Terrorism Stands Out as Source of Payments Fraud in North America Compared

Jul 18, 2019

Though most payments fraud is due to identity theft and organized crime in North America, the continent also sees a standout number of incidents due to terrorism as compared to other developed regions.

According to the information-security firm Terbium Labs’ report, “The Next Generation of Criminal Financing: How Payment Fraud Funds Transnational Crime,” 8% of the 154 criminal cases in North American it reviewed were due to terrorism. Only 2% of the 112 cases it examined in Europe were linked to terrorism.

A Quick Snapshot at the Other Numbers

In North America, 33% of fraud were related to identity theft and 32.5% were related to organized crime, according to the report. Fraud also was due to the following:

  • Human trafficking 17.5%
  • Drug trafficking 15%
  • Money laundering 13%
  • Tobacco trafficking 1%
  • Firearms trafficking 1%
  • Automobile trafficking 1%

The figures add up to more than 100% because some cases involved multiple types of fraud.

A Battle That Must Be Fought

No matter where or how the fraud originated, merchants, card networks, and issuing banks must do whatever they can to fight the global payments fraud problem. The payments industry need assess the scale of the payments fraud problem, which is no longer just stealing credit card numbers or using another person’s identity. Today, fraud is now a highly organized criminal economy that continues to bloom on stolen payment data.

The firm also noted the way fraudsters use payment fraud to fund horrendous crimes and activities. For example, two credit card fraud cases in 2010 were used to support Hezbollah, which is on the U.S. State department’s list of foreign terrorist organizations.

In the U.S. case, the two individuals charged with aiding Hezbollah illegally took large cash advances on credit cards “to purposefully have them discharged during bankruptcy proceedings and use this money to fund Hezbollah,” as well as transferred funds abroad, according to the report.

The other case occurred in Canada and involved an individual who purchased vehicles and shipped them to Lebanon for Hezbollah’s use. The terrorist group also forced the individual into bank fraud, credit card fraud, and the export-oriented vehicle theft.

What This Means for the Future

Since the number of cases of terrorism-related payments fraud cases were unbalanced between North America and Europe, the issue should be further scrutinized to figure out why the number are the way they are. For instance, are the rates of terrorism-related cases in Europe not completely accurate due to selective case availability or dismissals that occurred before they reached the public.

To combat this, the payments industry must do more. They must have proper monitoring tools in place to find out where money is going, how fraudsters are using the money, as well as other trends in criminal financing and fraud.

In Conclusion

Fraud is no longer just a matter reversing charges, fighting chargebacks, and reissuing cards, the payments industry as a whole need to take a closer look at the root causes, follow the money trails, and then, put a strategy in place to fix the problems. Just like international crimes, like human trafficking, terrorism-related fraud needs to be taken seriously.

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