Cybercrime: Better Than Drugs

Just say no: Cybercrime can be more profitable than the illegal drug trade, a researcher says.

Guillaume Lovet, a threat response team leader at Fortinet, says based on his independent research, a big-time phishing scam can be as profitable as the heroin business. Lovet, who presented his research on the business models of cybercriminals at the Virus Bulletin Conference last week in Montreal, says there are basically four levels to the cybercrime model: the skilled coders or programmers; kids (the workforce); organized crime; and the drops or "mules."

"Coders" are typically twentysomething programmers who sell their ready-to-use tools or services for hundreds of dollars to the "kids" or others who use them to steal bank accounts or other sensitive data. Their kiddie customers are typically young (ages 13 to 20) hustlers who frequent IRC "carding" channels, Lovet says.

Then there's the mob, he says, or the "puppet masters" of the scams. "It's not kids who set up phishing scams. They steal the accounts and sell to those people who know how launder the money," he says. "The endpoint is real, organized crime."

If a kiddie hacker steals a bank account with around $170,000, for instance, he would typically sell it to the bad guys for about $400. "When you're a 16 year-old kid in Ukraine, $400 bucks is a lot of money," he says. But the real criminals on the receiving end get the $170,000 account.

"If you are a criminal syndicate with lookout drops in the Ukraine or Russia -- and you have stolen credit cards -- you can turn them into real money via drops."

Organized criminals typically use "mules" to launder the money: These are the organizations located in countries without digital laws, and that turn virtual money -- also known as e-gold -- into cold, hard cash. These scammers typically get 50 percent of the deal. Not all mules are trustworthy, Lovet says, so cybercriminals typically look for "Webs of trust" or mules that their counterparts trust.

Aside from wiring money, another major money conduit is so-called "e-gold," basically virtual gold that criminals cash in using the West Indies-based service of the same name, Lovet says. "It takes about five minutes to create an e-gold account, and it's anonymous and doesn't ask for an email address," Lovet says. "As of now, e-gold is unregistered entity" on the Internet, so it's the choice of cybercriminals, he says. It's independent of any country's jurisdiction.

"E-gold can load debit cards issued by offshore companies," he says, and the criminals can then get cash via ATM machines.

But Douglas Jackson, chairman of e-gold Ltd. and CEO of OmniPay, part of the U.S. contractor that operates e-gold -- Gold & Silver Reserve -- maintains that e-gold does track cybercrime and has stopped many cybercriminals in their tracks. E-gold has also put in place tighter controls for monitoring illegal activity, he says, and it does validate email and other information on each transaction: OmniPay, which accepts the money payments, validates names and mailing addresses, for instance.

"It's the worst choice a criminal can make: they are headed for jail if they use e-gold" for illegal means, he says. "You can't obfuscate the money trail."

Cybercriminals typically hook up through IRC chatrooms, Lovet says, and the next cybercrime vector will be smart-phone dialers. So far, he's only seen worms just replicating themselves among the handsets, but he expects more sophisticated attacks to begin appearing within the next year. "What if the people behind those worms started including other functions" like botnets.

If a botnet herder has a botnet of 5,000 zombie phones, for instance, he would advertise his botnet on an IRC. That would be attractive to an offshore ringtones supplier, which would purchase the botnet for about $500, he says. "Assuming each ringtone costs $2 and the ringtone provider orders the bots to download tend of its ringtones, it could make [a raw income of] $100,000."

Still, even cybercriminals know it's risky business. They have to weigh their profits and their risks of getting busted. "Whatever you do on the Net, you can always be caught," he says. "There's a tradeoff between profits and how low you want to stay under the radar."

— Kelly Jackson Higgins, Senior Editor, Dark Reading