4 Year Credit Card Scam Finally Comes to Light

Over and over in articles here at Identity Theft Secrets we’ve advised consumers to carefully check their credit card statements for discrepancies.  In decades past, most of use would have only pulled out a credit card for larger purchases.  With so many credit card rewards programs going on, some of use credit cards much more often.  On top of that, we now can and do use credit cards for tiny purchases like a meal or café mocha at McDonald’s or even a $1.00 Red Box movie rental. Are we really paying attention to those small numbers on our credit card statements? As a whole, apparently we are not and scammers knew it all along.

The 4-year credit card scam story:

The U.S. Federal Trade Commission filed charges in March is the U.S. District Court in Illinois on what is believed to a four-year credit card scam with very patient scammers.

The scam worked by making very small charges on stolen credit cards but making just one charge per card.

Steve Wernikoff, a staff attorney at the FTC who is prosecuting the case says, “It was a very patient scam,” and “The people who are behind this are very meticulous.”

U.S. assets of the “gang” have been frozen and the merchant accounts of 14 so called “money mules” in the U.S. that moved money to offshore countries have been shut down.

How did they do it?

These credit card scammers set up fake U.S. companies but used some very slick methods to make them appear legit and keep them under the radar. They used similar names to real companies and even sought out close by addresses to make them look legit.  Then they used an elaborate system of call forwarding and mail forwarding to keep them scam running.

Where they obtained the credit card numbers to begin with has not been revealed.

The Facts and Figures in the Credit Scam:

*Charges were between 25 cents and $9.00 and therefore stayed below the radar.

*Scammers set up over a 100 bogus companies and then ran the charges through legit credit card processors.

*According to the FTC, 1.35 million dollars were charged.

*Cardholders never contested Ninety-four percent of the charges.

*Only 78, 724 of the fake charges were noticed and reported.

“They know that most of the fraud detection systems won’t detect anything under $10,” says Avivah Litan, Gatner research firm analyst, “and they know that consumers won’t complain about a 20 cent fee.

*First Data processed 110 of the 116 fake merchant accounts.

(First Data had no comment on improving security measures but confirms that they cooperated with the investigation by the FTC.)

It took “money mules” to transfer the money.

One of the named 14 mules, James P. Smith of Texas, admits to working with a former boss using the name “Alex Moore” for years but says he never realized he was doing anything illegal.  Smith says in a letter to a judge that he is “ashamed” and will cooperate to assist in catching his former boss.  It is believed that money mules were recruited through the internet with spam e-mail messages.

Would you or have you noticed a small but unfamiliar credit card charge?  Did you report it? We’d love to hear your insight in our comments section.