A significant part of the success for breaking up this Internet crime ring goes to eBay's Fraud Investigation Team (FIT), which had been quietly working behind the scenes for many months to help Romanian law enforcement agencies, providing key information which helped in the investigation.

The FIT's growing reputation
Notch up another success to the eBay Fraud Investigation Team. Its growing list of successes in bringing online criminals to justice is earning the team a solid reputation among law enforcement agencies around the world. In today's online world, with criminals using increasingly sophisticated technology to scam the rapidly growing online population, eBay's Fraud Investigation Team (FIT) provides a lot of the ammunition that helps law enforcement agencies wage the unceasing battle on Internet crime.

The Chatter team went to meet John Kothanek, the head of eBay and PayPal's North American Fraud Investigation Team, to learn more about their efforts. Under his affable demeanor, Kothanek, a former US Marine, exudes an air of quiet menace and dogged determination, which should make online criminals think twice before committing fraud on eBay or PayPal.

Speaking in crisp, matter-of-fact sentences reminiscent of his Marine background, Kothanek gave us some insights into how eBay pursues the relatively small number of “bad guys” who take advantage of the world's online marketplace to perpetrate criminal activities on our members.

At the very outset, Kothanek quickly demolished the myth of fighting online crime as a glamorous lifestyle. “It's not like TV where at the beginning of a one hour show the FBI agent gets a call, and because he's got nothing else going on that day, hops in his car and goes over to the bad guy's house. Then he chases him down the street, smacks him on the back of the head, and throws him in custody. Usually at the end of the show, with commercial interruptions, the bad guy's been prosecuted and sentenced in a gripping courtroom drama. In the real world it doesn't work like that at all. It takes much, much longer. It can take months and years before cases come up before a judge or prosecutors.”

What the FIT does
Kothanek outlined some of the key activities of the Fraud Investigation Team:

• The eBay and PayPal FIT investigates potential misconduct on the eBay and PayPal platforms, warns users where appropriate, and refers cases to law enforcement.
• The team works closely with regulators, law enforcement and consumer protection investigators on pending investigations and prosecutions.
• FIT quickly responds to all requests for information from law enforcement agencies so those agencies can build their cases.

In addition, FIT plays a supportive role in educating law enforcement agencies about the changing trends in online fraud.

Tools and Techniques
So how does Kothanek and his team build up cases against the bad guys? And what kind of skills does it take to be a Fraud Investigation Team member at eBay?

To answer these questions, Kothanek went into the history of investigating fraud at eBay and PayPal. Five years ago, he had been hired as PayPal's first investigator for fraud. He quickly built up a team of dedicated professionals whose skills ranged from understanding the intricacies of network security, network administration, and computer forensics, to having vast experience working with law enforcement agencies.

In early 2004, over a year after PayPal had become a part of eBay, Kothanek was asked to head up a joint eBay-PayPal team focused on Fraud Investigation. Kothanek said that combining the eBay and PayPal teams meant that they had greater visibility into the nature of online fraud – they were able to monitor it from a marketplace perspective (on eBay) as well as from a financial perspective (on PayPal).

As most team members had been with eBay or PayPal since the earliest days of both companies, they had witnessed the companies' growth and evolution and were very familiar with the back-end systems and architecture. This enabled them to build diagnostic tools customized to the needs of identifying and fighting fraud on eBay and PayPal. Their efforts resulted in a world-class array of tools that make it easier for the team to detect patterns of suspicious behavior.

Kothanek went on to explain how the team uses its tools to identify possible criminal scenarios, in the process also providing insights into the criminals' modus operandi. “If hackers have broken into a credit card company's data servers, they can steal vital information on someone's credit card accounts. They then have access to someone's date of birth, address, credit card information, social security information, etc. Using this information they can open multiple accounts on eBay or PayPal, and start committing fraud.”

Using their sophisticated tools, eBay and PayPal's frontline representatives in Customer Support Centers based in Salt Lake City, Utah and Omaha, Nebraska are usually the first to detect patterns of suspicious behavior. The patterns that the team looks for includes unusual velocities of payment (for example, each time money is paid into a number of apparently unrelated accounts, the money sits there for exactly the same time before being moved out to another account).

How to win friends and influence people
After identifying a fraudster, Kothanek's team systematically builds up evidence that can be used by law enforcement agencies to prosecute the criminal. Unfortunately, not all cases can be prosecuted. Because law enforcement agencies are often strapped for time and resources, they often find it impractical to prosecute a case. Considerations such as putting taxpayer dollars to appropriate use often come into play in the decision on whether to prosecute a case, Kothanek explains. “Obviously it doesn't serve the taxpayers of New York state to fly a bad guy from California to a New York courtroom to prosecute him for a $400 case for a local victim in New York state. Every prosecutor wants to do that, but it just doesn't serve the taxpayers' purposes. At some point, a realistic and non-emotional decision has to be made about whether to move forward in a case.”

But even if prosecutors decide not to move forward with a case, that doesn't mean that eBay members have to bear the consequences of the criminal's acts. Kothanek's team doesn't give up so easily. Sometimes they use their extensive contacts in the world of law enforcement to serve justice in other ways.

Kothanek cites the example of someone who reported that their stolen tennis racquet was being listed for sale on eBay. Realizing that this incident would be unlikely to result in a formal case for prosecution, Kothanek made a few phone calls to his contact in the police department in the town where the seller was located. Soon afterwards, a police car pulled up outside the seller's door. The policeman explained to the seller that the tennis racquet had been identified as stolen property, and it would be best for everyone if it was returned to the rightful owner. The racquet was duly returned and the matter was dropped. “These methods are often effective, because once someone realizes that the local police are aware of their activities, chances are that they won't flirt with the wrong side of the law again.”

For those cases that do go to court, Kothanek reports that the sentences being handed out to convicted online fraudsters are becoming increasingly harsher. A few years ago, two Russian fraudsters who had ripped off US companies for millions of dollars had been sentenced to only three years in prison. But now, online criminals are being put away for longer periods, ranging from five to twenty years. Bail amounts in such cases are also rising, from about $2,000 a few years ago, to the million dollar range now. Kothanek is happy about this trend, saying that it is likely to deter young online fraudsters, who previously had shrugged off the risk of spending a few years in prison against the opportunity of making a fast buck through online crime.

A large part of Kothanek's job is traveling the world to raise awareness levels about online fraud and building relationships among the law enforcement community. Kothanek is a member of several law enforcement and police associations, and is often called on to speak about online crime at their events. During the course of these interactions, Kothanek loses no opportunity to build up eBay's contacts in law enforcement. In the process, he and his team also learn a lot about the latest trends and techniques in the murky world of online crime.

As part of their effort to provide extensive support to law enforcement agencies, at this year's eBay Live!, the Fraud Investigation Team flew in around 60 officers from all over the U.S. to conduct a special one-day course on using the latest tools and techniques in areas like network administration, network safety, and Windows forensics.

In conclusion, John Kothanek had this to say about the role of the Fraud Protection Team. “We're here to protect our members' money and profits from the bad guys. We also help make sure that nobody trashes the good name of eBay and PayPal through their criminal activity. If a criminal act falls within prosecutorial guidelines, my guys will keep working the case, if it takes five years, ten years, or even longer if necessary.”