DOJ Cracks Down on Use of ‘Microtransactions’ to Conceal Fraud

The Department of Justice (DOJ) has announced a crackdown on fraud networks that steal money from consumer accounts and use fraudulent “microtransactions” to conceal their illicit activities from financial institutions.

These networks employ deceptive tactics to continue their fraudulent schemes, causing significant financial losses to individuals and small businesses across the United States, the DOJ said in a Friday (Dec. 15) press release.

The cases brought forward by the DOJ this week include two civil actions seeking temporary restraining orders and the appointment of receivers to prevent the defendants from dissipating their ill-gotten assets, according to the release.

These civil cases are part of a larger effort by the DOJ’s Consumer Protection Branch to dismantle networks of fraudsters who exploit misrepresentations or unauthorized charges to siphon money from consumers’ financial accounts, the release said.

Fraudsters and their accomplices often employ the use of “microtransactions” or “microdebits” to hide unauthorized charges, per the release. These tactics involve grouping unauthorized charges with a large number of low-value transactions, known as straw transactions, to reduce the fraudster’s chargeback rate.

A chargeback occurs when a transaction is refused or reversed by an account holder’s bank, according to the release. By artificially lowering the chargeback rate through microtransactions, fraudsters can mask the underlying fraudulent scheme and avoid account scrutiny or closure.

Investigations conducted by the U.S. Postal Inspection Service (USPIS) Criminal Investigations Group played a crucial role in uncovering these far-reaching fraud schemes, the release said.

One of the cases highlighted by the DOJ involves a network of fraudsters who allegedly stole millions of dollars from consumers and small businesses, per the release. The defendants, through sham companies, made recurring unauthorized charges against victims’ bank accounts.

To conceal their activities, they created bogus websites, fake customer authorizations and a fake customer service call center, the release said. The defendants also utilized sham microtransactions to avoid detection by banks.

In another case, a network of fraudsters processed payments for clients who made unauthorized charges to consumers’ accounts and engaged in various illegal activities, including technical support scams, according to the release.

The defendants created sham entities to disguise their clients’ true activities and recruited straw owners for these entities, the release said. They also used sham microtransactions to evade scrutiny from banks.

These cases are part of a broader crackdown by the Consumer Protection Branch, which also includes several criminal cases, per the release. The DOJ has charged individuals involved in unauthorized charges and microtransaction schemes, aiming to protect consumers and hold fraudsters accountable.

PYMNTS Intelligence has found that the online gaming industry is an attractive forum for illegal or malicious activities as microtransactions become a more dominant aspect of online gameplay.

This has made it essential for the industry to find ways to differentiate between legitimate customers and bad actors easily and swiftly, according to the “Digital Identity Tracker®,” a PYMNTS and Jumio collaboration.