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Cyber Fraud Is Going Global, FBI Sting Reveals

Banks need to respond to a new fraud environment where fraudsters have online anonymity and the ability to connect international through the internet.

Yesterday the FBI announced the arrest of two dozen suspects in the largest international sting operation against card-related cyber fraud activity ever. The 24 arrests were made in eight different countries and prevented over $205 million in losses from credit and debit card fraud, the FBI said on its blog. The international scope of the fraud network that the sting operation was directed against reveals the global nature of cyber fraud today.

"Financial institutions need to understand how truly global fraud has become," says Ben Knieff, director of Product Marketing at NICE Actimize, a provider of financial crime, risk and compliance solutions. "There is an entire economy and business centered around fraud and much of it is perpetrated through cyber crime and malware."

Just a few years ago, Knieff says, most fraud was committed on a small scale at the local level. But now cyber crime has gone international, partially thanks to the ability that the internet provides for fraudsters to connect anonymously across international boundaries. Someone can now skim an ATM machine and then sell the credit card information to someone making counterfeit cards in another location, Knieff explains.

Knieff also points out that banks have an increasing number of legitimate foreign customers, and that banks might need to change their security controls to reflect their increasingly international customer base and security threats.

A bank's ability to adapt and make changes to its security and fraud detection rules quickly is one of the keys, Knieff remarks, in being able to combat the fast-evolving cyber fraud threat.

"The threat environment is so much more complex than just a few years ago." He says that this has led to a strong need in the view of many IT and fraud prevention teams that he speaks to for flexibility in implementing or adapting fraud detection rules.

Knieff adds that he expects instances of cyber fraud to increase and distinguishes two different "flavors" of cyber fraud networks that exist. The first is a loosely-affiliated model of individuals or small groups with no one in charge. The second "flavor" functions more like a large scale criminal organization with a centralized structure.

But both models, Knieff says, are evolving in the ways they leverage malware. Fraud networks are now able to deploy malware that targets individuals by waiting on a site to steal card information, attacks businesses by infiltrating their data servers or compromises financial institutions by gaining direct access to account information. Groups can buy and sell malware kits and other fraud tools through underground online forums like the one targeted by the FBI sting, and can even distribute such tools through social media.

The news isn't all bad though. The recent sting operation by the FBI, in collaboration with several other law enforcement agencies in other countries, showcases how law enforcement can use the anonymity that the internet provides fraudsters through sting operations. The FBI was able to infiltrate this particular fraud network and conducted a two-year undercover operation that prevented more than 411,000 credit and debit cards from being compromised. This demonstrates how the internet - and the sense of security that fraudsters gain from online anonymity - is a double-edged sword, Knieff says.

Knieff adds that he was impressed by the level of inter-agency cooperation in this particular case.

"What's new is the effectiveness of law enforcement coming together," he says.

Those arrested in the operation are suspected of taking part in a cyber fraud network that bought and sold stolen identities, exploited credit cards and used counterfeit documents and sophisticated hacking tools, according to the FBI.

[See related: Card Fraud Costs U.S. Payment Providers $8.6 Billion Per Year]

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio

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