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August 19, 2010

Is Advertising Fraud Funding Terrorism?

fraud

For those who aren’t aware of it, I have a background in Cybercrime and Law Enforcement – before even working in interactive advertising, there was a time where I was devoted to catching cybercriminals and kiddie porn traffickers.

There is still a part of me that always wants to catch the bad guy and put him in jail – and have even while working in this Industry been involved in catching fraudsters and criminals, and have put a few of them back in jail. However, it’s come to my attention that there might be something even more devious happening in the industry: the very real possibility that interactive advertising fraud is helping to fund terrorism.

During my time running a display ad network, there was a constant influx of people submitting websites to our reviewers that looked like legit websites. They would often copy websites, change a few things – many times it was obvious, sometimes it was pretty damn convincing. Using proxy servers, they’d apply using a US IP address and real postal address.

For those who weren’t trained in noticing “little problems” in the websites, it would easily seem that they were actually showing advertising on a legit, highly trafficked website. After a month or so, when the site was making money, they would often then change the pay information on the website to another address, or request a wire to an offshore bank account – hoping that some companies would be too busy to notice or even think twice about it. More than once during my time, the new address was in China, or worse in a country with extensive terrorist ties, including Pakistan, Libya or Syria. Every major network, whether it is display or affiliate based has similar stories.

There is already significant information that terrorists use the internet for much of their activities, including to recruit, organize and learn. Those “in the know” in Cybercrime can tell you that there are already well known links to terrorism and botnets.

The American Federation of Scientists, in a report prepared for Congress, points out that current cybercrime rings have ties to both drug dealers and terrorists. The FBI has long acknowledged that terrorists are using botnets in order to attempt to disrupt the infrastructure of the United States.

Botnets have been traced back to the middle-east several times, their complexity growing yearly. The ties to organized crime are well documented and since many of these criminals have no qualms about who they work with, it is easy for them to provide support and training for terrorist groups. Different types of wire fraud, credit card fraud, phishing and other scam mechanisms have been tracked back to terrorists over and over again. Similarly, these methods have been tracked to interactive advertising fraud – which often provides a “legit” method of cash flow, through paid advertising.

Interactive advertising is always vulnerable to fraud. Without standard checks and balances, many companies rely on their own knowledge (or lack thereof) and poorly trained staff who haven’t the foggiest idea of how to detect fraud.

Companies that provide turnkey products for anyone to create a banner network or affiliate program allow almost anyone with a computer and a few thousand dollars the ability to make a new company. With the complexity of the schemes, even those with basic training can often be fooled by proxy-ip situations that make it look like real people are viewing advertising, clicking on the ads and often even buying products.

Anyone who has run a network knows that fraudsters are often applying to networks at an alarming rate, getting hundreds of applications from people that don’t pan out to be real. Since it costs almost nothing to run these schemes and defraud, even if a small percentage of these scams are not caught, hundreds of thousands of dollars a week can be sent to scammers…and into the hands of possible terrorists.

There is another problem here that makes this even worse. As we all know, there are some companies in our industry that while they themselves might not be committing fraud (or claim they are not), they are very much lenient on the type of fraud that occurs under their watch.

For years I sent notices to various ad networks showing them extreme examples of fraud occurring in their network, and many of them did not seem to care or take notice. For them, often small businesses, turning off a publisher account that makes them thousands of dollars a day seems like a bad idea, so they ignore the fraud. When fraud occurs, they take the attitude “if no one complains too much, especially the advertiser” then why do anything about it?

I have argued over and over again that they are just as complicit in the fraud. I now have a much greater case against them – in cases like this, where they don’t take action, they are helping to fund terrorist cells and groups.

If we can’t “prove” that the money is directly going to terrorism or turn a blind eye to the possibility, it’s only because much of the industry refuses to connect the dots. If checks are being cut and wires being sent, based on fraudulent activities, to countries that have ties to terrorism, then it’s very likely the money is making its way into the hands of terrorist organizations.

It is not a huge leap to reach the conclusion that some part of online advertising in the US is funding terrorism. If you think that the money is going into those countries to fund after-school daycare programs, or to help feed the poor, you’d be sadly mistaken.

Terrorist cells in those countries are engaged in many types of crimes, ranging from drug growing to arms dealing, all to fund their desire to destroy the “western world.”

We have a responsibility as an industry not only to prevent fraud for the industry, but for the greater good. Fraud of this kind doesn’t just hurt your clients, and eventually your business, but could be hurting many people in a real, tangible way. I even had a friend, who is a recognized expert in Affiliate marketing tell me that he knows of Affiliate networks that send checks to Iran, Syria, Pakistan knowing “full well what they are tied to.”

I urge the industry as a whole to look at these issues and examine them. I urge the IAB and the DMA to address the overwhelming issues of fraud in our industry and the need for the industry to make changes that prevent not only the fraud, but prevent the money being used to fund terrorism.

Maybe a decade ago, such thoughts would be considered the rants of a crazy guy. Now, with all we have learned, and with the giant leaps in technology and the well-documented connections of cybercriminals to terrorist organizations, we need to open our eyes… if only a little bit.


In perhaps the fastest growing industry ever, one person has made a name for himself as a leader and innovator. Pace Lattin, the publisher of the top newsletters in new media and online advertising, is one of the inventors of many of the technologies and methods that have become standards in the industry. He has been called many things, including a rabble-rouser, a guru, an innovator and a watchdog — but one thing stays the same: he is one of the most interesting leaders and commentators in the online advertising industry. Marketing Sherpa, a leading marketing research publication called him the most influential journalist in online media for a reason. IndustryPace.com

14 Responses to “Is Advertising Fraud Funding Terrorism?

    avatar Joe H says:

    It seems to me this problem surrounds the whole pay per click industry, it is well known that pay per click is full of fraud, i meen people clicking other competitor ads, this opens the door to all types of fraud. Maybe ti is time to do away with pay per click and go to real advertising!

    avatar Tom Shivers says:

    Had to retweet this one!

    If money is the dominating persuader (obviously moral responsibility isn’t), then terrorists will have to be defeated with the same tactic.

    avatar JV says:

    “I urge the IAB and the DMA to address the overwhelming issues of fraud in our industry and the need for the industry to make changes that prevent not only the fraud, but prevent the money being used to fund terrorism. Maybe a decade ago, such thoughts would be considered the rants of a crazy guy.”

    No, not a decade ago.

    avatar Tom Grimshaw says:

    Well said Pace! Keep up the good work. We change the world for the better, one person at a time.

    avatar Las Hiding says:

    Sir, with all due respect to your work experience and apperent knowledge of the topic I cannot aggree with you. One very simple reason: This article puts, as happens often with statements arising from fear and paranoia, every member of a group in the same box. Yes, we need to investigate crime. But that crime only. Once a crime occurs there must be someone to investigate it and put the croonies, once found guilty into prison. But put in simple words all what you were trying to say in your article, or at least what I understood from it is similar to medieval accusations when someone coming form a certain background or belonging to certain groups are accused of anything that comes to mind. This is paranoia, Sir, nothing else. Yes, I am also afraid of terrorism, I would also like to put all criminals into prison but I would never ever say that any company doing business in Pakistan or Syria is automatically linked to terrorism just because they have a turnover of several milion dollars. I do belive that there are legit businesses in those countries that are in no way linked to terrorism and I would not mind doing business with them until I am proven wrong. Making accusations is no way my job. The US government pays investigators, like yourself (and I have no doubts you were very successful) to look out for links between companies and terorist organizations. But until proven guilty everyone (and not only those living in US or the western world) is innocent. One more note: yes if doing business with Syria is not legal for US companies then doing business with them is wrong and unlawful. So, let’s obey the law and stop putting people in boxes.

    avatar robert says:

    All this cyber terrorism and botnet activity should make it obvious that we have to make using the Windows operating system illegal. We all know how suseptible they are to hacking and viruses. Millions of Windows operated PCs have been pirated for use by botnets. There should be and end to all that,… make operating a Windows machine illegal.

    Personally, I switched to Linux (Ubuntu) partly for the above reasons but also because Bill Gates gave China the access to the kernel that he has kept from his American “brothers”. To a company that prefers treason and profits over their neighbor I say “good riddens”. The fact that Windows is so vulnerable to exploitation is just icing on the cake.

    avatar Alec Ward says:

    “More than once during my time, the new address was in China, or worse in a country with extensive terrorist ties, including Pakistan, Libya or Syria.”

    Er, excuse me, you haven’t included the country with the greatest terrorist network of all which has been involved in covert operations to overthrow countless democratically elected governments throughout the world and even as we write supports by word and dollar another country engaged in systematic assassinations of it’s “enemies”.

    Who is that country y’all might ask? Yes, you got it, the good ole US of A, so lets not get involved in blatant ‘we are all whiter than white’ politicking when writing about the Internet.

    avatar Jim W says:

    Good post, for so many years we have seen that the terrorist groups have been using the illegal drug trade to fund their activities. They will be where ever the money is.

    A article on botnets, how they work and how to recognize them would be good.

    avatar Sandra says:

    Thank you, Pace, for this informative article on cybercrime and its link to international terorism.

    avatar Kalena says:

    JV and Alec – one word = THANK YOU!

    avatar Kalena says:

    Well technically that’s two words, but you know what I mean.

    avatar -MA- says:

    So anyone who wants to make money online in Iran, Syria, Afghanistan etc is now a terrorist?

    Blinded by your own ignorance and hate. Living in constant fear from threats your government makes up to control you.

    Brilliant comment by Alec Ward.

    avatar forex robot says:

    Keep posting stuff like this i really like it

    avatar Alec Ward says:

    Just to substantiate my first comment: http://www.youtube.com/watch?v=kjnpHZwhtZc&NR=1

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