Fraudsters turn to prepaid cards to launder proceeds

In a Krebs on Security blog post, Brian Krebs reported on a new fraud trend – cyber thieves turning to prepaid cards to launder the proceeds from identity fraud schemes. Krebs said the movement to prepaid cards arises out of a need for criminals to reduce their dependency on unreliable money mules.

Krebs described a common money transfer fraud scheme that employs money mules to distribute stolen funds. Through money transfer services, fraudsters wire funds into the bank accounts of money mules, who then withdraw the funds in cash and wire it, minus a small percentage for their efforts, back to fraudsters. Due to banks' anti-money laundering fraud controls, fraudsters have to use up to 15 mules to launder $100,000 in stolen funds, according to Krebs. But the nature of the average mule does not make them perfect criminal accomplices. They are "not the sharpest crayons in the box," Krebs wrote. "They often have trouble following simple instructions, and frequently screw up important details when it comes time to cash out…"

So fraudsters are turning to prepaid cards to sidestep the expense and hassle of hiring and using money mules, Krebs said. In several recent online banking data compromises, fraudsters appeared to have sent at least half of the money transfers to general purpose reloadable prepaid card accounts, Krebs reported.

"[T]he thieves pulling these e-banking heists have access to massive amounts of stolen data that can be used to fraudulently open up prepaid cards in the names of people whose identities and computers have already been hijacked," he said. "Once those cards are approved, the crooks can simply transfer funds to them from cyberheist victims, and extract the cash at ATMs."

The blog post is available at www.krebsonsecurity.com/2012/04/thieves-replacing-money-mules-with-prepaid-cards/ .

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