Difference between revisions of "Carding Fraud"

Revision as of 23:53, 27 January 2023

Carding refers to a type of fraudulent activity involving the theft and unauthorized use of credit cards. Typically, carding involves using the stolen card to purchase prepaid gift cards or other merchandise that can be resold. The term "carders" refers to criminals who engage in carding related activities.^[1] The Nilson Report states that "Gross fraud losses to issuers, merchants and acquirers of card transactions from merchants, as well as acquirers of card transactions from ATMs reached $28.65 billion" in 2019, and that 33.57% of these losses came from the United States. These losses do not include the costs of fraud prevention and detection to retailers.^[2]

Carding Methods

Carding begins with carders obtaining card numbers and other information that allows them to impersonate the card holder. There are a variety of methods used to acquire card numbers and other information.^[3]

Online forums & Marketplaces

Forums and Markets on the Web as well as hosted as hidden services on the dark web provide carders with resources as well as opportunities to buy and sell stolen credit card information.^[4] Estimates for the total sales of personal information on the dark web is roughly one billion dollars per year. This information can be used to take over financial accounts.^[5] The carding community using these sites remains resilient to raids by law enforcement. Following raids, the number of carding markets has historically decreased temporarily before recovering again.^[6]

Skimming

Skimming is the technique of modifying point of sale devices to steal data. This is commonly done with an overlay terminal that reads data from the magnetic strip on credit cards. Overlay terminals are designed to fit over, and appear like, a regular point of sale device as to avoid detection. Popular skimming targets among carders include card readers in stores, gas pumps, and ATM machines.^[7]

Data Breaches

Credit card information can be leaked after retailers that store payment data become victims of hackers. In 2014, large U.S. based retailer Home Depot suffered a data breach due to hackers using custom exploits to gain access to their payment data. The breach exposed the information of over 40 million customers.^[8]

Social Engineering

Social Engineering encompasses practices involving deceiving and manipulating card holders or businesses to gather information. One case of carders employing social engineering occurred at a Hilton Garden Inn in Dallas Texas when the carders called hotel guests and pretended they were a hotel employee verifying credit card numbers after a computer issue.^[9] There are many other ways that carders can use such as Email or text, usually involving impersonating a trusted institution.^[10]

BIN Attack

BIN or Bank Identification Number is used to indicate what financial institution a credit card belongs to.^[11] A BIN attack is where carders use a valid BIN number to generate lots of random credit card numbers, then test these numbers to find valid numbers. Generally, computers are used to automate the generation and testing of the card numbers.^[12]

Cashing Out

A common method carders use to make profit is the following:

1. Carders create listings for easily sellable items on markets such as Ebay.
2. When a bidder wins a bid for the carder's listing, the carder places an order with a real vendor of the item with the stolen credit card information
3. If the payment is successful, the real vendor will ship the item to the bidder.

In this scheme the bidder is not aware of any fraudulent activity, and either the real card holder will not notice the charge, or will file a fraud claim and the real vendor will be required to cover the loss.^[13]

Prevention

Merchant Mitigations

Due to substantial losses, merchants employ numerous strategies to make carding fraud difficult, and detection easier. Card processors use Address Verification Systems so that merchants can check provided billing addresses against the billing address on file with the issuing bank.^[14] This strategy makes it more difficult for carders, but can be circumvented by using social engineering or other methods to get the correct billing address. CVV security codes also add additionally security to transactions. CVVs are used to verify that the purchase was made by the real card owner. Online merchants do not store CVVs with credit card information, thus requiring CVVs can be an effective measure against data breaches as the leaked data will not include the CVV.^[15]

Card Holder Mitigations

Many card issuers have zero liability policies that protect card holders from being responsible for carding fraud in most cases. Fraud victims should contact their bank immediately if suspicious activity is spotted on their account. Risk of fraud can be reduced by checking for skimmers at point of sale devices and ATMs, keeping all personal information private, and being aware of common social engineering techniques such as fake emails asking for personal information.^[16]

Ethics & Legality

In the United States, the Fair Credit Billing Act protects card holders that fall victim to carding fraud from paying more than $50.^[17] Much of the losses from carding fraud fall on card issuers, about 68.39% of worldwide gross losses. The rest mostly harms merchants.^[18] While much of the monetary costs do not fall directly on the card holder, merchants and card issuers may respond to losses by increasing prices rather than security measures. Card holders may also face other challenges, for example Merchants using Address Verification Systems can require card holders to update their billing address before using their card after changing residence.^[19] In addition, card issuers may require fraud claims to be disputed due to chargeback fraud. Chargeback fraud occurs when a card holder requests a chargeback for a purchase they made themselves. This leads to card issuers investigating fraud claims, and legitimate cases of fraud may not be resolved immediately or correctly.^{[citation needed]}

See Also

References

1. ↑ https://www.investopedia.com/terms/c/carding.asp
2. ↑ https://nilsonreport.com/mention/1313/1link/
3. ↑ https://www.forbes.com/advisor/credit-cards/how-credit-card-information-is-stolen-and-what-to-do-about-it/
4. ↑ https://eprints.soton.ac.uk/413441/1/Final_Paper_After_Acceptance.pdf
5. ↑ https://nilsonreport.com/mention/1313/1link/
6. ↑ https://aisel.aisnet.org/wisp2018/20/
7. ↑ https://abcnews.go.com/GMA/News/video/credit-card-skimming-crimes-rise-96656884
8. ↑ https://www.reuters.com/article/us-home-depot-cyber-settlement-idUSKBN2842W5
9. ↑ https://www.nbcnews.com/id/wbna43662080
10. ↑ https://lifelock.norton.com/learn/identity-theft-resources/what-is-carding
11. ↑ https://www.investopedia.com/terms/b/bank-identification-number.asp
12. ↑ https://www.ascentra.org/learn/news-blogs/article/2022/07/26/credit-card-fraud-bin-attacks
13. ↑ https://krebsonsecurity.com/2015/11/how-carders-can-use-ebay-as-a-virtual-atm/
14. ↑ https://www.investopedia.com/terms/a/address-verification-system.asp
15. ↑ https://www.americanexpress.com/en-us/credit-cards/credit-intel/what-is-cvv/?linknav=creditintel-cards-article
16. ↑ https://www.emerald.com/insight/content/doi/10.1108/13590790810907236/full/html#idm46555354902368
17. ↑ http://uscode.house.gov/view.xhtml?req=granuleid%3AUSC-prelim-title15-chapter41-subchapter1-partD&edition=prelim
18. ↑ https://nilsonreport.com/mention/1313/1link/
19. ↑ https://www.investopedia.com/terms/a/address-verification-system.asp