The Reshipping Scam

Date: January 04, 2005
Source: InternetRetailer.com
By: Ed McKinley

More than 50 people crowded into a Lagos, Nigeria, street one day last spring, shouting in outrage and manhandling four local cops and an American FBI agent who were arresting a neighborhood kid they suspected of running online scams. “I thought we were going to have a riot,” recalls FBI supervisory special agent Dale Miskell. “The people started going nuts.” Neighborhood women felt especially protective of the 18-year-old boy being taken into custody, he says.

The officers broke free of what they say was a potential mob, escorted their handcuffed suspect into an armored Chevy Suburban nicknamed the “War Wagon” and made their retreat. “At certain times, you don’t want to hang around,” Miskell says.

17 arrests

The arrest was one of the 17 collars, all of them far from quiet or routine, that Miskell helped make during a 30-day trip to Nigeria that spanned April and May last year. It was his third journey to West Africa in the last two years to fight online crime. “In every arrest, these guys ran and fought,” Miskell says.

Nigeria and Ghana have earned notoriety for web crime, according to officials of the Merchant Risk Council, a not-for-profit group that’s helping authorities track scams there and throughout the world. Miskell was in Nigeria as part of a mission by the Internet Crime Complaint Center in Fairmont, W.Va., an organization formed in 2000 by the FBI and the National White Collar Crime Center, to fight international online fraud. He was acting on information provided by the Merchant Risk Council.

Miskell reports that arrests for cyber-crimes in Nigeria are rare. Both the Merchant Risk Council and the Internet Crime Complaint Center believe that cooperation among online merchants and law enforcement agencies made the arrests possible and could serve as a model for the future. Retailers can provide data that can indicate who’s committing the crimes, but have no law enforcement capabilities. And police agencies are not sources of information but have the means to investigate data and make arrests. “We look to this as a proven case where we can collaborate productively between private industry and law enforcement,” says Tracy Brown, director of Internet security for American Eagle Outfitters and Merchant Risk Council cochair and head of the council’s law enforcement committee. “We would welcome members all the way down to local law enforcement to partner with us on getting the bad guys.”

Reshipping

By now, online merchants have become wary of shipping merchandise to addresses in West Africa because so many customers in the region use stolen credit card information to make their purchases. But criminals are always on the alert for ways to circumvent fraud-prevention measures. Many in Nigeria have come up with ingenious schemes to dupe Americans into unwittingly cooperating with their rip-offs. Those schemes are known as “reshipping” and often start at a singles chat web site.

In a chat room, or on a singles phone line, a scammer establishes a relationship with a potential victim, often wooing her by sending her flowers or little gifts. Eventually, he gives her a story about hardships in Nigeria, including the inability for some reason or another to obtain American goods. He persuades her to agree to receive merchandise that he buys online, then reship it to Nigeria.

Once she agrees, the criminal uses stolen credit card information to buy goods online and have them shipped to his American girlfriend. The victim rewraps the merchandise and ships it to an address in West Africa. And so it goes until the victim gets tired of the long-distance romance, the criminal switches to a new victim or the victim herself gets in on the scheme and keeps the merchandise.

Criminals also have refined methods of preying on small businesses, Miskell says. A con artist in Africa might develop a relationship with a retailer who sells a relatively low-cost item, chocolates, for example. After becoming a trusted customer, the criminal then will ask the merchant to buy a high-value item, say computers, to reship to him in Africa.

If the small retailer protests that computers aren’t what he sells, the confidence man cites their working relationship, asks him to do it as a favor and offers to pay a small commission. The victim agrees, charges the computers to his own card, ships them to Africa and receives a cashier’s check from the scammer. Only later does the small business owner find out the check’s no good.

19,000 monthly complaints

Such problems plague a large number of Americans, says Miskell. During a single recent 90-day period, some 1,500 people in this country, either knowingly or unknowingly committing a crime, repacked expensive goods for reshipment to West Africa, he says.

Under Nigerian law, authorities are allowed to open packages as they arrive in the country. Miskell reports that every one of the 46 parcels he opened during a single day of his stay there had been reshipped to launder the merchandise. He says he could only guess about the legitimacy of the stacks of packages he didn’t have time to inspect.

Miskell had some idea which packages might be bogus, however, because of information he was receiving daily from his colleagues back at the Internet Crime Complaint Center. The center, or IC3 as it’s called, is staffed by about 40 employees of the FBI and 20 people who work for the National White Collar Crime Center. A U.S. Postal Service employee also works there to coordinate information exchange with his agency, and the center hopes to persuade the Secret Service to station a person there as well.

Because the non-profit National White Collar Crime Center is involved, the IC3 doesn’t have to treat the information it gathers as FBI intelligence, which could limit its ability to inform retailers of emerging trends. The center’s analysts sift complaints from consumers, merchants, associations and law enforcement agencies, compiling facts to build cases. Some 19,000 complaints about spam, phishing and reshipping are fielded in a typical month.

Victims as far apart as Macon and Tacoma may have been robbed or swindled by the same online criminal, but the authorities can figure that out only by processing the complaints nationally. By combining the schemes that are related, the center can come up with cases with high enough dollar amounts to warrant pursuing.

Tracking help

When enough information is amassed, the center works with state and local officials to take to the field for interviews, searches and arrests. One national action the center took, Operation WebSnare, has brought dozens of criminals to justice.

The center gets help in tracking crimes from the Merchant Risk Council, which was formed in 2000 to help make online commerce safer. The Merchant Risk Council’s 7,000 subscribers include online merchants and vendors who sell to those retailers, says Julie Fergerson, vice president and cofounder of ClearCommerce who serves as the Merchant Risk Council cochair.

Bringing more law enforcement agencies into the network that exchanges and analyzes information on cyber crime is one of the Merchant Risk Council’s goals, Brown says. Miskell’s work in Nigeria could prompt other law enforcement agencies to join the Merchant Risk Council, Brown hopes.

Fergerson and Brown hold up the partnership of the Merchant Risk Council and IC3 as a model for future relationships. The Merchant Risk Council prompted the IC3 to take action in West Africa because so many problems arise there. “That’s the place we complained loudest about,” Brown says.

Miskell, who cites information from the Merchant Risk Council as vital to his work as program manager for IC3’s effort in Nigeria, made his first trip to West Africa in February 2003. He and three other FBI agents spent a week training officers in a class he calls Cyber 101, the same course taught to law enforcement officers in the United States.

The investment in the trip shows the IC3’s commitment to attacking online crime at the source, says Miskell, who estimates the cost of sending an agent there at $20,000 for airfare, food and lodging—salary not included.

Shortly before Miskell’s group arrived, the Nigerian government had organized the Economic and Financial Crimes Commission, an elite group of police officers and lawyers. That commission came into being because the Nigeria government could no longer ignore allegations of police corruption, Miskell says.

After that round of training, Miskell returned alone in December 2003 to help the police form liaisons with the local branches of international shipping companies, such as Federal Express, DHL and United Parcel Service.

That cooperation paid off last spring when Miskell made his third visit to Nigeria—this time to help make arrests. His group, which included several local officers, began its day by opening packages that had arrived in the country for delivery. Often, they’d open a container from one shipper, Fed Ex, for example, and inside find a box delivered by UPS to an address in the United States.

Next, the group took that package, piled into the War Wagon and drove to the address. Two plainclothes detectives hopped out of the vehicle and kept the building under surveillance while a third officer, under cover in a shipping company uniform, made the delivery.

Fake...

Page 1 2