Internet fraud: follow the money
If you can't keep them out, can you at least make them pay?
While the internet has provided inumerable benefits, it has also been the field for new types of fraud and rights infringements. If the financing used by people who illegally upload or otherwise exploit content were cut off, might it be possible to combat the spread of their activities?
That’s the proposition examined in a position paper made available towards the end of last year by Cédric Manara, professor of law at EDHEC Business School. Attacking the Money Supply to Fight Against Online Illegal Content? examines the extent to which the collaboration of intermediaries has put an end to illegal activity on the internet. This study looks at two main types of revenue made from online activity – money earned directly and that earned through the monetisation (through advertising, for example) of a site – and provides a framework “for implementing a proposal to cut off the lifeline that allows counterfeiters to flourish”.
The aim of the study is to spark debate about preventive mechanisms targeting financial flows; during November 2012 it was presented to and discussed by representatives of Union des Fabricants, the French Anti-Counterfeiting Association, Google, PayPal and the Association des Services Internet Communautaires, the French association of internet service providers.
Although it is largely concerned with the protection of intellectual property, the mechanisms discussed in the paper will be of interest to anyone with an interest in how money flows around the internet, both legally and illegally, and the role of banks and payment mechanisms in that flow.
“The internet has provided economic growth, new forms of social exchange and political revolution, it has also seen the rise of new types of fraud and rights infringements that sometimes share the characteristics of the internet itself: they can be global, large-scale, widely distributed, etc. The increase in specifically internet based offences has sometimes led to the creation of internet-based mechanisms designed to eliminate them, such as the dispute-resolution mechanism invented to combat the fraudulent registration of domain names, or the notice and take down approach to eliminating content that infringes a right,” the paper notes.
The first of these mechanisms, the Uniform Dispute Resolution Policy, arose from the need to attack those who register domain names that are identical or close to trademarks at a low cost, and who can easily avoid legal action by hiding or modifying their identity and by choosing their domicile in a friendly jurisdiction.
The paper looks at different types of fraudulent activities, and some example of how they have been addressed by institutions and authorities.
“It would appear possible to implement a mechanism that targets the payment of revenue associated with alleged illegal activity, but such a mechanism must be accompanied by certain guarantees if we are to avoid abuses or unwanted secondary effects,” it concludes, but adds that “The idea that such a mechanism can be put in place presupposes that it is possible to identify payments that benefit fraudulent activities and that appropriate action can be taken.”
According to the author, people “who struggle against online rights infringements – in particular companies with intellectual property rights – often face difficulties in identifying the persons behind the infringement. Even if they achieve this, they may face a second obstacle in seeking quick sanctions against those responsible, depending on the speed of the relevant judicial procedures and jurisdiction. Identifying the fraudsters themselves is possible providing they communicate their identity, but this of course is understandably rare”.
The weak point is that fraudsters who seek to make revenue directly from their online activities hide their identity on their website, but must provide information that will allow them to receive money on an account opened by them with an electronic payment service provider.
Even so, “while it is therefore easy for a third party to determine the destination of a payment made to a fraudster, this does not allow them to determine the identity of the payment beneficiary” without recourse to injunction and other lengthy (and costly) legal proceedings. “The time this takes would allow a well-organised fraudster to switch intermediaries or change his account to avoid using the same account during this period and thereby avoid being traced, not to mention the possibility that the identity used to open the account in the first place was false,” says the paper. “The time required for action to be taken actually allows for the preservation of the illegal activity and acts against those looking to sanction the violation of their rights; even if the data for identification purposes has been obtained, one cannot be certain of correctly identifying the individual concerned. It is clear from the mechanisms for the circulation of payments that beneficiaries cannot immediately be identified.”
Another possibility, based on the example of advertising-based fraud on websites would be to introduce an authority responsible for inspecting the disputed website and who would order the intermediary to suspend all payments benefiting the publisher of the website deemed by it to be irregular. “Such a mechanism would make it possible to delegate responsibility for determining the legality of a website to a third party with the legal authority to do so. However, this may have an impact on the need for a quick response to any claim that rights have been clearly violated, thus heightening the risk of a ‘cat and mouse game’ in which the fraudster repeatedly changes the payment service provider through which he operates.”
The creation of this new mechanism would compel intermediaries to review the website of any publisher whose payments are subject to suspension. If an intermediary carries out an analysis on the basis of an illegal advertisement brought to his attention, this analysis relates to the ad in question; but in principle intermediaries would also examine any content that has been indicated (for example by an advertiser) as illegal. The fact that intermediaries are committed not to enter into partnership with providers of online space on sites with illegal content means that they would be forced to remove such ads and block or close the account of the provider in question.
In practice the consequence of this is the outcome sought by the proposed mechanism: the suspension of the account leads to the suspension of payments, without any need to create a specific system for the sequestration of these payments. Self regulation appears to be a better tool than a legislative change (too complex to be designed) to implement the suggested measures. This is in line with the e-commerce directive of June 8, 2000 that encourages the drawing up of codes of conduct. To enhance collaboration, a Memorandum of Understanding could be drafted, following the example of the one already signed in the EU between rights holders and e-commerce platforms, it concludes.
