Black Hat to White: Evolution of a Fraudster, Part 2

Black Hat to White: Evolution of a Fraudster, Part 2

January 14, 2021

By Alexander Hall, Card Not Present Contributor

[Editor’s Note: Alexander Hall is a former fraudster who now works to help businesses protect themselves from the tactics he used to use. Alexander will begin contributing to Card Not Present as an expert in fraud, sharing his perspective and advice from time to time. Before he does, however, we wanted to introduce him to our audience and describe his journey. We hope it will not only help merchants understand the way a fraudster thinks and what their motivation is to break the law in this way, but also why they would give up the life and make a career of helping the very people they were stealing from. In the second of two parts, Alexander examines his decision to switch sides and how his prior life left him equipped to augment the technology developed to fight fraud.]

The Decision to Change

In 2016, my wife and I learned that we were expecting our first child. It was at this point that she laid down the law and told me, "in order to be in our lives, you need to straighten up."

It wasn't easy, and it took several weeks to build up the courage, but I ended up walking into court and submitting myself for traffic violation warrants. I was never caught and punished for fraud, but when I turned myself in, I received paperwork for an outstanding warrant regarding Mid-Level Trafficking of a schedule 1 controlled substance. I took a plea deal for a 48-month probation sentence.

During my time on probation, however, more of my past came back to haunt me. I asked an old acquaintance for a ride home from work. He and his girlfriend picked me up and took me directly to an Office Max, where, without my knowledge, they attempted to pay for $3,500 worth of equipment with a stolen set of checks. I was outside, smoking a cigarette and on the phone when the police arrived. I was taken into custody.

At the time of writing, I am six months away from the end of a 48-month probation sentence.

According to the terms of my probation, I am required to maintain work. I had very good motivation to stay out of trouble and out of jail. So, I tapped the skills I had invested so much time to develop and decided to pursue a career in fraud prevention.

The Other Side of the Fence

The first position that I held in the fraud prevention community was as the sole fraud prevention specialist for a vape distribution company. Six months into my tenure, I had successfully conducted data-point transaction analysis for $2.1 million worth of monthly sales and chargeback representments while identifying weaknesses and vulnerabilities in operations spanning three divisions, ranging from fulfillment and marketing to B2B sales and retail e-commerce. The mitigation and prevention efforts that I employed resulted in $1.2 million of mitigated losses.

During my time with that company I worked my way up to dropship division manager, maintaining the accounts of around 60 dropshippers. In addition to the fraud prevention work I conducted for my employer, I also helped many of the dropshippers get their fraud and chargebacks under control. My policies and procedures have been successfully applied to billions of dollars of transactions throughout the corporate and online retail environments.

But 2020 arrived and Covid wreaked havoc all over the globe. This led to layoffs, and I was not immune. My experience with giving advice to external clients I worked with convinced me I could do the same, as my own boss, with other kinds of companies. The pandemic, and me losing my job, gave me the time needed to launch and develop a strategy for my company, Dispute Defense Consulting.

A Fraudster's Evaluation of the Fraud Prevention Industry

Since I’ve become active in the community of fraud fighters and service providers, I have learned a great deal about the systems the industry has developed to mitigate fraud. It is clear that the methods in place now are significantly effective—and growing more sophisticated every day. Each solution is effective, however, in a very focused way, which means there are no technology solutions that work for everyone in every situation. It’s why you always hear fraud experts talk about “layered solutions.”

With intimate knowledge of the methods I employed in my past life, I know that, at a general level, fraudsters operate along three dimensions: the identity, the requirements, and the execution.

Please note, you do not see words like “credit cards,” “transaction,” or “dark web.” This illustrates how dynamic the practices are. Fraudsters are not tied to definitions or expectations. Every transfer of value is fair game. This leads me to my assessment of the industry.

There is a chasm between where fraud prevention is and where my methods were.

I cannot stress enough just how impressive the systems developed by this industry have become. They are robust and beautiful. That being said, there are three fundamental ideas that must be adopted in order to effectively close the gap between fraudsters and fraud prevention:

  • Understanding that fraudsters' methods are not limited by our definitions. We are merely slapping a pretty label on a method employed by a fraudster who wasn't smart enough to remain in the shadows.
  • Every transfer of value stands to be exploited. Fraud prevention strategy varies greatly between companies of different sizes, industries and business models. The hot dog vendor only needs to identify fake cash. Enterprises need fraud prevention methods employed in almost every one of their departments.
  • Due to the eternal struggle between customer satisfaction and merchant security, effective fraud prevention is always devalued in the eyes of company leadership. This almost exclusively perpetuates the existence of fraud throughout the various levels of commerce.

Goals of a Former Fraudster

I am now the professional equivalent of a newbie. After operating on the dark side for so long, my legitimate professional career is only three years old. That being said, I have very ambitious goals for myself, for the fraud prevention industry in general, for my family and for my business.

My most important objectives are:

  • Building credibility
  • Gaining Trust
  • Establishing a business where I can apply my expertise to helping people who need it

The community has been very warm and welcoming to me and I am very thankful for everyone who reached out and started a conversation. My story is instructive, and I hope it proves useful to others in the community. I will continue to provide information through Card Not Present and other sources people can use to protect their businesses.

I look forward to working with everyone in the fraud prevention space.

Check out Part 1 of this Series

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