The Payments Hustler
Jane HennessyHead of External Alliances, G2 Web Services
UMACHA Navigating Payments Conference
October 5, 2017
• Who is the Payments Hustler?
• How does he work?
• How have authorities gotten involved?
• What do you do about it?
Agenda
Who is The
Payments Hustler?A brief overview
• Deals in illicit products
or services
• Usually operates online
• Learned to hide his transactions
by accepting credit cards under
a front business
(“Transaction Laundering”)
• Then lost his access after the
card networks and acquirers got
smart, causing him to rotate
alternative payment methods
(“Payments Laundering”)
Who is The Payments Hustler?
The Payments Hustler
ALTERNATIVE PAYMENTS METHODS
E-Wallets Mobile Pay Bank Debits/CreditsPeer-to-Peer
MSBs Pre-Paid Cards Vouchers Cryptocurrencies
What Payments Does He Use?
• 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
What is the Growth and Acceptance of APMs?
$1.35T
+32% 2017
(Juniper Research)
Mobile Wallet
2016
Peer to Peer
100MM US Adults
+25% 2017
(Javelin Strategy)
2016
Pre-Paid Cards
$3.1T
by 2022
Pre-Paid
Self-Study Laundering-As-A-Service
Where Does He Learn?
Why Do They Dwell in the Dark Web?
What is The Dark Web?
• Information not searchable by traditional search engines
• Not easily traceable
• Used by Payments Hustlers to share tips in real time
The most popular browser is “The Onion Router” or simply known as TOR
The company profited
anywhere from $600,000 –
$800,000 a day
The company profited
anywhere from $600,000 –
$800,000 a day
Latest Take Down
How Does He Work?A high-level overview with case studies
With his merchant accounts closed,
he is forced to go back to the
drawing board
What Is His Strategy?
Transaction Laundering
Rule #1 — The Payments Hustler is Working to Get Paid
Payments Laundering
Point-to-Point
Mobile Wallet
$50
Vouchers
Pre-Paid Cards
Cryptocurrency
MSBs
And/Or
Pre-Paid
• 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
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)
Methods
Merchandise
Month 1 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 2 Step 1
What Does It Look Like In Practice?
Step 3 Step 4
What Does It Look Like In Practice?
Step 1 Step 2
What Does It Look Like In Practice?
Clearly this payment brand would not want to be seen as facilitating bestiality
Escrow
What Does It Look Like In Practice?
What Does It Look Like In Practice?
The payment has been laundered and no evidence of the illicit nature of the transaction is readily apparent
How Have Authorities Gotten Involved?Regulators and legislators take notice
Are Regulators Taking Notice?
US CongressState Laws
Are Legislators Taking Notice?
What Do You Do About It?A playbook for action
Sales Underwriting Account Monitoring
Look for Transaction Abnormalities
Regularly Initiate Test Orders
Create a Feedback loop with Customer Service
Key Tactics
Review Business Customer Online Reputation
Look for Process Abnormalities
Align Sales Practice with Business Goals
Use Clawbacks of Commissions
Key TacticsKey Tactics
Detect Related Undisclosed Businesses
Ferret Out Front Businesses
Detect Related Accounts
Apply a Common Business Detail Review
Key Tactics
Compliance & Risk
Sales Underwriting Account Monitoring
What Does Good Organizational Communication Look Like?
Apply organizational best practices and stay abreast of fraud trends so you direct countermeasures
In a comprehensive KYC/KYCC program, that deals
with APMs, we see two investigative components:
1.Known Universe — Your alternative payments solution(s) and their
associated business customers
2.Unknown Universe — Business customers who are claiming to have
accounts with your APM or are using your APM through some kind of
proxy as a means of hiding either the origination of the funds
and/or what it is being spent on
Confronting the Fraudsters
Strategies for Known Universe
Is: Enrolls your customer websites in
persistent Business Customer
Monitoring to seek prohibited or
malicious content
Does: Uses your portfolio to scan the
WWW for any changes in your
customers business profile
Means: You discover when merchants
turn to prohibited activities before
they can involve you in legal trouble
or damage your brand
• Business Customer Monitoring
• Fraud History Database
• Watch Lists/Negative News/Complaints
Is: A sizable database that checks
past fraud and compliance violations
for connections to your portfolio
Does: Checks your customers
against Business Customer records
to find those previously caught in
illicit activities
Means: You prevent your payment
system from being exploited as a
last resort by crooked merchants,
even when they try to use aliases
Is: KYC intelligence that helps you
comply with BSA/AML and consumer
protection laws
Does: Leverages both exclusive data
and aggregated data sourced from
hundreds of global watch lists and
hundreds of thousands of news and
information sources
Means: You are informed of merchants
connected to PEPs or sanctioned
persons so you avoid penalties and
other regulator actions that can
permanently harm your business
Data-driven:
machine crawling | bad actor database | expert analysts | data science
Source: Ripoff Report
“I actually worked for
iWorks in St. George,
UT and was very
troubled with the
fraud taking place
there”
“I actually worked for
iWorks in St. George,
UT and was very
troubled with the
fraud taking place
there”
Year 1 Year 2 Year 5Year 4Year 3
“The company name given to me
when researching was MIT, and was
in good standings with the BBB.
When my charge card statement
arrived, the charge read Real
Estate training. Later I learned it
was iWorks… I tried contacting the
original salesmen. After four
attempts by email and phone
messages, no response.
“The company name given to me
when researching was MIT, and was
in good standings with the BBB.
When my charge card statement
arrived, the charge read Real
Estate training. Later I learned it
was iWorks… I tried contacting the
original salesmen. After four
attempts by email and phone
messages, no response.
“The previous
comments by former
iWorks clients have all
been valid. There is
absolutely no one to
call, write, or to
negotiate with
regarding a refund”
“The previous
comments by former
iWorks clients have all
been valid. There is
absolutely no one to
call, write, or to
negotiate with
regarding a refund”
“They have several
lawsuits pending and I
regret ever working
for this company”
“They have several
lawsuits pending and I
regret ever working
for this company”
“If there is an Atty in UT that
would take this case to help
me recover my money, I
would like to talk. If iWorks
wants to resolve this, I am
open to discussion; however,
I cannot get in touch with
them”
“If there is an Atty in UT that
would take this case to help
me recover my money, I
would like to talk. If iWorks
wants to resolve this, I am
open to discussion; however,
I cannot get in touch with
them”
iWorks Consumer Complaints
Strategies for Unknown Universe
Is: A continuous crawl across the WWW
e-commerce sites looking for your
payment brand
Does: Finds merchants engaging in
forbidden activity — as defined by law,
regulation and credit card rules — and
who are using your brand to facilitate
their activity
Means: You avoid investigation by law
enforcement, unfavorable media
coverage and other brand damage
because you find and act on prohibited
commerce first
• Brand Monitoring
• Brand Investigations
Is: Portfolio audit of your payment
brand by trained analysts
Does: Finds concealed use of your
brand, such as shady business
customers that bait buyers with the
false pretense of credit card
acceptance and switch to your brand
after payment fails
Means: You have access to global
investigative tools to ferret out
hidden misuse of your payment
system, discovered through human
research experience and machine
driven web monitoring
• Test Transactions
Is: Sets up your system to trace
purchases to hidden endpoints without
buying the goods or services
Does: Combines analysis tools and
mystery shopping to expose fraud
within your system
Means: You find merchants violating
your terms and conditions that are
dealing in the most egregious
commerce, such as illegal drugs or
pharma, illicit gambling, counterfeit
and other endeavors
*May require third party assistance
Data-driven:
machine crawling | bad actor database | expert analysts | data science
Processing Sites Found Using Unknown Universe Tracing
Transaction Started On this site
Same Phone# is a clue
that this is a network
of sites
Process attempt #1
• With the growth of APMs comes the expanding opportunities for fraudsters to find ways to get paid
• Payments Hustlers rotate through new payment types to exploit loopholes and less developed due diligence policies
• Payments Hustlers are tech savvy and have access to data about the vulnerabilities of your financial products in great detail
• Legislators, law enforcement and regulators are not just targeting banks but new payment-method businesses as well
• Payments Hustling poses a threat to your brand and your bottom line
• You can protect yourself with the proper due diligence on Known Universe (recognized accounts) and Unknown Universe (concealed users)
Key Takeaways
Thank you! Jane HennessyHead of External Alliances, G2 Web Services
[email protected] | 415-867-9293