The Changing Landscape of Fraud Who is Kount
Founded in 2007 › Technology dating back to 1998 › Multiple patents
Safeguard some of the world’s largest: › Merchants › Payment Service Providers › Ecommerce Platforms
KOUNT CONFIDENTIAL & PROPRIETARY Strategic Partnerships
“This alliance underscores our commitment to provide clients with the tools they need to significantly improve and sustain financial performance. Our partnership with Kount offers clients the first truly integrated fraud-monitoring tool at the point of transaction authorization. This is a significant step toward a global effort to reduce CNP fraud.”
Mike Duffy, Former President, Chase Paymentech
KOUNT PROPRIETARY AND CONFIDENTIAL Fraud Hurts
Costs businesses more than $100B annually
In 2013, more than 550 million personal IDs were compromised, lost or stolen
Roughly 1% of corporate revenues are lost to fraud, 2.7% internationally
#1 reason for chargebacks is suspicion of fraud
1,492,215 IRS fraudulent tax returns, totaling $5,221,018,184 - As many as 2,700 tax returns sent to one address in Lansing, Michigan FRAUD CONTINUES TO INCREASE IN:
SIZE
SOPHISTICATION
SPEED
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud
MRC 2011 Annual e-Commerce Payments and Risk Conference
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud
KOUNT CONFIDENTIAL & PROPRIETARY KOUNT CONFIDENTIAL & PROPRIETARY KOUNT CONFIDENTIAL & PROPRIETARY KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud
Black Market Pricing
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud How a Remote Town in Romania Has Become Cybercrime Central
MRC 2011 Annual e-Commerce Payments and Risk Conference
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud Evolution of Fraud
MRC 2011 Annual e-Commerce Payments and Risk Conference
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud
Data breaches are at unprecedented levels - More data being stolen - Data being “weaponized” faster - Enabling the growth, size and speed of fraud - 204 breaches so far in 2014
4.6 million 1.1 million 775,000 310,000 90,000
300,000 170,000 150,000 20,000 75,000
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud
100 million + valid credit/debit cards with PINs
Increased market for compromised credentials
Offline going online
Everything looks good, valid bank authorization
KOUNT CONFIDENTIAL & PROPRIETARY The Storm Before the Storm
EuroCard, MasterCard, Visa (EMV)
Chip & PIN
19 EMV Effect
Europe
Counterfeit
Card Not Present
Lost & Stolen
Other A Call to Action
UK CNP Fraud Losses (£M) since EMV Adoption in 20011 . A sizable event occurring in the payments
£328 industry with EMV migration in the US by 2015
£291 £266 . UK’s migration to EMV, demonstrated that CNP +350% fraud losses are likely to rise £227 £213 £221 £183 . Growth in use of SecureCode, Verified by Visa, £151 and Amex SafeKey cited as reason for CNP fraud 2 £122 decline £110 £96 (Regulation and compliance laws) £73 . Fraud Management Tools are essential to address CNP Fraud
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1“EMV in the US: Putting It into Perspective for Merchants and Financial Institutions”, First Data Corporation, p. 8 “Fraud – The Facts 2012”, Financial Fraud Action UK, p.12 The Storm Before the Storm
Confidently predict more breach announcements › We are watching the increased activity through our technology which is showing more data is being compromised and distributed Breaches will continue until October 2015 – EMV › When EMV (chip ‘n’ PIN) is finalized and in place for most retailers › Counterfeiting is more difficult Fraud moves online › Once counterfeit and ATM fraud is reduced, fraud moves into the online channel › We are seeing evidence of this movement already The explosion of mobile, alternative payments › The perfect storm of fraudsters moving into new channels, explosion of mobile and alternative payments, unprepared merchants 22 There are more mobile phones on the planet than there are TVs.
More people own a mobile phone than a toothbrush or a toilet.
It takes 26 hours for the average person to report a lost wallet. It takes 68 minutes for them to report a lost mobile phone.
KOUNT CONFIDENTIAL & PROPRIETARY KOUNT CONFIDENTIAL & PROPRIETARY KOUNT CONFIDENTIAL & PROPRIETARY Going mobile
Mobile Phone users are at least 3x more likely 64% of those surveyed to become victims of phishing attacks DO NOT USE a screen lock or password to secure their device Although 73% of us are aware of the increased security risk of public WiFi, 66% still connect to public networks
KOUNT CONFIDENTIAL & PROPRIETARY Using a mobile device in the past 12 months… 87% Checked an account balance or recent transaction 53% Transferred money between two accounts 27% Made a bill payment 21% Deposited a check using a mobile phone camera
KOUNT CONFIDENTIAL & PROPRIETARY Mobile Future: Devices
New Innovations
Source: NTT DoCoMo vision 2010: http://www.youtube.com/watch?v=ae-Ssclu5A4 Case Study - CDBaby
1
Fraudster posing as an artist post music for sale on CDBaby.com
KOUNT CONFIDENTIAL & PROPRIETARY Case Study - CDBaby
1
Fraudster posing as an artist post music for sale on CDBaby.com 2
Fraudster joins CDBaby affiliate program, receives 75% commission
KOUNT CONFIDENTIAL & PROPRIETARY Case Study - CDBaby
1
Fraudster posing as an artist post music for sale on CDBaby.com 2 3
Fraudster joins CDBaby affiliate program, receives 75% commission Using stolen credit information, Fraudster purchases music from affiliate (Fraudster)
KOUNT CONFIDENTIAL & PROPRIETARY Case Study - CDBaby
4 1
Fraudster posing as an artist post music for sale on CDBaby.com Pays fines, 2 Pays royalty chargebacks 3 to artist Pays commission to affiliate (75%)
Fraudster joins CDBaby affiliate program, receives 75% commission Using stolen credit information, Fraudster purchases music from affiliate (Fraudster)
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud
• 1 million customers worldwide • 200,000 U.S. customers. • 12 million financial transactions a year
KOUNT CONFIDENTIAL & PROPRIETARY Evolution of Fraud
Liberty Reserve, a major global online cash transfer business run out of Costa Rica, has been shut down and its executives arrested to face U.S. charges of laundering $6 billion.
According to charges unveiled Tuesday by U.S. Attorney Preet Bharara in New York, "Liberty Reserve has become a financial hub of the cybercrime world, facilitating a broad range of online criminal activity including credit card fraud, identity theft, investment fraud, computer hacking, child pornography and narcotics trafficking." According to the indictment, it moved tens of millions of dollars through shell company accounts maintained in Cyprus, Russia, Hong Kong, China, Morocco, Spain and Australia, among other places.
KOUNT CONFIDENTIAL & PROPRIETARY What Can You Do? Consumers
Reduce exposure - Shredding machine - Don’t open unknown emails - Don’t download from unknown sources - Virus, malware software (update it, regularly) - Separate accounts for online use, prepaid options - Use passwords - Change passwords - Don’t give information over the phone to unverified people/businesses - Use a security service (LifeLock) What Can You Do? Business
Update and audit payment procedures - Is your payment service provider PCI compliant? - Does your payment service provider offer fraud protection services, options? - Review payment procedures at least annually
Don’t assume you’re protected - Where are your weak links? - Mail Order/Phone Order - What is your liability?
How do you handle sensitive transactional data? - Network security - Employees bonded - Audit and update regularly Q & A
Brad Wiskirchen CEO Kount
KOUNT CONFIDENTIAL & PROPRIETARY