Fraud and Cryptocurrencies: An Alternative Payment System Exploited by Fraudsters

Fraud and Cryptocurrencies: An Alternative Payment System Exploited by Fraudsters Jane Hennessy Head of External Alliances, G2 Web Services January 12, 2018

What Payments Does He Use? Peer-to-Peer

E-Wallets

Mobile Pay

Bank Debits/Credits

ALTERNATIVE PAYMENTS METHODS MSBs

Pre-Paid Cards

Vouchers

Cryptocurrencies

•

Alternative Payment Methods (APMs) are payment methods apart from credit/debit cards used to make online purchases or transfer money

•

While credit/debit cards are still the dominant online payment method, APMs are gaining ground rapidly

•

While card brands become better at detecting “front” businesses, APMs are only slowly realizing this threat

How Does He Work?

A high-level overview with case studies

Payment Brand Protection The Payments Hustler is Working to Get Paid Point-to-Point

Prepaid Cards

MSBs

Cryptocurrency

Vouchers

Mobile Wallet

Bank

Fraudulent Merchant

What Are His Tactics?

Plan A: Alternative Payment Networks (money transfer, P2P)

Plan B: Bank Payments (account-linked debits, credits)

Plan C: Cryptocurrencies (general: bitcoin, specialized: potcoin) • Bad actors probe less monitored payment types for weaknesses through trial and error • Alternative and emerging payments are often unprepared and find themselves unwittingly enabling crime

Illegal Drug Store — Bitcoin

Illegal Drug/Research Chemical Store — Litecoin & Etherum

What Does It Look Like In Practice?

Month 1

Merchandise

Methods

Month 2

Month 4

What Does It Look Like In Practice?

“If you can’t fix it, feature it!”

-Sir Ernest Shackleton

What Does It Look Like In Practice?

Step 1

Step 2

What Does It Look Like In Practice?

Step 3

Step 4

What Does It Look Like In Practice?

Step 1

Step 2

Clearly this payment brand would not want to be seen as facilitating bestiality

Other Uses

Posing as others in the crypto-community

ICOs posing as legitimate actors for sales — seeking money pre-ICO — masquerading as agents

Securing proprietary information — e.g., insider information on M&A deals

Nigerian princess lives to see another day — in Bitcoin

Thank you!

Jane Hennessy Head of External Alliances, G2 Web Services jhennessy@g2llc.com | 415-867-9293