Fraud Protection & Compliance
Over the last year, the global pandemic has profoundly impacted fraud trends, with financial criminals feasting on a desperate stew of consumer loneliness, financial difficulties, boredom and desperation. A few months ago my colleague TJ Horan blogged about money muling, a crime in which unsuspecting folks are duped into illegally transferring ill-gotten funds on behalf of criminals, unwittingly acting as a cog in the vast machinery of financial thievery. As it turns out, money isn’t the only thing that can be muled — merchandise bought with stolen credit card information can be “laundered” through unsuspecting victims, too.
My latest fraud video captures my recent conversation with Jesse Gossman, a South Florida police detective and president of Bottom Line Fraud Consulting. During our fascinating chat about his recent “boots on the ground” work in fighting fraud, Jesse told me about merchandise muling, one of the area’s fastest-growing crimes.
Laundering Fraudulent Purchases
Like money muling, merchandise muling isn’t new, but Jesse explained how this work-from-home scam has exploded during the pandemic as people have had reduced hours at work, or lost their jobs altogether. On top of that, he notes, “a lot of companies have completely changed their business model during COVID, to start employing people directly at home in remote work. It’s become a lot more common, so ads on Craigslist, for example, offering large amounts of money for working at home doing ‘merchandise inspection’ or ‘quality control’ don’t look too far out of the ordinary.”
In reality, though, the “employers” are looking for intermediaries to ship merchandise bought online with stolen credit card information; the “employees” provide a stable, secure place to receive deliveries. After ostensibly inspecting the merchandise to make sure it’s defect-free, the mule ships it on to the “customer,” who is in fact the fraudster, and may be using a large number of temporary addresses as receiving points. The fraudster can then sell the merchandise and pocket the cash.
“Criminals don’t want to steal directly from the victim,” Jesse explained to me, because they can be more readily caught. By using an intermediary, “when law enforcement gets involved, there’s an innocent third party in the middle who didn’t realize they were taking part in a criminal enterprise” headed by a ringleader who’s impossible to track down. He added that, as an unspoken rule in law enforcement circles, mules who participate in these schemes unknowingly are not prosecuted. Nonetheless, those who have handled stolen goods across state lines have committed a federal felony offense, which no otherwise law-abiding citizen wants to face.
A Local Twist on a Global “Secret Shopper” Scam
The popularity of the merchandise muling Jesse describes appears to put a South Florida twist on a global “secret shopper” scam reported in 2020. Here, victims in the U.S. were tricked into conducting “secret shopper” research, buying goods, and then sending the goods to recipients abroad.
Research firm Digital Commerce 360 reported on this scam early in the pandemic; criminals had created phony businesses that purported to conduct secret shopping excursions on retail sites to evaluate the customer experience the retailer was providing. One business, calling itself “the premier intelligence shopping company,” launched a website to recruit workers who would make purchases with what turned out to be stolen credit card information, send the goods to addresses on pre-printed shipping labels and fill out a survey evaluating their online shopping experience. In return, the “employee” would be paid or allowed to keep some of the merchandise.
In reality, the employees (mules) were helping to conceal the illegal activity going on behind the scenes. By furnishing mules in the U.S. with stolen credit card accounts, fraud rings avoid having to list their own addresses in Russia, Nigeria, Malaysia or other fraud hot zones as a delivery destination. Working with mules also makes it harder for merchants to identify and detect fraud because the transactions are made by apparently legitimate shoppers.
Of note, when legitimate businesses hire mystery shoppers, they generally do so through independent companies, many of which are members of the Mystery Shopping Providers Association (MSPA).
Stay in the Know with my Latest Fraud Video
“Quality control” and “secret shopper” scams both illustrate how creative and resourceful fraudsters are, tailoring their deception to exploit economic and individual vulnerabilities. To learn about the galloping growth of merchandising muling, and more of the latest fraud crimes and tactics, watch my new fraud video in conversation with Jesse Gosssman above. And keep up with all of my fraud news and views by following me on Twitter @LizFightsFraud.
