Internet Crime Complaint Center Report is a Joke
The Internet Crime Complaint Center has released their 2007 Internet Crime Report. For those that never heard of them, The Internet Crime Complaint Center (IC3) is a partnership between the Federal Bureau of Investigation (FBI), the National White Collar Crime Center (NW3C), and the Bureau of Justice Assistance (BJA).
To be fair, I acknowledge that this, like any statistical report, can only report on the statistics that are collected. Having said that, it would be very interesting to know the demographics of the people that have filed complaints with the IC3. The statistics are vastly different from the numbers that merchants are experiencing.
According to the 2008 Annual Online Fraud report published by CyberSource, which can be downloaded here, the fraud rate has remained substantially the same at 1.4% of revenue but, because of the increase in online sales, the dollar amount lost to fraud has risen to $3.6 Billion. I have seen at least one other survey that is consistent with these figures. Those statistics are for online credit card fraud alone! That’s far greater than the $239 Million TOTAL losses reported by the IC3. In fact, the IC3 reports that only 4.6% of that $239 Million, or $15.3 Million is from credit card fraud. Does anyone besides me see the disparity between $3.6 Billion and $15.3 Million?
I suspect that people are not reporting their losses to the IC3 for one of two reasons. The agency is fairly new so perhaps people are just beginning to learn that there is, indeed, a place to report cybercrime. The more likely reason is that people just don’t bother because nothing is done. Law enforcement, especially on the Federal level, simply does not have the resources to investigate a median loss of $680. We’re lucky if they touch 10 times that amount. In fact, the IC3 report itself tells us that “only one in seven incidents of fraud ever make their way to the attention of enforcement or regulatory agencies.” and that’s across all classes of reported cybercrime!
The IC3 is nothing more than a statistic gathering joke, and a poor one at that.
Not only does law enforcement fall far short (through no fault of their own) but the payment industry as a whole has no incentive to stop credit card fraud. When merchants are victims of credit card fraud, they loose their money, their product or service, and they are forced to pay additional fees, generally $25-$35 per chargeback, for what amounts to being fined for being the victim of a crime. The proceeds of those fines go directly into the pockets of the payment industry - the processors and the card issuing banks. As long as there is a revenue stream from fraud for the only people that can stop it, fraud will continue.
If the IC3 report has any accuracy at all, it’s the fact that card holders reported losses of $15.3 million while online merchants suffered losses of $3.6 Billion. Cyber merchants take all the losses - but we knew that already!
You can download the full IC3 report here. I suggest that you don’t read it on a full stomach.
