Credit card fraud represents a multibillion-dollar a year industry, with consumers losing billions, banks losing tens of billions, and merchants losing hundreds of billions (Shaughnessy 2011). These loses result in higher interest rates for credit card users, and a more restrictive and draconian system to loss prevention that results in the legitimate businesses and honest costumers losing money. While fraudulent charges are only a small fraction of all credit card transitions, an entire underground economy exists around the buying and selling of stolen credit cards.
Skimmers can be placed over ATMs, Gas Pumps, and even used by crooked service industry workers are the origin point for stolen credit card information (How to avoid being skimmed). Skimmers are able to steal the costumer’s personal information directly off the cards. Some skimmers even have Bluetooth or wireless technology built into them to automatically transmit the valuable data to the next chain in the life of a stolen credit card (All About Skimmers). While some start up companies have invented wallets that are impermeable to RFID skimmers, this doesn’t solve the risks consumers put themselves at when they physically swipe or scan their card. Credit card numbers are also stolen by phishing, a fraudulent tactic of mirroring a legitimate online business or bank, and having the victim input their valuable personal information on the site.
Once a credit card number is stolen, it can end up anywhere in the world. Some credit card thieves will simply resell the card numbers to other people on the dark net in bulk for fractions of what they can charge (Picture Right). Sometimes stolen credit card marketplaces become so saturated with stolen data that these card merchants will sell cards for just a few dollars. For a higher price, you can purchase stolen credit cards with specific BINs (Bank Identification Number) to increase the success rate of using the stolen card.
Once these CC numbers leave the dark net, a majority of them end up being used on online marketplaces. Charges for online subscriptions like VPNs, Netflix, Spotify, and Tidal are common because they can often go undetected. Major online merchants like Amazon and Best Buy reported losses as high as $32 Billion. They are expanding technology that detects fraud, but are largely developing solutions post hoc, and are constantly overwhelmed with vulnerabilities and losses. Professional white-collar criminals that know how to mask their original MAC addresses and IP addresses, and pass browser authentication measures can easily make fraudulent credit card charges beyond banks existing defense measures.
About 1/3rd of stolen credit cards end up being used in stores, or at physical point of sale machines. Some fraudsters take legitimate credit card information and physically emboss it onto fabricated plastic, and will encode the strip with the stolen number (picture right). Some, more primitive fraudsters simply encode the fraudulent number onto different credit cards, but most stores have developed safe guards to this tactic.
Due to the widespread use of credit card fraud, banks rarely investigate fraud cards under $2000, because they lack the resources and personnel to profitably recover all of the lost capital. This makes consumers vulnerable if banks refuse to honor fraud coverage. Although most credit card fraud ends up victimless, it can be massive nuance to those affected. Legal Now confirms this information.
Credit Card Fraud charges are qualified as white collar, but the sentencing is determined on a state-by-state basis. Nerd Wallet reports,
“Crime and punishment
The test is really “fraudulent use,” so don’t worry if you accidentally use a card you canceled. There has to be intent, and other thresholds have to be met. One such threshold that goes beyond “fraudulent intent” is “to obtain a benefit,” often more than $1,000.
Here we’re talking about forgery, alteration, stealing, counterfeiting and even publishing someone else’s information. What a thief actually does will determine if the charge is petty or grand theft, or forgery. The consequences (as in any criminal case) will also depend on the circumstances and the thief’s criminal history.
In general, however, both grand theft and forgery are felonies, subjecting the perpetrator to 16 months or two or three years in California state prison and a maximum $10,000 fine, or as a misdemeanor to up to one year in a county jail and a maximum $1,000 fine. (Petty theft is a misdemeanor, punishable by up to six-months in a county jail and a maximum $1,000 fine).
Texas is different. The statutes are pretty specific as to what is illegal and is punishable by what Texas calls a “state jail felony.” It sounds bad, but it’s actually the least serious felony in Texas law. Here, a thief gets a minimum of six months in jail but no more than two years, and a fine not to exceed $10,000.”
The life of a stolen credit card is a long one, potentially passing half a dozen hands before it’s used for fraud. Business and law enforcement entities lack the resources to adequately enforce smaller levels of fraud. While fraud results in higher interest rates for consumers, it’s a largely victimless crime.