BUSINESSWEEK ONLINE : APRIL 3, 2000 ISSUE
BUSINESS WEEK E.BIZ -- SPECIAL REPORT Anatomy of an Internet Credit-Card Scam They're an unlikely set of adversaries. Daniel Vasiliu, a teenager from Bucharest, Romania, and David Stien, a middle-aged credit union manager from Indiana. Here's how the winds of global Internet fraud likely brought the two together. 1. Vasiliu gets valid credit-card accounts by using a credit-card number generator freely available on the Net. (All card numbers are based on an underlying algorithm originally designed to prevent key-punch errors by store clerks. The generator, a software program, simply creates a number using that algorithm, making it easy to come up with a legit account.) The card numbers happen to use Crane Federal Credit Union's bank identification number. 2. Vasiliu tests the validity of the card numbers by buying memberships at sex sites on the Web. 3. With valid card numbers in hand, Vasiliu goes on a shopping spree. He proceeds to e-commerce sites--such as FTD and tiny Colorado computer reseller LEM Computers--and orders goods sent to Romanian addresses. 4. Merchants confirm the validity of orders. The scam is made easier because there is no address-verification service for foreign credit-card orders. In the U.S., address verification is another safety net for merchants, matching delivery information to card-holder information on file. Such a system would have red-flagged the Vasiliu order. 5. Vasiliu starts receiving merchandise--watches, flowers, cigars, computer products-- while Crane members start receiving the bills. 6. Crane members complain to Stien, who has the fraudulent orders removed from their bills. 7. The big losers are the online merchants. They are fully responsible for ''card-not-present'' transactions through the mail, phone or Net. Banks issue a chargeback, meaning the e-tailer must eat the cost of the stolen merchandise, plus an extra fee. In all, Vasiliu racked up over $21,000 in charges to Crane cards. 8. Despite a 470-page complaint sent by Stien to Romanian police, Vasiliu is never charged with a crime, according to Romanian authorities. _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ BACK TO TOP					RELATED ITEMS Fraud on the Net TABLE: The Top 10 Scams on the Net CHART: Cyber Fraud on the Rise Online Scambusters Card Sharps TABLE: Anatomy of an Internet Credit-Card Scam TABLE: Bad Credit INTERACT E-Mail to Business Week Online

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