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Ad Networks: A New Avenue for Money Laundering

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Each year approximately 5 percent of global GDP, or $2 trillion, gets laundered worldwide. In most cases of money laundering, you wouldn’t be faulted for thinking of shell companies headquartered in empty offices on some tropical island or secretly wired money transfers into third-party bank accounts. However, new money laundering trends and techniques are slowly cropping up in today’s digital age that deserve a moment in the spotlight.

Online Ad Fraud and “Clickjacking”

An Adweek report revealed that $6 billion was allegedly stolen from advertisers through online ad fraud in 2013. This occurred through the use of automated malicious computer programs called bots that were installed on private computers without the users’ knowledge. These bots then take over the computers on which they are installed and surreptitiously click on fake ads created by fraudsters in order to make money for organized crime groups.

Another type of online ad fraud is called “clickjacking”, since the user’s clicks in a web browser are effectively hijacked, sending them to a different website from the one that they actually selected and also stealing referral commissions from the rightful advertisers. A group of Estonian criminals operating under the guise of a web hosting and online ad firm created clickjacking malware that infected at least 4 million computers in about 100 countries.

How Ad Networks Could Be Used for Money Laundering

By using legitimate ad networks, criminal organizations can set up fake websites and online ads specifically for the purpose of falsely generating web traffic and fraudulently earning revenue. In July 2015, the ringleader of the Estonian group pleaded guilty to charges of wire fraud and computer intrusion in a U.S. federal court. According to prosecutors, this scheme resulted in $14 million in payments from ad brokers to a team of seven cyber criminals. In addition to the U.S. criminal case, the Estonians were also found guilty of money laundering in June 2014.

Online advertising can also be exploited when organized crime groups recruit other people without any prior criminal history to register websites with ad networks using their personal information. The websites are then used to carry out online ad fraud, with these individuals acting as “money mules” who receive payments from the ad networks on behalf of the criminal gangs. In return for managing the deposits and transferring the money to the fraudsters, the money mules typically receive 20 to 50 percent of the proceeds as payment.

More recently, an article was published in the Journal of Money Laundering Control that studied clickjacking in India. The researchers found that 86 percent of Indian websites provided no protection against clickjacking as opposed to 51 percent of global websites. They also discovered that in the case of dynamic websites, such as social media networks and online banking, only 18 percent of Indian websites offered some sort of protection, compared with 63 percent of global websites. Even though the article is focused on the situation in India, it also reveals there are still many websites globally that are still vulnerable to clickjacking.

How to Protect Against Online Ad Fraud

It has not been entirely clear whether or not there is a genuine cause for concern when it comes to online ad fraud and money laundering. Part of the issue is that there have been no clear measurements or data on the amount of online ad fraud that is currently occurring or the sources of the fraud. This is no longer the case.

The U.S. Association of National Advertisers (ANA) and bot detection company White Ops released a report in December 2014 providing some hard data based on a study of 181 online campaigns run by 36 different advertisers in nine different categories. White Ops analyzed the 5.5 billion times that online ads were seen on 3 million websites. They found that up to 52 percent of website traffic generated through paid advertising was fraudulent through the use of bots and projected a global loss of $6.3 billion to bots in 2015.

In an open industry like online advertising, it may be hard to be certain how much paid incoming online traffic is from real people. However, the ANA has provided some recommendations to protect against online ad fraud, such as advertising during waking hours, demanding transparency from advertising firms regarding paid traffic, and using independent monitoring to analyze traffic for signs of fraud.

Compliance: Regulators, Audits and Accountability

In the United States, the Federal Trade Commission (FTC) is the national regulator for advertising and marketing. Because online advertising is a relatively new medium, the FTC’s current guidelines and regulations are only focused on traditional concepts such as fair and honest advertisements and helping consumers prevent unsolicited advertising.

There are presently no laws on the books that specifically address the problem of online ad fraud such as click fraud and clickjacking. Rather, prosecutors must charge perpetrators with other related legislated criminal acts such as wire fraud and money laundering, as in the case of the Estonian gang.

To help tackle these concerns, the Trustworthy Accountability Group (TAG) was created in December 2014 by the ANA, the Interactive Advertising Bureau, and the American Association of Advertising Agencies. TAG works closely with companies throughout the digital ad supply chain and focuses on eliminating fraudulent traffic, combatting malware, fighting Internet piracy, and promoting transparency. With greater accountability and transparency from third-party online advertisers, businesses will achieve better businesses results.

It is worth noting that some sectors outside of financial services are already subject to formal regulatory scrutiny. For example, online gambling businesses, which are currently legal in New Jersey, Nevada, and Delaware, are required by state regulations to detect and prevent suspicious transactions that could be linked to money laundering, fraud, or other criminal activities. As the problem of online ad fraud continues to grow, lawmakers may begin considering regulation of the industry to reduce financial losses.

Do you think that online advertisers should be held accountable for reporting suspicious transactions, like online casinos?

The information in this blog is intended for public discussion and educational purposes only. It does not constitute legal advice.

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