Credit card fraud continues to pose a major threat to financial institutions and consumers, even as banks invest heavily in fraud detection and identity protection tools. A recent federal case involving a multi-million dollar “bust-out” fraud scheme highlights how organized criminal networks can exploit stolen personal information, manipulate credit systems, and generate significant profits before being caught. The case also raises broader questions about whether the financial rewards of large-scale fraud still outweigh the risks for cybercriminals operating in today’s digital economy.
The math just does not make sense. The ringleader of a Chicago credit card fraud team gets indicted in 2015 and two years later, the verdict calls for retribution of $3.6 million and a 13 year sentence, which with good behavior, might be 5 years.
…forget about the retribution, Sebastian Deptula was an unnotable real estate agent and that will never happen. At 13 years for $3.6 million, this generated an revenue stream of $240,000 for Mr. D, though if he gets out in 5, the income effect is more like $720,000 per year.
Credit card fraud still seems profitable, even if you get caught.
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Sebastian Deptula, 37, of Medinah, and eight co-defendants were charged with submitting false information to obtain multiple credit cards and rapidly exhausting the spending limits on everything from electronics to cash advances before the cards were frozen or canceled, according to a federal indictment.
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The credit card “bust-out” scheme ran from 2010 to 2014 and involved a number of financial institutions and associates recruited by Deptula, authorities said. In some cases, card balances were paid down from accounts that had insufficient funds, buying extra time to make additional purchases before the cards were canceled.
In this case of sleeper fraud, where the ring set up accounts under rogue names and then just maintains the card before doing a “bust out”, simple account information created the opportunity. The events had nothing to do with the recent Equifax fiasco, but the criminals used the same sort of information that was stolen from the 145 million Equifax victims.
Understanding what went on and how it developed is important since there are so many consumers currently exposed in the United States. PNC and Citi were the lead banks in this Federal case.
Looking into consumer disputes, like the ones you might enter into FICO Falcon the broadly used fraud software, seems to have broken the case.
But, for the convicted criminal, $720,000 a year is quite an ROI.
For the rest of us, watch your back.
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group
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