INCOMING: FBI probing negative option bank fraud schemes
Continuity Marketing ı By Paul O'Neal
6,421 0 Comments
According to sources, the FBI is actively investigating several negative option billing schemes and the vendors that are helping faciliate them.
The negative-option bank fraud diet and beauty schemes work like this:
Step 1: An advertiser (merchant) that seeks to promote a product signs up for a CRM that has the capabilities to load balance the transactions.
Step 2: Thereafter, the advertiser connects with a website designer that knows how to put together a bank page. The bank page is the page that the advertiser presents to banks to acquire the merchant accounts, aka MIDs, to handle the transactions.
Bank pages are compliant websites that are designed to acquire the merchant processing (MIDs) to process credit card transctions.
Step 3: With the assitance of the CRM provider, whom makes intros to MID providers and/or provides MIDs themselves, the advertiser registers dozens of shell companies to acquire MIDs for the sole purpose of using the CRM to load balance the transactions to stay beneath the Visa/Mastercard fraud thresholds of 100 or less chargebacks per month.
This is referred to as the shell game, and in essence is bank fraud. The reason why it is bank fraud is that the "bank page" is not the intended product that advertiser seeks to sell, rather it is a bait and switch scheme to acquire MIDs.
Once the MIDs are acquired, the advertiser then launches a non-compliant website selling 1 non-compliant negative option product across the dozens of merchant accounts that are registered across the dozens of companies that were ostensibly setup as "separate" negative option compliant websites. Merchant bank providers like REDACTED are the banks of choice for many of these negative option advertisers.
Step 4: The advertiser finds a private label supplier of supplements, similar to what Tarr Inc. did, and discovers a fulfillment center to pick, pack, and ship the products.
This allows for the advertiser to pay for only product they ship, that way if their MIDs are shut down they can cut their losses without having too much product overhead.
Step 5: The advertiser needs a way to advertise the negative option trial with hidden terms & conditions. Since Facebook, Instagram, and Google disallow their type of advertising, they turn to affiliate networks to attract rogue affiliates.
Rogue affiliates get attracted to the negative option campaigns that offer $30-50 CPA (cost per acquisition) bounties per free-trial credit card submit.
In order to maximize their returns, rogue affiliates cloak Facebook, Instagram, and Google to get their fake news sites live promoting the negative options scams.
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