbers of the card number which make it possible to learn what bank issued the card and what type of card (ATM-card, credit, gold, etc.). Synonym of word “Prefix”.

Chargeback - the cardholder’s bank voids the removal of money from its card.

Dump - information, which is written to the magnetic strip of the card, it consists of 1,2 or 3 tracks.

MMN - Mothers Maiden Name (generally the primary account holder’s mother)

Track (road) - a part of the dump with specific information. Every 1st track is the information about the owner of the card.

2nd track - information about the owner of card and about the bank who issued the card, etc. 3rd track - it is possible to say - spare, it is used by stores for the addition of the points and other.

Slip - synonym to the word “cheque” (conformably to card settlings).

Card balance – amount of credit remaining for spending in the card account.

Automated Clearing House (ACH) - the automated clearinghouse. The voluntary association of depositors, which achieves clearing of checks and electronic units by the direct exchange of means between the members of association.

Continuous Acquisition and Life-cycle Support (CALS) – the integrated system of the production guaranteeing, purchase and exploitation. This system makes possible to computerize all data about the design, development, production, servicing and the propagation of the production.

Debit Card - Card, which resembles the credit card by the method of using, but making possible to realize direct buyer account debiting at the moment of the purchase of goods or service.

Delivery Versus Payment (DVP) - the system of calculations in the operations with the valuable papers, which ensures the mechanism, that guarantees the delivery will occur only in the case of payment and at the moment of payment.

Direct debit - payment levy method, mainly, with the repetitive nature (lease pay, insurance reward, etc.) with which the debitor authorizes his financial establishment to debit his current account when obtaining calculations on payment from the indicated creditor.

Electronic Fund Transfer (EFT) - the remittance of means, initiated from the terminal, telephone or magnetic carrier (tape or diskette), by transfer of instructions or authorities to financial establishment, that concern the debiting or crediting of the account (see Electronic Fund Transfer/Point of Sale - EFT/POS).

Electronic Fund Transfer/Point of Sale - EFT/POS - debiting from the electronic terminal, for the transfer purpose from the account of a buyer into the payment on the obligations, which arose in the course of transaction at the point of sale.

Integrated Circuit (IC) Card - It is known also as chip card. Card equipped with one or several computer micro-chips or integrated microcircuits for identification and storing of data or their special treatment, utilized for the establishment of the authenticity of personal identification number (PIN), for delivery of permission for the purchase, account balance checking and storing the personal records. In certain cases, the card memory renewal during each use (renewed account balance).

Internet - the open world communication infrastructure, which consists of the interrelated computer networks and provides access to the remote information and information exchange between the computers.

International Standardization Organization (ISO) – International organization, which carries out standardization, with the staff office in Geneva, Switzerland.

Magnetic Ink Character Recognition (MICR) - System, which ensures the machine reading of the information, substituted by magnetic inks in the lower part of the check, including the number of check, the code of department, sum and the number of account.

RSA - the coding and authentication technology, developed in 1977 in MIT by Rivest, Shamir and Adel’man, which subsequently opened their own company RSA Data Security, Inc., purchased recently by the company Security Dynamics Technologies, Inc.

Real-Time Gross Settlement (RTGS) - the payment method, with which the transfer of means is achieved for each transaction in obtaining instructions about the payment. Decrease the risk with the payment.

Smart Card - card equipped with integrated circuit and microprocessor, capable of carrying out the calculations.

System risk - the risk, with which the incapacity of one of the payment system participants either financial market participants as a whole to fulfil their obligations, causes the incapacity of other participants or financial establishments to fulfil its obligations (including obligations regarding the realization of calculations in means transfer systems) properly. This failure can cause significant liquidity or crediting problems and, as result, it can cause loss to the stability of financial markets (with the subsequent action on the level of economic activity).

Truncation - procedure, which makes it possible to limit the physical displacements of a paper document (in the ideal version) by the bank of the first presentation, by the replacement by electronic transfer of entire or part of the information, which is contained on this document (check).

Card Balance - Current used Credit

Avail Credit - Actual credit avail for Spending

Cash Advance Avail - Actual amount avail as Cash for ATM usage.

Integrated Circuit (IC) Card - It is known also as chip card. Card equipped with one or several computer micro-chips or integrated microcircuits for identification and storing of data or their special treatment, utilized for the establishment of the authenticity of personal identification number (PIN), for delivery of permission for the purchase, account balance checking and storing the personal records. In certain cases, the card memory renewal during each use (renewed account balance).

LE - Law Enforcement, Coppers, Piggies, The Fuzzzzzzzzzzzz

Lappie- Laptop

Communication Methods

As in all endeavours, hackers and carders need a means or several means of communication. Given the international make-up of most hacking groups and the fact of Cybercrime being truly borderless, the communication methods chosen by these groups must be internationally accessible, cost effective and have a high level of anonymity. Listed below are several of the primary communications methods used by hackers and carders:

IRC - Internet Relay Chat, a series of interconnected computer servers on various networks, which enable users to chat in, channels and one to one. The channels are also referred to as rooms and are controlled by the user who first established the room.

ICQ - America Online (AOL) owned peer-to-peer chat application. Chat rooms can be established within the ICQ network but entrance is by invitation only.

AIM- AOL Instant Messenger

Forums - Website sponsored bulletin boards where public and private messages can be posted about various topics. Examples: forum.carderplanet.com,  eraser.hostmos.ru, www.darkprofits.com and www.carderclan.net

Email - Electronic mail

A Credit Card (VISA) Transaction

There are two parts to every transaction. First, a customer presents a Visa product, usually a card, to a merchant, who needs immediate authorization of the transaction. Second, at the end of the day, the merchant needs to receive the funds for the transaction via its financial institution and ultimately from the customer’s issuer. The specifics will vary depending on transaction type, complexity, technology, and processing services but the typical flow is illustrated here.

How a Purchase is Made

Authorization at the Point of Sale

Maria presents a Visa card (credit or debit) at ABC Stores. ABC uses an electronic terminal or the telephone to request an authorization from its financial institution (DEF Merchant Services).

DEF checks to see if the account is valid and has sufficient funds. It sends an authorization request message, including months before the theft. During the theft portion, the hacks begin to glean specific information, i.e., credit card numbers from the system as needed. The theft phase can last for years and the hackers usually leave a very small footprint of their activities. The dump stage occurs when the hackers steal everything in a very “noisy” manner. This stage is used to burn all those “script-kiddies” and “lamerz” who are taking advantage of the original hackers’ backdoors. The dump phase usually results in press coverage and the “red-flagging” of all the credit cards in the system at that point in time. The victim company makes security changes and over time lets their guard down. The hackers then attempt to use the old backdoors they created. If they are still in place, the theft stage begins again. The hacks normally take advantage of known vulnerabilities, which have not been patched by the various victims. Most hacks occur against Microsoft Windows platforms and utilize the Msdac exploit, the MSSQL exploit or the IIS exploit. A wealth of information is available about these exploits on the Internet. The truly skilled hackers have developed their own tools and place backdoors on systems such as, installing Telnet and secure shell daemons on high port numbers or creating their own user id’s and passwords after installing a sniffer to steal the root level passwords. These are the first things System Administrators should look for, as well as changing all root level passwords via face-to-face meetings with all root level users. Sending the change of passwords via email will be intercepted if a sniffer has been installed on the system. Sometimes, the hack is automated using a “bot” which makes it impossible for the System Administrators of the victimized networks to stop because they are physically not fast enough to fight the bot. The only way to stop the bot is to take the network offline.

Investigations thus far indicate the following items are being stolen for use in various schemes detailed later in this paper:

• Credit card databases

• Personal information (name address telephone numbers)

• Bank accounts

• Bank routing numbers

• Social Security numbers

• Email addresses and passwords

• Computer logon names and passwords

• ACH transfer records

• Merchant accounts

• Order histories

• Client lists

• Partner lists

• Company telephone directories

• Website Source code

• Shipment tracking numbers

• Ebay accounts

• Escrow accounts

• Proprietary Software

Getting Credit Cards

Of all the data sought by hackers, credit card databases are the highest priority. This is because they are the easiest to use. There are nine basic methods to obtain credit card numbers:

Phishing – This is the practice of sending fraudulent e-mails that appear legitimate. The email often appears to be from a bank or financial institution and request the recipient update their account information by utilizing the link included in the email. The link takes the recipient to a bogus web page where all the requested information is captured and later transmitted to a site controlled by the criminal for their use in cybercrime. Amongst the information often requested are the recipients’ social security number, credit card number, PIN and cvv2.

Buy – There are literally thousands of “Vendors” on web sites such as Forum.carderplanet.com, darkprofits.net and Shadowcrew.com willing to sell dumps of credit cards at varying rates. If a carder knows how to use cards, expending $200 up front for cards is easily recouped.

Trade – Through the different communication methods discussed above, hackers and carders trade credit cards online. Many cards are offered free of charge. The individual who stole the cards often has used these cards for fraudulent purchases. They are then offered to the community as a whole with the intention of having multiple people use the cards. Law enforcement will therefore have a harder time identifying the original hacker from the various carders.

Generate – There are numerous software packages freely available on the Internet, which generate credit card numbers. Many of the programs use a secure algorithm just like the legitimate credit card companies. The problem for the carder with generated cards is that less than 1% of the cards are valid. This means the carder will need to have access to obtain validity and authorization before trying to commit fraud. A common method would be a merchant account.

Visa and MasterCard do not issue or generate cards; however, they allow banks to issue cards with the respective logos/brands. American Express differs from Visa and MasterCard in this respect. American Express controls all cards and card numbers using their logo. American Express actually generates card numbers in advance, which are stored in an active state awaiting issuance to a customer. If a carder generates one of the stored American Express cards, any merchant receiving the card for payment will receive authorization for the purchase.

Extrapolate – Once a Carder obtains a valid card through any of the different means listed herein, he can extrapolate additional cards based on the valid card number and the expiration date. Various extrapolation programs are freely available on the Internet. These programs utilize the valid card as a base for creating additional cards, particularly the first six digits. Extrapolation increases the likelihood of obtaining valid credit cards to approximately 18-20%. Once again, a method to determine the validity via authorization is required.

Fake Shops – It seems every business must now have a presence on the Internet in order to do business. Couple this fact with the publics’ belief that web sites are not easy to set up. It is not difficult to understand why many feel if the company has a nice web site, the company must have money and be a reputable company. Many hackers and carders will use these beliefs to their advantage by setting up fake online shops offering products for sale at cut-rate prices. Good hackers and carders will spend the extra time to post fake recommendations on rating sites to help move their fake shop into the top ten slots on search engines.

When customers place an order at the shop, they will be informed via email; their product will be shipped in 4-6 weeks. While the customer is waiting for their product, the shop owners continue to collect credit card numbers. At this point, there are three possible scenarios:

The first is that the product is simply not shipped and the credit card is never charged. The second is the product is not shipped but the credit card is charged. In the third scenario, the product is shipped and the customer is happy. The details of this scheme will be covered in depth later in the paper but, in all three scenarios it should be noted, the hackers and carders received legitimate credit card numbers with full information.

Intrusions - The method of obtaining credit cards that has received the most press is Intrusion. The hacker simply gains unauthorized access to a system and steals the database. The systems targeted by hackers include the following:

• Online shops running shopping card programs

• E-Commerce payment solution sites, which handle online orders for online shops

• Credit Card processing companies such as Authorize.net, creditcards.com and CCBill.com

• Online monetary exchange sites where a person can purchase monetary units using credit cards

• Online Casinos

• Pornographic websites (victim often do not notify Law Enforcement of intrusions)

• Banks and Financial institutions

Each of these targets will have credit card information stored in some variation. Some will include full information including CVV2 numbers while others will simply store the credit card number and expiration date.

Identity Theft - This method is labor and time intensive but, once the credit card is obtained, the card is valid and often has a high credit limit. Using stolen identities, the carder simply applies for a credit card. How the identities are obtained range from simply web searches to buying access to ChoicePoint or Lexus/Nexus gaining data from their databases. This scheme will also be covered more in depth later in this paper.

Social Engineering (SE) - By far the most low-tech method of obtaining information, the hackers and carders will simply try to get the individuals to provide the information. This is done through telephone calls, faxes or email. A very common SE method is the email sent to particular customers stating there is some issue with their account. The customer is asked to log on using the link contained in the email. Once the customer logs on, all the information they input into the web site is collected for use by the hacker. When the individual selects the submit button on the web page, a message stating some computer glitch appears and the customer is asked to select the continue button which will redirect the customer to the legitimate site and the customer re-enters their information. This time, the proper site accepts whichever change the individual makes, and the customer has unknowingly provided the hacker/carder with full account information. This method has been reportedly used for gathering email, PayPal, bank and credit card account information.

The Schemes

Each hacking and carding group try to develop their own original scheme to make money from the stolen data however, there are several primary schemes for converting stolen data into cash or product upon which all the others are based. Below, the primary schemes and a few widely used variations are detailed. It is important to note, the variations are only limited by the imagination and knowledge of the subjects.

Sell - The easiest and quickest method to make money from stolen cards is to simply sell them online. The sale of card data is called a “dump” in which the hacker/carder offers the data for trade or sale, often track 1 and 2. The going rate online is approximately $.35-$.50 for credit card numbers and expiration dates. Cards with full subscriber information and CVV2 numbers range in price from $2.00 to $4.50. In addition, cards are sold based on their verified credit line i.e., $100 for a card with an available credit line of $10,000.

Auction Fraud - Also an incredibly easy scheme, auction fraud has been somewhat limited by the establishment of online escrow companies. However, note, fake online auction companies can easily be created as well. In this scheme, the subject simply posts a fake auction item and sells it to the highest bidder. The buyer sends the seller money or a credit card number but never receives the product.

A couple variations of this scheme are as follows:

A. The hacker/carder uses the stolen credit card to make purchases of auction items. This can be done on a person-to-person sale or using an escrow account. If an escrow account is involved, the hacker/carder will either open an escrow account based on the stolen information or will steal an escrow account and use whatever funds are in the account to make purchases. The purchases will be shipped to a drop and picked up later by either the subject or his associate to be re-packaged and shipped elsewhere, usually overseas. The use of a drop and an associate is called a trans-shipper. How trans-shippers are obtained is discussed later.

B. The second variation is more sophisticated and forces the escrow account to serve as a money laundering conduits. The hacker/carder will open several escrow accounts, one based on a bank account controlled by the hacker/carder and the others based on stolen credit card or bank account information. Often times neither account is in the subject’s true name. The real account is used to post numerous online auctions. The auctions take place for a limited period and the hacker wins his own auctions using one of the fraudulent accounts. This fraudulent account is then used to pay the escrow company. The seller informs the escrow account the product has been sent, the buyer states he received the product and instructs the escrow company to release the funds. The funds are transferred to the real escrow account from which they are immediately withdrawn and transferred to a bank account or withdrawn via an ATM. At no time during the transaction did any product change hands. All the money was transferred via the escrow company thus, in 30-days when the cardholders whose cards were used for the fraudulent accounts file chargebacks, the chargeback is sent to the escrow company.

Fraudulent Purchases - This scheme is also simple in that the hacker/carder simply makes a purchase online using the stolen credit card. The difficulty for this scheme is that merchants often will not ship overseas therefore; the subjects need an address within the U.S. to which to ship the product. On Fraudulent Purchases, the hacker/carders need a drop, a person or location to send the packages without identifying themselves. Drops can be obtained in various ways...

The most common is to post on a hacker/carder forum the need of a partner and establish a working relationship with whoever answers the postings.

Drops can also be obtained by posting a job offer onHotjobs.com or Monster.com for an individual to work at home. Individuals will be paid via Western Union to accept and repackage items and send them overseas. A skilled Social Engineer can convince people of the legality of accepting packages in this method and the newly hired employee is unaware they are facilitating a crime. When it comes to paying these employees, the hackers/carders vary as well.

Many will simply not pay their employees and leave them “holding the bag” when complaints are filed. Others choose to pay their employees through Western Union. Still others act as if they are paying the employee by sending them a counterfeit check.

The checks will be drawn for substantially higher amounts then are owed the new employee. When the employee comments regarding the value of the check, the employer states it was an oversight and asks the employee to simply wire the employer the remaining funds after the subtraction of the monies owed the employee plus a bonus for being honest. The employee sends the wire transfer overseas and two to three days later finds out the check is counterfeit. The employee is out not only their salary but also additionally the amount wired overseas.

The third variation is called COB (change of billing). Most credit card companies allow their customers online access to their account. With this online access, the customer can change billing addresses; telephone numbers, passwords and soon. The intriguing aspect is that most people do not activate their online access. When a hacker/carder steals a credit card with full information, they can then go online and change the billing address to match that of one of the drops they control. The COB is extremely useful when the company the items are being purchased from, will only ship to the billing address.

If the drop is worried about having the packages shipped to their address, P.O. boxes are used and an ingenious method is to send the packages to vacant homes. An individual can contact a local real estate agent to determine which homes are for sale and when the occupants plans to move out. During the brief time the house is vacant, the drop can simply pick up the packages from the mailbox of the vacant house.

A final variation involves some sophistication, but it limits the need for an associate. When an item is fraudulently purchased, the hacker/carder has the package shipped to the credit card holder’s real address. A slow shipment method is requested as well as a fax or email of the scanned shipping bar code. When the hacker/carder receives a copy of the shipping bar code, they can utilize a bar code scanner to read the code. They then contact the shipping company, provide the information contained in the bar code and a change of the shipping location. The new cost for the shipment is billed to the defrauded company or can be charged to another stolen credit card. Merchant Account - One of the more popular schemes is Merchant Account fraud. In this scheme, the hacker steals the credit card database of one company and the merchant account of a second. The

carder charges an amount on each card to the merchant account. Once the charges have cleared, approximately one hour later, the carder issues a refund from the merchant account for the total amount charged on the cards to the hacker controlled debit card account overseas.

A “drop” is then used to retrieve the stolen money from the ATM using the hackers’ debit card and the money is forwarded via Western Union, Money Gram or Webmoney to the hacker. Often times the money is bounced through several bank accounts before reaching the hacker/carder or the hacker/carder will forego the use of a drop and pick up the money themselves. The victim is not aware of the charges and the refund until their merchant account is reconciled, usually at the end of the month. When the card members notice the unauthorized charges on their cards, they request the charges be cancelled. This results in a charge back to the merchant for the cost of the charge as well as a fine for bad charges.

Western Union/Money Gram/Egold - This scheme is similar to fraudulent purchases however, the purchase is credits, which can be translated into cash or traded for goods. The hacker/carder uses the stolen credit card as collateral for online monetary units such as money orders, Egold dollars or Webmoney dollars. The use of these monetary mediums is expensive in terms of fees and percentages but, since the money is stolen in the first place, hackers/carders do not complain about the charges.

A hacker/carder can use these online dollars to purchase money orders at Western Union and have the money orders forwarded to companies to pay for goods and services. A notable purchase through money orders is the monthly payment for maintenance of websites associated with hacking or carding.

Bank Attacks - Bank account information can be used for opening escrow accounts, online brokerage accounts (i.e., E*trade, Datek or Ameritrade) or initiating wire transfers. Currently, most banks with online presence do not allow wire transfers online for the regular customer. However, brokerage accounts and corporate accounts issue credit cards and do allow online wire transfer requests. These accounts often have a significant credit limit or bank balance. These are the targets of the truly financially motivated hackers and their organized crime backers. In order to cause a wire transfer to travel overseas, the hackers will have to compromise the SWIFT transfer system. It has been reported online, several hackers have found a way to compromise the system but no reported cases have been found. For wire transfers in the United States, the Automated Clearinghouse (ACH) network is used. A hacker who has researched the ACH system could cause an ACH re-route to occur thus, having money deposited into a hacker-controlled bank account, which could be access online, or through International ATM machines. Most companies allow and encourage the use of direct deposit for paychecks and accounts receivable transactions. These transactions utilize the ACH network. If the company uses an outside payroll company or accounting firm, they very likely use an outside company to handle all ACH transfers. These ACH transfer companies are the targets for hackers. If a hacker can gain access to an ACH processing company, they can change the database to reflect a new bank account for a client. This will cause all transfers normally sent to the victim’s bank account to be re-routed to the new bank account controlled by the hacker/carder. If the new account is a corporate account, the bank has 72 hours to clear the transaction. After 72 hours, any discrepancies are the responsibility of the bank. In essence, are-route of an ACH transfer for one week could bankrupt a company.

Identity Theft - When a hacker/carder steals personal data from any location, this information can be used to create fake id’s, known as novelty id’s to hackers, credit cards, bank accounts, loans and numerous other fraudulent media. If a hacker obtains a Social Security Number (SSN), they can use that information to apply for credit cards online in the real name of the SSN holder. They can also open bank accounts online at sites such asNetBank.com. These bank accounts will have credit cards or debit charges associated with them which can be sent via a re-mailer, trans-shipper or U.S. based associate to the hacker/carder’s location.  A notable trend has been the use of stolen credit cards to buy access to information sites such as Consumer Info, ChoicePoint or Lexus/Nexus. From these sites, the hackers/carders can identify addresses and telephone numbers for cardholders whose cards were stolen but the full cardholder information was not obtained. These sites and the information provided by them have enabled hackers/carders to commit identity theft at will.

Fake Sites - Similar to the fake store sites detailed above, hackers/carder will create fake auction, escrow and bank sites. As stated above the three possibilities for these shops are:

the product is not shipped and the card is not charged

the product is not shipped and the card is charged or

the product is shipped and the card is charged.

If the product is not shipped and the card is not charged, the hacker is simply collecting cards to use later. Often times the customer will forget about the purchase or will not worry about the lack of receipt because their card was never charged. If the product is not shipped and the card is charged, the hacker was just stealing the money and will have to re-establish the fake site under a different name after approximately 6 weeks. The customer will often complain in these cases resulting in a chargeback to the fake sites merchant account. When the chargeback is not paid, the merchant account will be shut down and the hacker will start a fresh. 

If the product is sent and the card is charged, then the hackers have coupled their schemes. Meaning they are using one of the other schemes to obtain products to then sell on their site. The stolen goods will be shipped to the unsuspecting customer per the deal, but the hacker/carder will now have the customer’s credit card. If the hacker/carder is patient and waits three to six months before making a charge, it will be nearly impossible for the customer to determine from which site the card was stolen. The added bonus is, if the original retailer of the re-sold goods reported the serial numbers of the equipment as stolen, when the new customer tries to register the equipment, it will red flag the customer. By that time, the transactions are sorted out, the hackers/carders and their site will be long gone with the money from the sale of stolen merchandise.

Extortion – When all other methods have been exhausted, many of which have been successful, hackers and carders will turn to basic extortion to obtain money. The most common extortion is phrased similar to the following: “Hello, I have found holes in your system, for $2000 dollars I will fix the holes and make sure no other hackers gain access to your system. I would hate to have to tell your customers about you lack of security. “This threat usually comes in the form of an email or fax. If the victim does not respond a second email and/or will be sent stating if the victim does not pay, the extortionist will be forced to post the stolen information on the Internet. The interesting thing about extortion is often two or more members of the group responsible for the intrusion and theft will try to extort the same company independently. This results in confusion for the victim and the extortionist.

DDOS – Distributed Denial of Service (DDOS) attacks are not often considered part of profit making but recent trends show the use odds attacks are being used in association with extortion. Once hackers have created a BotNet with tainted (files/programs containing a virus/worm payload as well as IRC client with instruction to call home periodically) viruses, file sharing downloads (warez, mp3s, etc.) or straight hacking, DDOS attacks will be launched knocking particular sites offline for days at a time. (Those sites on the same network as the targeted site will suffer a loss of service as well making them collateral damage and future extortion victims.) Victims will often pay extortionists the requested sum rather than suffer the loss of business. Some enterprising individuals, known as botmasters, who have successfully build large botnets, will hire themselves out. They are in essence cyber mercenaries willing to DDOS any and all sites if the price is right.

Collecting the Money
Once all the fraud is committed and the profits have been reaped, the hackers and carders need to convert the money to cash. The most common request is to have the money wired via WesternUnion (WU). For a small percent of the profit, WU clerks in Eastern Europe will look the other way if the recipients’ Id does not match the name of the individual retrieving the cash. If a passphrase is used, there is no need for an Id. Finally, WU transfers can be used to fund ATM cards, which then require no ID’s and no personal contact to obtain the funds. All of the schemes allow the hackers and carders to convert the money into electronic credit that must be sent to a bank account or e-currency repository. These repositories can be as simple as an online bank account such as NetBank and INGDirect or normal bank accounts at banks that have less stringent banking requirements, i.e., off shore banks in Latvia, the Republic of Nauru or Cyprus. The problem with these methods is the paper trail associated with keeping money in a bank. With the advent of e-currency/online escrow accounts, came the advent of e-currency ATM cards, also known as pre-paid credit/debit cards. These cards can be purchased for a small fee and funded using any of the e-currencies currently available including, EVOCash, Egold, LogixPay, eBullion, GoldMoney, Pecunix and NetPay. The cards are in essence pre-paid ATM cards that are funded by sending money to the particular e-currency broker. The cash is then withdrawn at any ATM that accepts the respective ATM cards.

Providers of prepaid Debit cards or e-Currency ATM cards include, SwiftPay, WMcards, Ecount, Wired Plastic, Green Card, Citi Cash Card, Eufora, as well cards issued by the e-currency companies and hundreds of others. Many enterprising subjects have set themselves up as middleman for the carders. These individuals set up online businesses that handle the money-laundering and stolen property sales (“consignment shops”) aspects of the schemes for the carders. The sites will offer bank accounts, debit cards and drop addresses to the carders in exchange for a fee. The carders will then have the profits from extortions, PayPal fraud, Auction fraud or any of the other schemes deposited into the account or shipped to the address. However, no real bank account will be set up for the carders. The site owner will open one bank account and using an Excel type spreadsheet, assign accounts to each of his clients. When money is deposited into the bank account of the site owner, a special denotation will be required indicating into which client account the money is to be deposited. This denotation will mean nothing to the legitimate bank at which the site owner’s account resides. The site owner will deduct his percentage and denote the remaining amount on his spreadsheet as belonging to the specified client. The client can then have this money transferred to a bank account, a pre-paid debit card or use the money to purchase ecurrency.  The site owner has created their own bank without the regulations or oversight of a legitimate bank.

Conclusion
An organized use of the above detailed schemes could result in the de-stabilization of the banks and the credit card industry being victimized. These schemes have already been attributed to the collapse of several businesses and were utilized to finance at least one terrorist attack (the Bali bombing). At a minimum the loss, which exceeds $10 billion a year in fraud and damage to computer networks, can being blamed for the rise of purchase prices to consumers and the rise of interest rates on credit cards.

International financially motivated hackers are talented, educated and willing to do anything for money. They do not fear law enforcement because they think they cannot be caught. They do fear the FBI but only if they come to the United States. They are overseas therefore; they are invincible.

However, plans are being made to work with the respective law enforcement agency in each of the countries where hackers and carders have been identified. The intention of these cooperative efforts is to provide law enforcement with the proper training to catch the hackers and carders, to arrange their prosecution either in their home countries or in the U.S. and to obtain copies of their computer hard drives for use against additional targets. This cooperation has already worked in Belarus, England, Canada and has been requested by Turkey, Ukraine and Russia. Finally, these hackers/carders offer up information regarding hacking and carding freely online. Thus far, all indications are the schemes are being used by loosely connected groups who join force for one or two jobs and then part ways.

Given the availability of the information and the changing climate of the world, in the near future, these attacks/schemes will be operated by highly organized groups with various political agendas.

Online chatter has begun regarding “big hits” such as attacking various countries’ central banks, shutting down systems and bilking large corporations for millions of dollars. All indications are this type of crime will continue unfettered if law enforcement does not increase our knowledge base and cooperate internationally. However, we will never stop this type of crime, by understanding, what they are doing and how they are profiting, we may be able to limit the criminal’s effectiveness while dissuading others from trying to hack and card in the first place.