This week’s Secret Crime Fighter discovered a money laundering scheme being supplemented by chargeback collusion - the criminals finding a clever way to double their money. The typology is an interesting example of how financial criminals are not loyal to a particular crime type, but will use any available means to further their interests.
Our Secret Crime Fighter this week is a payment processor, whose customers are merchants looking to take payments. The merchants of interest were UK based contractors registered as limited companies, set up a number of years ago with good credit histories. They had websites that looked genuine, albeit some of the images looked like stock photos. There were no online reviews of the businesses, and they had no other web presence.
Perhaps the only red flag at this stage were the merchants’ director histories - the original UK-resident directors had been replaced by Eastern European directors just a few months before signing up to our Secret Crime Fighter’s service.
Once the merchants had set up their accounts they made a test payment, processed no payments for a few months, and then started to slowly scale the transactions. The first payments were smaller, maybe £500 or £600, but grew over time, to £1000 or more per payment. Generally there were just a few transactions per day, and they were typically within business hours, mimicking expected behavior.
The cards being used to make the payments were a mixture of business and personal cards, a mixture of debit and credit cards, and from a range of banks. The names associated with the business cards were always names of people. More than 20 cards were used to make payments to each merchant, but the cards did share names. Interestingly, the payments were usually made from the same area in North London, but when payments were made by supposedly the same person (based on the name associated with the card), the geolocation of the payments were not the exact same houses, but were located nearby.
Most cards were used several times, but the merchants were careful to keep the spend for each single card below £10k.
In total, over a period of 5 or 6 months, £100k worth of payments were taken by the merchants.
Once the merchants had taken ~£100k of payments, the disputes started. The majority of the payments taken were recalled via disputes, which left our Secret Crime Fighter potentially on the hook for them.
Given the volume and timing of disputes and the consistent pattern and nature of the transactions, the assumption is that the merchants and the cardholders were in collusion, in a clever attempt to double their money.
Our Secret Crime Fighter was able to put in place some rules to detect and stop further merchants from carrying out this crime. The rules looked for the red flags, and in particular things like repeat patterns in card use, different locations for the same card names, and high numbers of card present transactions when such transactions would be unexpected.
Thanks for reading our latest Secret Crime Fighters newsletter. If you have an interesting typology that you’d like to share, we’d love to hear about it! Please email us at [email protected].
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Will AI + Automated Testing Eliminate the Third Line of Defense?This week’s Secret Crime Fighter discovered a money laundering scheme being supplemented by chargeback collusion - the criminals finding a clever way to double their money. The typology is an interesting example of how financial criminals are not loyal to a particular crime type, but will use any available means to further their interests.
Our Secret Crime Fighter this week is a payment processor, whose customers are merchants looking to take payments. The merchants of interest were UK based contractors registered as limited companies, set up a number of years ago with good credit histories. They had websites that looked genuine, albeit some of the images looked like stock photos. There were no online reviews of the businesses, and they had no other web presence.
Perhaps the only red flag at this stage were the merchants’ director histories - the original UK-resident directors had been replaced by Eastern European directors just a few months before signing up to our Secret Crime Fighter’s service.
Once the merchants had set up their accounts they made a test payment, processed no payments for a few months, and then started to slowly scale the transactions. The first payments were smaller, maybe £500 or £600, but grew over time, to £1000 or more per payment. Generally there were just a few transactions per day, and they were typically within business hours, mimicking expected behavior.
The cards being used to make the payments were a mixture of business and personal cards, a mixture of debit and credit cards, and from a range of banks. The names associated with the business cards were always names of people. More than 20 cards were used to make payments to each merchant, but the cards did share names. Interestingly, the payments were usually made from the same area in North London, but when payments were made by supposedly the same person (based on the name associated with the card), the geolocation of the payments were not the exact same houses, but were located nearby.
Most cards were used several times, but the merchants were careful to keep the spend for each single card below £10k.
In total, over a period of 5 or 6 months, £100k worth of payments were taken by the merchants.
Once the merchants had taken ~£100k of payments, the disputes started. The majority of the payments taken were recalled via disputes, which left our Secret Crime Fighter potentially on the hook for them.
Given the volume and timing of disputes and the consistent pattern and nature of the transactions, the assumption is that the merchants and the cardholders were in collusion, in a clever attempt to double their money.
Our Secret Crime Fighter was able to put in place some rules to detect and stop further merchants from carrying out this crime. The rules looked for the red flags, and in particular things like repeat patterns in card use, different locations for the same card names, and high numbers of card present transactions when such transactions would be unexpected.
Thanks for reading our latest Secret Crime Fighters newsletter. If you have an interesting typology that you’d like to share, we’d love to hear about it! Please email us at [email protected].
