Crooks with books: Laundering money as an “author” (part 1)

Createspace enables independent authors to publish their works and to distribute them through Amazon.

Amazon takes care of the printing, shipping, and payments. The author receives a monthly royalty payment. I used Createspace to publish Bankers are people, too.

Unfortunately, criminals have also discovered that they can use the platform for money laundering.

Brian Krebs explains how it works on his blog, KrebsonSecurity. Someone publishes a bogus book and sets an extremely high price for it, e.g. $555. They use stolen credit cards to buy the book. Amazon pays the “author” about 60% of the retail price in royalties. This money looks like a legit income. The stolen money has been laundered.

In the story told by Brian Krebs, the personal information of a real author was used to set up the book on Createspace. Amazon deposited the royalties ($24,000) in a bank account controlled by the criminals. I guess they used a money mule to remain anonymous. By the time the real author becomes aware that his name has been used, the fraudsters have cashed out the bank account. The trail of investigators ends with the money mule, who probably doesn’t know the identity of the organizers.

However, there are a couple of things I don’t understand about this story.

First of all, why would the criminals use the name and data of a real author? At some point, that person receives a tax form from Createspace, which reveals the fraud. To me, it seems much easier to set up the mule as the author of your fake book.

Secondly, a commenter on Krebs’ blog thinks that Amazon is a good cashout for cyber criminals because the money goes directly into a bank account. This in contrast to cashing out bitcoins obtained through illegal activities, because those bitcoins need to be converted into fiat money on bitcoin exchanges. But this makes little sense to me for two reasons:

  1. Amazon pays royalties at the end of the next month after a book was sold. This long delay does’t sound much better than the waiting time for cashing out through a bitcoin exchange.
  2. The bank account in which the royalties are paid is owned by someone who is not the author listed on Amazon (stolen identity, remember). So an IRS investigation will find that the royalties are not legitimate income of the account holder. The money is not truly laundered.

The ‘best’ money laundering converts an illegal sum of money (e.g. cash earned by dealing drugs) into money in a bank account. It should look like the money has been obtained legally (e.g. revenue from a carwash). As far as I can tell, the fraudsters in Brian Krebs’ post aren’t very good at laundering money.

In a follow-up post, I’ll describe a possible way to launder money ‘properly’ using Amazon Createspace. You obviously should NOT do that!!!


While you’re here: this is a legitimate book on Amazon. Check it out 🙂

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