Massive check-fraud botnet operation tied to Russia

 Check fraud is an old-fashioned kind of crime, but a criminal ring with ties to Russia is using modern cybercrime  techniques, including botnets, online databases of financial information and check imaging archives, to run a highly automated, multi-million-dollar counterfeit-check operation.

The crime ring, dubbed "BigBoss" after the name found on a directory server used as part of the massive check-fraud operation, was discovered by researchers from SecureWorks last April.

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"We figured out they're running a large-scale check counterfeiting scheme," says Joe Stewart, director of malware analysis for SecureWorks, who stumbled upon evidence of BigBoss while researching botnet code on the Internet.

Botnets are elaborate command-and-control systems used by criminals to control compromised PCs. The so-called "ZeuS" botnets that SecureWorks was researching that day are mainly used for financially related crime, such as stealing bank account information and executing unauthorized funds transfers. But Stewart says this is the first time he's come upon a check-fraud scheme that was linked to one.

"I came across this ZeuS sample that used this VPN tunnel, which was unusual," says Stewart, who is sharing his findings during a presentation at this week's Black Hat Conference. "They were accessing digital copies of check images, archives of check images, downloading massive amounts of these check images" after hacking into check-cashing services as well as corporate databases, which SecureWorks declines to name. Weak authentication and SQL injection vulnerabilities in warehoused check repositories were often a way for BigBoss to get in.

Ironically, some of the check images are said to have come from an anti-fraud network service for merchants who have a check-cashing service. Wherever it hit, BigBoss was after the check image and the ABA routing number, account number, company name and address and an image of the authorized signature for thousands of businesses.

All told, the BigBoss scam resulted in 3,285 fraudulent business checks in the last 12 months, totaling about $9 million in fake paper checks to try and fool banks into processing them through accounts held by legitimate businesses.

The fake checks were copied from digital check images that were stolen from a variety of databases and downloaded to be duplicated as paper checks with startling accuracy by BigBoss, a group using Russian as their shared language, with links to St. Petersburg, Russia, where they wanted money to be wired, whenever they could get someone to fall for the scheme.

So who were these fake business checks made out to? The payees were individuals that the shadowy Russian gang had recruited in the United States to act as financial agents for any number of numerous fake foreign firms that BigBoss made up. Some in the United States drafted into this scam clearly thought this was a legit job acting as a financial manager on behalf of a foreign firm, which sometimes passed itself off as Finnish.

Some of the BigBoss fronts were oddly spelled -- such as Succes Payment Ltd. or Global Busines Payments Inc.-- not to mention other names like InterWeb Exchange and Proteus Solutions. The payees whose names were put on these fake checks were the "money mules," who agreed to accept the task of depositing the checks they received in their own accounts, and wiring the amount through standard wire-transfer means to Russia.

From what SecureWorks can deduce, each week an average of about 20 of these "money mules" were sent paper checks through overnight delivery to deposit in their accounts and forward the money on to bank accounts in Russia through wire transfers. As a commission, they were allowed to keep 15% of the check's amount if they did that in one day. The cut dropped to 8% if the time slipped past the first day.

The BigBoss group had collected a pool of 2,884 names of people who had either responded to e-mail advertising a funds manger job, or been contacted after BigBoss after posting their resumes on job sites -- and BigBoss also seems to have hacked into employment databases in search of recruits.

It's not clear how many of the actual money mules knew what they were doing had pulled them into a vortex of crime and counterfeit checks. But Stewart says he did contact about a dozen of the money mules, even knocking on the doors of two of them to hear their stories firsthand.

"They knew immediately what I was talking about," says Stewart, who said the money mules frequently said they didn't understand at first what was happening when contacted by the BigBoss front organizations, but most soon figured it out.One of the money mules told SecureWorks that if a money mule didn't respond via e-mail with the wire information within a couple of days, the group does not give up -- they'll call the mule on the phone and ask about the money. In one instance, a representative of the group, a woman speaking English with a noticeable Russian accent, called and left several voice messages, urging the mule to provide an update on the status of the check.

The check limit was under $3,000 -- the usual amounts were between $2,700 to $2,900 -- probably due to the fact there are U.S. regulations pertaining to how banks treat checks over the $3,000 amount, Stewart says. But some banks did question the checks anyway, Stewart says, noting it's unknown how successful BigBoss has actually been.

SecureWorks has shared its findings with law enforcement in the United States and notes that one way for a business to keep check fraud of this type at bay is to use a banking service called "Postitive Pay" that puts tighter restrictions on adding new payees to business accounts.

While much of the BigBoss operation involves tricks that can be carried out over the Internet from a foreign country like Russia, there may be some elements in the United States supporting the operation since the check delivery was always dependent on overnight deliveries (using stolen credit card numbers) from U.S. locations.

When Stewart considers the type of technologies favored by BigBoss, he notes that encrypting VPN traffic is a way that can defeat signature-based IPS/IDS devices that might otherwise detect the malicious transfer of data. In the BigBoss example, "it became clear that the primary reason for the VPN tunnel was to allow the controller to proxy traffic back to the bots, bypassing any firewall or network address translations that would ordinarily block arbitrary incoming connections from the Internet," Stewart says. By joining the botnet as just another "infected" PC, SecureWorks says its research arm was able to uncover a lot of information about the overall purpose over three months.

Read more about wide area network in Network World's Wide Area Network section.

This story, "Massive check-fraud botnet operation tied to Russia" was originally published by Network World.

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