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A widely reported spate of fraudulent 25-cent transactions on credit and debit cards across the country most likely was a bogus merchant's attempt to earn a substantial sum from thousands of microtransactions, according to Avivah Litan, a Gartner Group analyst. The fraud method has existed for years, she notes. Card-billing statements named Adele Services, of Melville, N.Y., as the merchant charging the latest round of suspicious microtransactions, but no business by that name is registered in the state of New York. In a more-dangerous use of microtransactions, fraudsters often make small donations to nonprofit organizations or transactions on other e-commerce sites that lack fraud-detection software to test the validity of card accounts before making more-expensive transactions. But those are transactions to legitimate merchants not bogus merchants, and reports say cardholders complaining of the microtransactions to Adele Services have not reported subsequent fraud on their cards that seems related to the scam, Litan notes. The fact that Adele Services was able to get a merchant account without being a registered business in New York "calls into question the vetting process used by the banking industry to give out merchant accounts," Litan tells CardLine. "This is one of the easiest ways for criminals to defraud the system," she says. "Sometimes there are a number of providers and [independent sales organizations] in between the primary acquirer and the merchant. … So the security is only as strong as the weakest link, as always."
