Female Fraudsters: Looking at Past, Present & Future

The number of female fraudsters has risen in recent years along with the boom in global e-commerce and new web-only financial services. While pop culture has long adored notorious femme fatales from Katherine Hepburn’s 1935 classic “Sylvia Scarlett” to the iconic “Thelma & Louise,” the reality is often much less glamorous for female fraudsters.

Taking a stroll down the slippery path blazed by women in fraud, we can turn to the example of Barbara Erni. She traveled the Liechtenstein countryside with a trunk she claimed was full of treasure. Wherever she’d stop, she’d ask her hosts to lock the trunk somewhere safe. The next day, both the trunk and her host’s valuables would be gone.

How did it work? Erni had a person with dwarfism as an accomplice who’d lie in wait in the trunk. Left alone, he’d emerge from the trunk to rob the joint. Together, he and Erni would make their getaway. While the fate of her accomplice is lost to history, Erni was caught. After confessing to 17 robberies, she was beheaded in 1785.

Female fraudsters in e-commerce’s early days

Closer to the present day, I (Gilit) learned the lesson the hard way that sweet old ladies are also capable of committing fraud. I was a young fraud analyst working my way through school doing manual review on night shifts at Fraud Sciences in the early aughties, when I got snookered by a friendly lady’s voice over the phone. I could tell there was something off in the payment data, but she assured me that the pricey Rolex watch was a gift for her son’s college graduation. I fell for it, and when the $17K chargeback arrived, I had only myself and our department’s policy at the time to blame. In the early days of e-commerce, women were usually assumed to be too innocent or too incompetent to commit financial crimes online. They really could get away with murder.

Today, fraud fighting teams can profile a clearer picture of the various roles that women play as fraudsters, accomplices to fraud and victims of fraud. It is worth noting that female fraudsters both real and fictionalized are still the exception to the rule. Internal research at several risk agencies shows that female perpetrated fraud trails male perpetrated fraud nearly 1:4. However, females lead males in the statistics for friendly fraud. For other types of fraud, women more often play different roles in the crime than men, as either conscious or unwitting accomplices, customers or as victims.

Putting a trustworthy face on triangulation fraud

Airline triangulation fraud is a perfect example of the specialized role women play in some fraud rings. Organized crime groups in Eastern Europe have hired women at many airports in the region to play the part of the “friendly local”, who can sell extra-cheap flights for cash. Behind the scenes, the gang is using stolen credit cards to purchase the airline tickets online. The role of the woman is to act as the “storefront” for the fraudulent operation by instilling trust in the heart of the victims that they are buying legitimately acquired tickets.

Not only are the tickets illegally acquired, but when the stolen card’s owner demands a chargeback for the transaction both the target airline and the end-purchasers become victims. The airline, of course, must return the revenue from the ticket sale to the legitimate card owner. However, if the fraud is discovered before the flight has occurred, the airline will also cancel the tickets. This means the end purchasers also lose their money. The only people who win are the criminals.

The cynical nature of this specific type of fraud becomes painfully clear when considering that many of the travelers seeking cheap last-minute travel opportunities in these countries are families of refugees from war zones. Fraudsters have long preyed on the misinformed or disenfranchised, but this isn’t always as victims. Many times they encounter people along the way who they use as unwitting accomplices.

Fencing hot items to babies’ mamas

One of the hottest targets for fraudsters is baby formula. It’s pricey. It’s portable. Its users need it constantly, and retailers love to buy it at a discount. All these factors make it the perfect product to steal. But someone walking into a local shop in an oversized hoodie making a grab is not a scalable operation.

In profitable stolen baby formula operations, women not only serve as the target clientele for fencing the stolen goods, but they are also roped into participating in the crime under false pretenses. Organizers of these schemes present it to the people they partner with, often single mothers given the nature of the product, as a legitimate multi-level marketing scheme. They simply separate the women participating in the sale of the product from the manner in which the product is collected.

The criminals in charge of the operation designate the saleswomen as “independent contractors” to reduce the organizers’ legal responsibilities toward their salesforce. Cash payment and pick-up services are also offered to the contractors to further incentivize them to not ask too many questions.

The fraud ring then acquires baby formula by starting with women who have legitimate excess product, whether from Medicare vouchers or promotional coupons. The gang then moves onto more motivated and larger scale suppliers who acquire the product through nefarious means. To cash out, the ring use its network of independent contractors to sell the baby formula down the pyramid to end-customers. There is a clear chain of command, training sessions and pricing guides for participating contractors. To the women in the middle, between the illegal procurement activity by the organizers and the actual end-consumers, it seems like a legitimate sales operation.

Women doing the (money) laundry 

Nail salons are also legitimate seeming businesses predominantly staffed by women that provide the perfect cover for illegal activity. This is because most nail salons are unregulated cash businesses.

Tina Alberino, a licensed cosmetologist with fifteen years’ experience in the beauty industry, notes in an interview with Vice that nail salons are often used as “cover businesses” to hide and launder income from massage parlors, which are more strictly regulated, that also offer sexual services. As one investigator with a state human trafficking department put it: “For every one parlor that goes up, six nail salons are required to filter the cash.”

Massage parlors engaged in prostitution also largely employ women, many of whom are victims of human trafficking. Aside from the few words needed to establish what a customer needs, many salon employees and masseuses in the U.S. speak little to no English, so it’s difficult for them to inform authorities about any wrongdoing. In some cases they are not sure of their legal status and have been taught to fear law enforcement.

There are an estimated 9,000 illicit massage parlors across the United States alone. These parlors garner $2.5 billion a year in revenue, based on a report by the nonprofit anti-trafficking group Polaris. From California to Cape Cod, law enforcement and advocates struggle to deter these businesses that profit from the exploitation of women, mostly from Asian countries. The high profile arrest of Robert Kraft, owner of the New England Patriots football team, for patronizing such a massage parlor in Florida is just the most recent example of this problem to reach wider notice.

Female fraudsters star in friendly fraud

Even though most fraud attacks suffered by eCommerce retailers are perpetrated by men, empowered female fraudsters can still find their own dubious ways to shine. In fact, women are responsible for 76% of friendly fraud chargebacks, a figure which significantly exceeds their 60% share of eCommerce sales. If it sounds like buyer remorse, or even like a stereotypically frivolous shopper to you — think again. Many of the friendly fraud patterns are premeditated, planned in detail and coordinated in private social media groups.

“When friendly fraud turns from a one-time impulsive event into a serial pattern, retailers need to defend themselves just as they would do against professional fraudsters,” says Maya Har Noy. Har Noy has a lot of experience with payments processing as co-founder of the U.S. payment service Globipay and past work experience with the companies SafeCharge and Simplex.

“Despite the threat of friendly fraud, it’s important for retailers to spot the fine line between criminal intent and coincidental buyer remorse,” says Har Noy. “It’s crucial for retailers to prevent friendly fraud in a non-intrusive manner, while providing the best customer experience to yield higher conversion rates and brand loyalty.”

Importantly, practically all fraud analysts who work today directly or indirectly for medium and large-size merchants know that just because it’s a polite woman on the other end of the line does not mean you can let through the purchase.

Feminists in crime: good or bad?

Beyond friendly fraud, it’s possible women criminal masterminds will in the future bridge the gap with their male counterparts in committing other types of fraud as well. But that is one feminist achievement our society would be better off without.

This article was originally published on About-Fraud’s partner website FraudBeat.

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Author: Gilit Saporta