What is IPTV?
Internet Protocol Television (IPTV) refers to the delivery of television channels through internet protocol (IP) networks rather than through more traditional means, such as cable or satellite. While there are legitimate offerings of IPTV through established television and communications companies, most online websites advertising IPTV are not working in a legitimate or legal manner.
On the surface, the use of illicit IPTV providers may not seem like a big deal. After all, who does it hurt? It appears to affect only the wallets of wealthy entertainment industry and streaming services garnering billions in payments from customers and subscribers.
However, the ease of subscribing to watch your favorite show through IPTV may actually have more serious consequences. This is because many illegitimate IPTV sellers have been tied to organized crime enterprises, ranging from fraud and money laundering networks to human trafficking and arms dealing.
What makes IPTV illegal?
Most online merchants selling IPTV subscriptions advertise themselves as carrying “thousands of channels” from around the world for a low monthly price. These services engage in unauthorized broadcasting of hundreds— if not thousands —of rights holders.
For example, in its latest Review of Notorious Markets for Counterfeiting and Piracy, the US Trade Representative identified the “BestBuyIPTV” service as offering 10,000 unauthorized channels from 38 countries, hosting a whopping 900,000 users and 12,000 resellers globally. As the report notes, the site is likely based in Vietnam, however its use of reverse proxy services masks the location of its hosting servers.
The unauthorized redistribution of protected broadcasts involved in IPTV amounts to a violation of intellectual property and therefore can be considered Intellectual Property Rights Infringement.
On a broader level, revenues generated from illegal IPTV subscriptions carry a high risk of flowing into the wallets of criminal organizations. With every purchase of an IPTV subscription, the reseller handles the payment and customer service, as the transnational criminal organizations run “decoders” responsible for the streaming infrastructure. Thus, operators of illicit IPTV websites act as money mules for organized crime networks.
How to spot a merchant selling IPTV
Merchants selling illicit IPTV often use certain language and images advertising their content, such as:
Payment environment for IPTV
Given the illegal nature and unauthorized redistribution of copyrighted material, it is no surprise that transaction laundering is common amongst illegitimate IPTV providers. These IPTV sellers employ different laundering methods to more discreetly sell their subscriptions.
The main models for IPTV include:
- Utilizing resellers as the middleman, which puts a layer of anonymity between the specific seller and the actual IPTV provider.
- Use of redirect links at the time of payment to websites selling unrelated items such as web hosting or anti-virus software. Subscriptions are purchased through codewords which correspond to the unrelated items sold on the site to which consumers are redirected.
- Use of Mail or Telephone Order (MOTO) or offline payment methods.
EverC investigates transaction laundering through IPTV
Recently, our analysts investigated a website selling IPTV subscriptions and found that all the above mentioned models were used in a highly likely case of transaction laundering.
- Step 1: To determine the legitimacy of the business, we attempted to purchase an IPTV subscription and noticed that our web browser was redirected to an alternate website.
- Step 2: After submitting an order, we received a notification stating that payment instructions will be sent via e-mail. An invoice from the IPTV website was received the following day.
- Step 3: Attempting to proceed with the transaction, we were once again redirected to a payment facilitator listing all major card schemes.
- Step 4: When we ran the test transaction, we were able to pinpoint details associated with merchant and identified a suspected front website by matching information recorded on the checkout page.
- Our assessment: It is very likely that the front site is laundering transactions for the IPTV seller.
Risks of payment facilitation for illicit IPTV
There are 3 key risks that payment providers should be aware of when considering an IPTV merchant.
Given that illicit IPTV sites provide thousands of channels from across the world at prices far lower than licensed providers could offer, it is almost guaranteed that any merchant selling such a package is rebroadcasting without proper authorization or copyright permissions. Major card brands require payment providers to have processes in places to effectively address and respond to sellers marketing IP-infringing goods. Failure to comply risks fines, chargebacks, reputational damage, or disqualification from card brand access.
Although not necessarily illegal in and of itself, many IPTV providers offer adult content packages. In this context, all non-face-to-face adult transactions and services are required by major card brands to be classified as Merchant Category Code (MCC) 5967 for “Direct Marketing – Inbound Telemarketing Merchants” (VISA & Mastercard). This high-risk MCC often necessitates additional due diligence and reporting requirements to ensure that the purchase of adult content or services can be properly tracked and does not violate card brand rules.
As mentioned previously, transaction laundering is a common method for illegitimate IPTV providers to earn proceeds. Authorities and card brands have expanded their detection capabilities as transaction laundering rings repeatedly exploit the payments ecosystem to run their insidious transactions. Per card brand rules, payment providers must maintain controls to detect and block transaction laundering activity, primarily through robust underwriting and ongoing monitoring protocols.
Be on the lookout for illegitimate IPTV sellers
Back to our investigation from earlier, we also determined that the front site for the illicit IPTV provider sought to process payments through an EverC client.
Here’s how we used this information to protect our clients:
- An analysis and recommendations for best practices for handling this type of issue were provided to the client.
- The information collected on the suspected transaction launderer was added to our internal database.
- If any of our existing or future clients onboard this merchant or any known associates, we will be able to immediately alert them to the potential problem and help them avoid this illicit activity.
To help our customers mitigate the risk associated with IPTV providers, our AI-driven technology assists in the detection of merchants involved in IPTV-related activity. For institutions operating in the payments system, this reduces their overall portfolio risk and possible repercussions from major card schemes.
Talk to us today and take a proactive approach to monitoring the IPTV landscape. As a leading fintech company operating in close alignment with card schemes, we are committed to interrupting payment activity related to some of the most heinous sorts of criminal activity.
For more information on how EverC can reduce risk in your merchant portfolio, contact us.