[CamperBob2]

Luckily, Paypal is an anti-fraud AI company which also happens to run credit cards sometimes

The thing is, it shouldn't take much in the way of "AI" to recognize that a company that has already been doing business for several months or even years is probably not going to wake up one morning and start defrauding people. Criminals are lazy, and running a business is a lot of work. It would take about 30 seconds' worth of review time on the part of a moderately low-paid staffer at PayPal to avoid most of these PayPal Media Debacle of the Week stories.

I simply cannot believe that it's that hard to distinguish between a fraudulent user and a real one, given the presence of a significant transaction history. New accounts opened by people with no discernible history? Yes, they should freeze/ban/lock first and ask questions later. Accounts that are clearly used as part of a business? Give the customer the benefit of the doubt, or at least a 5-minute phone call.

[ig1]

You're wrong. A common type of fraud on ebay is for an account to build up a reputation buying/selling low cost items (or high cost items between a group of criminal partners) before using the account to scam on high price items.

Criminals are perfectly willing to put time and effort to create fake accounts or just buy stolen accounts.

[CamperBob2]

To accept your statement that I'm "wrong," I'd need to see some examples of false business fronts that were not obviously bogus from day 1.

On eBay, yes, it was pretty easy to play the "Sell a bunch of stuff for 99 cents and then pull the big scam" game. But none of the widely-publicized cases where PayPal has basically attempted to wreck the lives of startup founders fall into that pattern. These people have all had independent web sites selling actual products, and/or a background in other ventures that could be checked if PayPal were to spend 5 minutes doing due diligence on them.

[mryan]

It's a relatively common thing for criminals to do, and is known as a 'long firm': http://en.wikipedia.org/wiki/Long_firm

1) Run a legit business for a few months

2) Build up credit history with suppliers

3) After a while, buy a huge amount of stock on credit

4) Sell all of the stock for cash at massive discounts

5) Disappear with the cash, leaving a pile of unpaid debt in your wake

[CamperBob2]

Sure. Someone does that when they are looking to steal hundreds of thousands of dollars, or millions of dollars.

Someone looking to put one over on PayPal is not going to do all that crap. Sorry. I need to hear some actual examples if I'm going to change my mind.

[rmc]

Selection bias. You do not see all the times paypal has successfully frozen an actual criminal organisation (i have no idea the numbers). If paypal's accuracy was 99%, then there would be 1 innocent startup squashed for every 99 successful defections. Do you think paypal need 100% accuracy?

[CamperBob2]

At the end of the day, letting criminals dictate how you do business with legitimate customers is not OK.

Simple due diligence will either eliminate the genuine criminals, or it will not. If five minutes' worth of due diligence by humans fails, then so will any conceivable AI algorithm.

[rmc]

Some criminals are after a quick buck. Some criminal organisations (eg Mafia) are a lot of work and go on for years. It's illogical to then assuming "There is lots of activity, ergo they must not be criminals".