First Party Fraud –Pulling back the curtain on a

pervasive and misunderstood threat

June 24 , 2015

18 charged in $200 Million credit card fraud scam that

created 7,000 new identities

Evolution of Conventional Fraud

1st Party Fraud“The business is the victim”

3rd Party Fraud“The customer is the victim”

Reason 1: Advances in Technology

Reason 2: Consumer Awareness Reason 3: Regulatory Environment

Emergence of New Threats

Bust Out

Credit

Repair

Synthetic

Identity

Identity

Theft

Counterfeit

Lost or

Stolen

Third

Party FraudFirst

Party Fraud

Credit

Fraud

Hybrid

New Account Screening Process

Confidential and Proprietary 5

1. Application3. Losses or Exposure

2. Authentication

Customer

Screening

Breakdowns

Transactional Value Chain

Extract Funds Move Funds Leverage Funds

Establish Identity Establish Merchant Establish Pattern

Transaction

All transactions perpetuate the scheme

Every single transaction is designed to serve multiple purposes

Organized Ring stole over $200MM

ALASKA (USA)

CANADA

UNITED STATES AMERICA

MEXICO

GREENLAND(DENMARK)

ICELAND

FARCA ISLANDS UNITED

KINGDOM

FRANCE

VENEZUELACENTRAL

AFRICAN

REPUBLIC

DEMOCRATIC

REPUBLIC

OF CONGO

ALGERIA

NIGERMALI

CHAD

SUDAN

ERITREA

TUNISIA

MAURITANIA

WESTERN

SAHARA

SENEGAL

GUINEA

LIBERIA

NAMIBIA

ZIMBABWE

ANGOLA

ZAMBIA

BOTSWANA

SOUTH

AFRICA

KENYA

TANZANIA

CONOGO

CABON

CAMEROON

NIGERIA

BURKINA

FASO

COLOMBOA

GUYANA

SURINAME

FRENCHGUIANA

ECUADOR

PERU

BOLIVIA

BRAZIL

PARAGUAY

ARGENTINACHILE

URUGUAY

BELIZEA

HONDURAS

NICARAGUA

GUATEMALA

SALVADOR

COSTA RLCA

PANAMA

HAITI

DOM.

CUBU

BAHAMAS

G.B.

SIERRA L.LVORY

COAST

TOGO

BENION

LES.

SWA.

MADAGASCAR

MALAWI

BU.

SWI.

GARMANYBEL.

NORWAY

DENMARK

ETHIOPIA

JAM.

MOZAMBIQUE

SOMALIA

LIBYA EGYPT

SAUDI

ARABIA OMAN

FRANCE

IRAQ IRAN

SYRIA

TURKEY

AFGHANISTAN

INDIA

TURKMENISTAN

UZBEKISTAN

KAZAKHSTAN

SRI LANKA

JORDAN

CYP.

GREECE

LTALY

BUL.

BOS.

HUN.

AUS.

SWI. M.

UKRAINE

POLAND

GARMANY

KUWAIT

QATER

M.

HOL.

MOROCCO

PORTUGAL SPAIN

RUSSIA

MONGOLIA

C H I N A

I N D O N E S I A

A U S T R A L I A

BHUTAN

BANGLADESH

MYANMAR

SRI LANKA

N.KOREA

S.KOREA

JAPAN

TAIWANLOAS

THAILAND

CAMB.VIETNAM

MALAYSIA

BR.

PAPUA

NEW-GUINEA

NEW-ZEALAND

RW.

SWEDEN

EST.

BELARUSLIT.

LAT.

FINLAND

SLO.

S.

A.

7,000 Synthetic Identities

25,000 Credit Cards

169 Bank Accounts*

1,800 Mailing Addresses

80 Fraudulent Merchants

Scope

AL, AZ, CA, CT, FL, GA, ID, IL, IN,

IA, KS, KY, ME, MD, MI, MS, MO,

NJ, NY, NC, OH, PA, TX, UT, VT,

VA, WA, and WI

28 States

The United States, Canada,

Romania, Pakistan, India,

United Arab Emirates, China,

and Japan

8 Countries

ROMANIA

PAKISTAN

INDIAUAE

Impacted Industries

Vulnerable

Populations

Government

Services

IRS, SSA, GSA,

Medicare/Medicaid,

Fannie Mae, HUD,

AAMVA, etc.

Healthcare

Group Purchasing

Organizations

(GPO’s),

Healthcare

Providers,

Hospitals,

Pharmaceutical

Companies, etc.

Financial Services

Consumer and

Business:

Auto, Credit Card,

Mortgage, Merchant

Processors and

Retailers

Insurance Industry

Auto, Medical, and

Personal Liability

Providers

Implications of New Risks

Regulatory Reputational Operational Financial

• Compliance Violations, Fines, Sanctions, etc.

• Abuse of Protected Classes

• Increased expense due to redundancy of effort

• Significant Fraud or Credit Losses

Understanding the Risks

Data BreachesChild ID Theft

Money

Laundering

Know-Your-

Customer (KYC)

Terrorist

Financing

Organized

Criminal

Syndicates

Exploitation of

gaps in current

controls

First Party Fraud Challenges

Manipulation of

Consumer Protection

Legislation

Lack of Universal

Definitions

Credit vs. Fraud

Organizational Silos

Consumer Appetite

Inadequate Verification

Tools

Thank You

For more information please contact us at info@turnkeyrisk.com