By Ron Teicher
Online service marketplaces are relatively new, and there are few ways for their operators to regularly monitor the entirety of services and transactions. Unfortunately, this creates an open environment for electronic money laundering, known as ‘transaction laundering,’ to occur.
Last November, we all discovered that no one is immune to cyber crime, when The Daily Beast published an article showing that Airbnb had been exposed to online payment system exploitation. The scam is simple: fraudsters use stolen credit cards to launder dirty money through complicit Airbnb hosts they meet in underground, online Russian forums.
Once the Airbnb booking transaction is processed, no one actually stays at the swanky (or not so swanky), advertised accommodation. Instead, the two parties split the payment and create fake end-of-stay reviews to close the transaction loop.
Because Airbnb spans thousands of locations over numerous governing jurisdictions, cyber criminals can easily capitalize on it and hide behind the huge operational scope. The current tools and processes in place to detect illegal or illicit activity are not enough to monitor the sheer volume of transactions that occur.
Uber now faces exploitations similar to Airbnb, but the transaction laundering process becomes a bit more complicated, albeit conceptually parallel: users of a laundering service pay for “ghost rides” — rides that they never took.
How the Uber scam works
Here’s how it works: the client employs a money laundering service to seek out and hire complicit Uber drivers looking to make an extra buck, who then accept ride requests from money laundering clients at pre-established rates.
Laundering large amounts of money is also pretty simple: multiple drivers are involved in the scheme, easily increasing the volume.
Then, after Uber takes its standard cut from the “ghost rides,” the complicit drivers distribute their earnings to the operator of the laundering scheme. The operator takes a cut, and passes along the remaining, clean money to the client.
Transaction laundering through Uber simply wouldn’t work without drivers willing to be part of the scam to earn their piece of the pie.
These “ghost ride” driving positions are viewed as highly valuable — providing additional revenue streams at minimal risk and involving little to no work. In fact, the positions are increasingly being advertised on online forums and have links with step-by-step guides to effectively execute the scam.
Why specifically Airbnb and Uber?
Money laundering through online platforms is highly popular among criminals because there’s no overhead to the operation, and no need to create a false business or entity, or to deal with real or fake goods.
Not to mention, these popular platforms are global-reaching and immense, allowing scammers to seamlessly cross borders with no regulatory eye keeping watch.
With the revolution of online marketplaces, comes additional risk: Transaction laundering has become rampant among many of the marketplaces we regularly visit. While the scam is a bit different than that which occurred with Airbnb and Uber, the idea is very similar. An unknown business uses the payment credentials of a legitimate merchant to process credit card payments for products and services, typically of illicit or illegal nature.
The core of ecommerce is the buying and selling of products and services through the internet. The process has become easy, involving just a few clicks and some data entry, and the transaction is nearly instant. Today, setting up an illegal operation for transaction laundering is just as easy as the ecommerce process, seeing that it can be done in a matter of minutes by anybody with a bit of online savvy and the motivation to commit fraud.
The scary reality is that this cyber crime becomes nearly undetectable to the major players who process millions of payments a day. And along the payment processing pipeline, all players — marketplace, credit card companies, and issuing banks — are responsible for the credibility of the transaction, knowingly or unknowingly.
What’s even scarier is that it’s estimated that transaction laundering for online sales of products and services is more than $200 billion a year in the US alone. With the high volume of transactions through online marketplaces and now the online service marketplaces, like Uber and Airbnb, that number will surely increase.