"The Twelve Scams of Christmas"
The most dangerous online scams that computer users should be cautious of this holiday season.
Today is supposed to be the biggest day of the year when it comes to online shopping. But whenever the volume of online transactions goes up, so does the amount of online fraud. In fact, the Internet Crime Complaint Center, which is run by the FBI and the National White Collar Crime Center, just recorded its 2-millionth complaint since the organization was set up in May of 2000.
Ori Eisen, CEO of 41st Parameter, a provider of fraud detection systems based on an analytics engine that keeps track of every transaction, says that those complaints represent a small fraction of the real problem. He says that most financial institutions have an incentive to not want to disclose the amount of money they are losing due to online fraud because they don't want to shake customer and investor confidence in their organizations.
Eisen says too many financial services organizations are simply calculating the amount of money lost to online fraud versus what it would cost to eliminate the threat. Because most of the perpetrators of online fraud have become adept at taking relatively small amounts of money with each fraudulent transaction, many financial institutions have convinced themselves that online fraud is a cost of doing business.
At the same time, many of them would like to see retailers incurring the cost of doing more to prevent online fraud. But by the same token, Eisen says that financial service organizations could invest more on the back end to prevent online fraud if they were so inclined.
That lack of inclination, however, results in a stream of illicit revenue flowing back to organizations that then use those funds to bankroll other illicit activities, including, says Eisen, the efforts of people whose ultimate goal is "to knock down buildings."
Eisen says ultimately it will require a combination of public outrage and international legislative resolve to induce financial services organizations to invest in systems that can dramatically reduce the incidents of online fraud. Eisen says that financial services companies are not ignoring the problem; they are just making business decisions based on risk versus cost. Unfortunately, those decisions are limited to the impact on their business, rather than considering the potential global implications of whose hands the money derived from online fraud ultimately winds up in.
Eisen says that in reality the "www" in World Wide Web actually stands for "wild, wild West." And just like in the early days of the frontier, it was not until companies such as the Union Pacific and Wells Fargo made it too much trouble to rob the trains and stagecoaches that the West became a safe place to conduct business. That same paradigm continues to hold true on the digital frontier today, says Eisen.
So the next time you hear somebody talking about what retailers need to do to make the Web safe, maybe they should ask the next logical question: What are the financial services companies actually doing to secure the Web beyond administering a Payment Card Industry Data Security Standard (PCI DSS) and penalizing retailers with fees for processing transactions that do get rejected? Judging from all the online fraud in the world today, the answer would clearly be not enough.