Drugs, guns, hacking services, and the worst porn you could imagine — they've all long been available in illicit markets on the Dark Web. If you're so inclined, you could also get a complete database of all registered US voters, complete with party affiliation, name, address, phone number, and voting history back to 2000 — all for the low, low price of 12 bitcoins, or about $7,800, based on current exchange rates. And because of anonymous browsing techniques, it's almost impossible for authorities to zero in on the sellers of these items
But the Dark Web — which consists of thousands of underground websites that are usually accessible only via special tools, such as the Tor browser — is bursting at the seams, and its wares have begun to leak out onto the "legitimate" web. Users who know where to look don't have to bother with Tor and other Dark Web mainstays; they can search directly for the items they want, eschewing bitcoins and paying via credit card.
Take the illicit drug industry. Setting up a sales page on a Dark Web marketplace is easy, and instead of restricting sales to a small geographical area, dealers now can sell to the world.
But the problem with the Dark Web is that it requires work. Potential customers must be savvy enough to download and install Tor and have to set up bitcoin accounts to pay for their purchases. That automatically disqualifies a large number of potential customers — technophobes and others who have a hard time following the instructions to order and then pay for goods using a currency that has to be bought and forwarded to dealers.
Out in the Open
Now the process is moving away from the Dark Web. Dealers are moving to the surface web, where they advertise their wares on sites such as Craigslist and online forums like Reddit, providing contact information that leads to chat groups where negotiations are conducted and instructions on payment and shipping are provided. Sites on the Dark Web are even creating YouTube videos that instruct potential customers how to find and connect with them, and there is a surface web search engine that helps guide customers.
Once a customer connects with a seller, it's time to pay, and while bitcoin remains a popular method of payment even on the surface web, a new scam called transaction laundering (TL) is becoming more common, as dealers in underground goods seek to expand their services. In a TL scam, a dealer will set up a website where legitimate-looking products are stand-ins for the “real” goods. It's a form of money laundering in which payments are processed by a legitimate merchant on behalf of another party, knowingly or unknowingly. As shown in the following three real-life examples of TL, the scam is very hard to detect.
In the first TL example, a California-based man set up a legitimate online business as a front for a network of online fraud. He used the company to process transactions for various sites, including many illicit sites, such as phony insurance policies. He also used false advertising to lure customers to sign up and provide their credit card information, and then he collected unauthorized payments, denied services, or closed down his websites completely. When customers complained, the chargebacks were spread between multiple banks so each one separately failed to notice an issue.
The second TL story started in an isolated small town in the Netherlands, where an online flower shop was receiving orders from all over Europe. Actually, the florist was being used as a front to process payments for a site selling marijuana internationally. The criminals used forums, chats, and social media to redirect online shoppers to the drug site.
The third case was more complex, involving a scammer who copied a not-for-profit, open source online video-game platform. However, the scammer ignored the requirement of the original makers of the game not to charge players, copied the version of the game to his own domain (referred to as the fictional name "fungame.com" for this article), and added in-game merchandise such as shields and weapons, and a payment page to purchase this merchandise.
Not realizing that fungame.com infringed on copyright laws, a bank approved fungame.com to process payments. The scammer repeated this action and registered clones of the game under multiple domains with several banks and processors. The scammer then used fungame.com as a front for several other sites. These new domains sold illegal merchandise such as counterfeit goods and drugs, all processed through fungame.com as in-game shopping. There were no players at all — only customers for illegal products.
Authorities have their hands full with cybercrime, but transaction laundering could turn out to be the biggest blow to the credit card system yet. Any illicit transaction can be easily hidden, and detecting these transactions manually is impossible; the only way to do it is through automated big data-based detection systems that can analyze information to look for patterns. Authorities have no choice; TL is a relatively simple trick, but it has dire and brand-damaging consequences.
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