Credit Card Scammers Attack East End
Source: Independed Online
By Carey London
Date: November 20, 2003
It may be the world’s second oldest profession: Fraud. Yet, while scam artists have always been a nuisance, it seems that in the Internet age they have become more pervasive, successful, and costly.
Enter The Elegant John, a bed and bath shop in East Hampton. Along with their storefront, they have an online store.
Two and a half weeks ago they received an email from "Mr. Steve, An international businessman." Mr. Steve wanted some goods shipped to his client in Lagos, Nigeria. The total came to $7,500. As the final arrangements were being made, Mr. Steve had one more request. Could the Elegant John throw in four Samsung cell phones and two pairs of Timberland boots? Oh, and he will pay a 10% "running around fee."
But it didn't end there. Mr. Steve then sent over four credit cards with four different names, such as, "Steve Jane," and "Smith Adams."
"[He] wanted the items to be split between four cards," said Eilis Miller, Manager of the specialty shop. "I put one [credit card] through and I got an approval."
In fact, she found that all four Visa credit cards went through. The numbers on the cards were the same save for the last four digits. The cards were linked to four separate checking accounts.
"These are actual checking accounts...stolen numbers!" she realized.
Bank Doesn’t Care
Upon trying to report the scam to their credit card company, Bank of America, they found that all four cards were issued from Bank America out of North Carolina. And perhaps even more surprising was the bank's unwillingness to locate Mr. Steve or to notify the cardholders from whom he stole.
"The bank doesn't care," griped co-owner, Richard Cabot.
Miller called the Federal Bureau of Investigation. They asked for Mr. Steve's U.S. address, and on Monday, Miller found out that he lives in Staten Island, allegedly. The FBI has not contacted her since, and the order will not be processed.
And so, for now, The Elegant John story ends here. But their tale is not uncommon. According to the FBI's Internet Fraud Complaint Center, fraud losses total $54 million in 2002, up from $17 million in 2001.
"For the third straight year, Internet auction fraud was the most reported offense, comprising 46% of referred complaints," said the report. "Among victims who reported a dollar loss, the highest median dollar losses were found among Nigerian letter fraud ($3,864), identity theft ($2,000), and check fraud ($1,100) complainants." Credit and Debit card fraud make up 11.6% of complaints (up 23.4% from 2001).
Furthermore, New York is among the top five states for victims of Internet crime.
And The Elegant John is not the only local company that has experienced Internet fraud from Nigeria. Last year, BoatingChannel.com, an online magazine and store for recreational boaters in Sag Harbor, received a phone call from a Dr. Mugrabi from Nigeria. He wanted to buy 20 Merchant Marine lifejackets. The total came to $1800. After several emails and phone calls back and forth concerning import duties and shipping costs, Mugrabi placed the order with "his" credit card.
"The credit card went through and was validated by our Merchant Bank," said Barbara Feldman, President of the company.
The life jackets were shipped out. Five weeks later, the bank that issued the card told Boating Channel that the name and address on the card did not match the name and address of the purchaser. The real owner resided in the United States. The company had to eat the costs.
While they blame themselves for having missed the code for an address mismatch, Feldman faults the bank for approving the transaction.
"There are many legitimate reasons for an address mismatch," she said. "Sometimes people have different billing and shipping addresses, or they move and haven't notified their bank. But our Merchant Bank never even signaled that the name didn't match that of the cardholder. That would have clued us in pretty quickly.
"Every time I see those credit card ads promising your card is protected against fraud, I think, 'sure, easy for you to say, you just charge the merchant,'" she said.
Additionally, banks charge on-line merchants a higher processing rate, said Feldman, because they claim they must offset the costs of a greater rate of fraudulent use. But, in fact, the cost of fraud is born by the merchant who must pay the entire charge.
Bank of America did not return calls. The Bank of New York, which has an office in East Hampton and Montauk, said bank policies regarding merchant accounts are generally the same, but two spokespersons declined to comment on how these policies work.
Customers who paid for services with a fraudulently obtained card have duped The Independent several times in the past month.
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