Beneath the radar: Exploring the economics of business fraud via underground markets

Abstract

Underground marketplaces have emerged as a common channel for criminals to offer their products and services. A portion of these product comprises the illegal trading of consumer products such as vouchers, coupons, and loyalty program accounts that are later used to commit business fraud. Despite its well-known existence, the impact of this type of business fraud has not been analyzed in depth before. By leveraging longitudinal data from 8 major underground markets from 2011–2017, we identify, classify and quantify different types of business fraud to then analyze the characteristics of the companies who suffered from them. Moreover, we investigate factors that influence the impact of business fraud on these companies. Our models show that cybercriminals prefer selling products of well-established companies, while smaller companies appear to suffer higher revenue losses. Stolen accounts are the most transacted items, while pirated software together with loyalty programs create the heaviest revenue losses. The estimated criminal revenues are relatively low, at under $600 000 in total for the whole period; but the total estimated revenue losses are up to $7.5 millions.