REPORT #126 Nov 1999

Produced by the Belize Development Trust

There has been the last few years, a growing problem with credit card scams using the internet. This is a world wide fraud and uses debit and credit cards. E-mails come by unsolicited mail to email users, offering small business people a service to collect credit card billings. Literally, no charges, registration fees, and a con game full of hype in the emails, promising small businesses their collection service to do credit card billing and collections for them. The hype tells of how it will increase their business.

The purpose of these emails is to collect credit card and debit card numbers. Credit cards were designed originally to be a one on one purchase, with physical merchandise. But the advent of on-line e-commerce has taken out the safety factor of having your I.D. checked, signature checked and other checks used by vendors selling to credit card users.

With on-line credit card sales, a valid credit card number is now sidetracked to a criminal conspiracy, literally spanning many different foreign countries. Once a criminal outfit has many good credit card numbers, they follow the procedure of setting up an adult sex site, using credit card payments. They then form a quickie company which will last anywhere from 3 months to a little less than 1 year as an intermediary collection agency.

What follows is based on slack banking rules and lack of security checks by banks. Banks originally relied mostly on the vendors to double check the I.D. of the person using a credit card. There are in some countries services that also allow for validity checking of credit cards. Banks for the most part simply relied on these procedures to validate the payment of bills from credit card collection companies. These companies are now often frauds. Banks often have rules, that say they are a) not responsible for credit card refunds under $50 , or b) not responsible for credit card refunds made for complaints after 60 days.

The scam game goes like this. You set up a porn adult sex site. You then form a collection agency (Corporation) for credit cards. You then get as many credit card numbers as you can, by soliciting nearly free services to bill for small businesses, or offering items for sale that are extremely cheap if bought by credit card numbers, or use a number generator ( uses algorithms ). Some phoney banks and other businesses sell the credit card numbers to the criminals. What you do as the criminal enterprise, is run the numbers by the banks to see if they get accepted? Sometimes on weekends when banks are closed their machines become overloaded and shut down. Then all credit card numbers, those valid and not valid automatically get approved. As you push these numbers, the rejected ones are tossed out and successful numbers are then billed a small monthly charge. Usually under $20. Hoping that the credit card holder will not check his total bill, item by item. This is repeated once a month up to a year. Usually, a credit card holder does not check thoroughly the billing, or in some cases the explanations are not complete enough from the bank statement. In many cases, when an objection comes into the bank and asked for a cancellation and refund, the amount is below that of the bank's internal monitoring system.

When a particular bank gets too many rejections from customers from a particular billing company for credit card collections, they stop payments through that collection agency. The criminals simply start another collection agency under a new name in the same office, or post box and close that earlier one down. This process can take up to 3 months and even longer. Most banks review these things on a yearly basis with the audit. When the billing is queried, the billing company says they will check and this gets some delays. Then eventually, they will say it was for a payment for viewing an adult sex video site on the internet. Some customers drop the issue there, as they get embarrassed and the amount is small. Banks don't care because the amount is under their refund policy. The customer gets stuck. But if enough customers get stuck, then the bank has to cancel paying that particular intermediary billing company.

One guy is reputed to have made $45 million in California and Las Vegas, doing this scheme over the last two years.

What is important for Belizeans to be aware of, is the applicable lessons to be learned in adult video sites, billing credit card collection companies, internet banks and credit card e-mail unsolicited spam mails, seeking to promote your business with easy credit card collections.

Banks have to learn to protect their customers billing from credit cards with more than one verification procedure. Too many banks around the world are just validating a credit card number without the secondary and third layer security systems of validation for payment. Such procedures have to be part of any banking system in Belize, both locally and dealing with foreign commerce. When credit cards were orignally set up, the validation was being done by the vendor, not the banks. Nowadays with internet credit card commerce payments, it is too easy to skip the secondary and third tier validations. Banks seem not to be setup for validation of credit card numbers and purchases. Thus padding a customers credit card account with $9.95, or $19.95 per month for an adult sex site defrauds the innocent customer. The Collection Agency ( another fraud ) can simply say they are acting for a video site collections. Some people have lost their jobs over company credit cards being fraudulently being billed for sex video sites, when in fact, the credit card number was sold to the collection agency by the bank itself, or collected through hackers, or other means.

The smart thing is to cut up your credit cards and buy a money belt and use cash.

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