The Department of Justice arrested 20 people in the US Thursday in connection with an international phone scam — the one I wrote about last week, where an Indian call center worker would call Americans pretending to be the IRS. They would demand money, and threaten immediate jail time if the victim didn’t pay.
I could glean some details of how this scam worked by documenting my interaction with the callers. But the indictment reveals several insights into how these types of operations work. (The feds said those arrested in India are part of a different, but similar, scheme than the ones they busted here.)
The feds had been investigating this widespread scam for years
This scam was extremely widespread. IRS Inspector General Russell George said his department heard from about 2 million people who said they received these calls — about 10,000 of whom admitted to paying the scammers, to a tune of about $50 million. And that’s just the people who contacted them.
And that’s not the only strain it put on government. The investigation involved several agencies and spanned three years, according to the Department of Justice. The feds admitted that several of those arrested could be replaced in the operation. But they see it very much as warning shot, even saying they plan to seek the extradition of the alleged scammers in India. In fact, some of those indicted are equity holders of the operation in India.
The most interesting thing might be the anatomy of the operation
The indictment also shows us who does what, and how the money travels. Below is a diagram that shows how this scam works, based on what’s in the indictment:
There are two levels of victims
The people who are scammed out of money are certainly the primary victims. The scammers buy personally identifiable data and call lists and pass them on to call centers.
But there’s a second layer of victims. US based scammers steal identities of Americans in order to register prepaid debit cards. Those debit cards are eventually where the money ends up.
Some of the money ends up in underground banks
A “hawala” is an underground banking system. As my colleague Zack Crockett put it, hawalas are the “original Bitcoin,” and you can read more about how they work here. People not involved with this scam use hawalas to borrow and send money.
Since the money exists in the form of prepaid debit card in the US, people in India can send money to US recipients through the hawalas without the money actually moving anywhere.
But as the diagram shows, several people in the process skim money off the top.
The big question: Will anyone get their money back?
The answer is probably no, because their system seems to quickly funnel money out of the scam.
Assistant Attorney General Leslie R. Caldwell said at a press conference, “The sad thing about these scams is: Often, once the money is paid, it is gone. We will do our best to get as much as we can, but that’s a very difficult thing because of the way the scam works.”