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After the Dust Settles: N.J. Fraud Ring Raises Questions for Acquirers, Merchants

By D.J. Murphy, Editor-in-Chief, CardNotPresent.com

When news broke recently about a massive credit-card fraud ring based in New Jersey, the headlines screamed about the $200 million in losses that U.S. Attorney Paul J. Fishman said could grow as knowledge of the extent of the sophisticated scams grew. Instead of targeting consumers and buying big-ticket items with stolen credit card information, however, the 18 men charged in federal court mostly defrauded financial institutions, getting tens of thousands of credit cards issued to more than 7,000 false identities.

 Even more problematic, the thieves allegedly created dozens of completely fictitious businesses that were able to receive merchant accounts and card-acceptance capability. Once secured, the defendants are accused of filling the accounts with false transactions using the fraudulent credit cards and cleaning out the accounts and repeating the cycle until processors, acquirers and ISOs caught on and shut the fraudulent accounts down.

Observers still are marveling at the time, patience and meticulous care required to nurture false identities worthy of high credit ratings on this scale. It was a new twist on an old con the accused had allegedly been running since 2007. But, the episode also has highlighted what some in the industry are calling “woefully inadequate” underwriting coupled with market conditions in which shrinking margins are ratcheting up the pressure to onboard merchants quickly.



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