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Microdeposits not robust fraud protection
This week Michael Largent of California, USA has pleaded guilty to computer fraud, mail fraud and wire fraud.
Largent made $50,000 dollars, not an extraordinary figure however, what was unusual was the way he managed to accumulate the money. Largent wrote a script which opened 58,000 fraudulent broker accounts using false names, addresses and social security numbers.
What made the fraud even more unusual were the fake names Largent used to open the accounts; he opened accounts using names of characters from King of the Hill and various Marvel Comics.
After the accounts were opened, Largent was then able to siphon off the micro-payments made to the account, and from these tiny individual amounts of between $0.01 and $2.00 was able to make over $50,000 dollars by transferring them all into his personal account.
Ironically, the micropayments were deposited in an attempt to verify if the accounts were genuine. Many financial institutions will make a small payment into an account to verify that it is active before accepting larger payments from the account. Micropayments are often seen as a cheaper alternative to other methods of verification; however this case proves that used in isolation they are not a robust form of ID verification.
Largent was caught as part of AML checks required under the USA’s Patriot Act, and traced using IP Address Verification which linked a pool of 5 IPs back to his personal bank account; he is due to be sentenced in August.
22nd May 2009
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