Regulators under siege: how data and privacy laws (GDPR, CDR) have unwittingly complicated the fight against carding

[Professor]

Prologue: The Privacy and Security Paradox​

The introduction of sweeping regulatory frameworks such as the General Data Protection Regulation (GDPR) in the EU and the Consumer Data Right (CDR) in Australia has been a triumph for citizens' digital rights. These laws are intended to restore control over their personal information to individuals, curbing corporate overreach. However, by 2027, an unexpected and troubling side effect has emerged: sophisticated carding syndicates have learned to use strict privacy regulations as a shield and tool, paralyzing investigations and complicating inter-company cooperation to combat fraud. Regulators, seeking to protect citizens from Big Tech, have unwittingly created a legal vacuum in which new, more sophisticated cybercrime has flourished.

Part 1: Legal Barriers: Why the "Right to Be Forgotten" Became the Right to Conceal​

1. Investigation Lockdown:

• Mechanism: At the request of a user (which could be the carder themselves or a "mule" compromised by them), a bank or service is obligated to promptly provide all data collected about them (the right to access) and, critically, delete it upon request for the "right to be forgotten" (the right to delete).
• Abuse: Carders use this as a tactic for the rapid destruction of evidence. After committing a fraudulent transaction, they or their "mules" request the financial institution to delete all transaction data, IP addresses, and session history. The bank, threatened with millions of euros in fines, is forced to comply, destroying the digital trail needed for investigation and connection to other incidents.

2. Difficulty in information exchange between organizations:

• Mechanism: GDPR and similar laws strictly restrict the transfer of personal data to third parties without the explicit consent of the subject.
• Abuse: This paralyzes collective intelligence. While banks could previously quickly share data on suspicious accounts, IP addresses, and fraud patterns through associations and informal channels, lawyers now block such actions. A carder banned from one bank can easily register at another because their information wasn't shared. Privacy laws fragment defenders, while criminals operate through global, well-coordinated networks.

3. Difficulty of identification and the “anonymous drop syndrome”:

• Mechanism: Data minimization and storage limitation principles prevent the creation of long-term, detailed risk profiles.
• Abuse: Carders actively use networks of "disposable mules," whose data quickly "evaporates" from systems after an attack. Even if a mule is caught, it is often impossible to link it to previous incidents or the perpetrator — the logs have already been deleted in accordance with retention policies designed to comply with GDPR.

Part 2: Technical Traps: Encryption and Pseudonymization as Enemies of Investigation​

1. End-to-end encryption (E2EE) as a sacred cow:

• Regulators, protecting the privacy of correspondence, have effectively mandated messaging apps and platforms to implement E2EE. This has been a boon for carding syndicates: all communications, attack coordination, and login transfers take place in environments (Telegram Secret Chats, specialized E2EE forums) that are technically impossible for investigators to access without a decryption key, which even the platforms themselves lack.

2. Pseudonymization vs. Anonymization:

• Legislation encourages the use of pseudonymized data (where an identifier is replaced with a key). However, in dynamic carding systems, where identities are "disposable," a pseudonym not linked to a real person has no forensic value. Criminals create thousands of such pseudonyms, and privacy laws prevent them from being linked into a single chain, requiring a separate, almost impossible, legal justification for de-pseudonymization for each individual "key."

Part 3: Burden of Proof Shifted to the Victim​

1. Carder as a “data subject” with rights:

• Legally, a carder who uses stolen credentials to access an account formally also becomes a "data subject" in the bank's system. When the security service attempts to analyze their actions, their "rights" (to access their activity logs and to correct "incorrect" data about themselves) can be used to sabotage the investigation through endless requests and complaints to the regulator.

2. The difficulty of legally collecting digital evidence:

• To collect evidence that meets court admissibility standards (for example, proof of ownership of a specific wallet or account), investigators must now go through complex procedures agreed upon with data protection commissioners to ensure the rights of the "suspected data subject" are not violated. This gives carders precious time to eliminate traces and transfer funds.

Part 4: The Birth of Regulatory-Compliant Fraud​

The most advanced syndicates have made compliance part of their business model.

• Using "legal mules": Hiring individuals who knowingly and legally provide their data (passports, biometrics) to register accounts, and then, using their right to erase their data, erase their traces. They are difficult to prosecute, as they have not technically violated anything — they are simply exercising their rights under the GDPR.
• Attacks via legitimate Open Banking APIs (under CDR): Using stolen credentials, carders gain access not through hacking, but through the bank's legitimate API, which is required by regulation for data exchange. The security system detects a "legitimate" request from a "client" exercising their right to access data and does not block it. The fraudster gains a complete financial picture of the victim for a targeted attack.
• "Guarantee" letters to regulators: In response to account blocking, carders, on behalf of the "infringed data subject," file complaints with the Data Protection Authority (DPA). The bank is forced to expend resources on lengthy correspondence with the regulator, proving fraud, which is often less expensive than a potential fine for GDPR violation.

Part 5: In Search of Balance: Paths to Regulatory Adaptation​

Breaking the siege requires not the abolition of privacy laws, but their evolution and smarter enforcement.

1. "Security exceptions" and "investigative rights": Clear but controlled exceptions are needed in legislation for cybercrime and fraud investigations, allowing data to be stored and exchanged within special secure protocols between authorized financial institutions and law enforcement agencies.
2. Privacy-Enhancing Technologies (PETs) for security: Implementation of advanced methods such as zero-knowledge proofs, federated machine learning, and homomorphic encryption. This will allow banks to jointly train anti-fraud models on data without disclosing the data itself and check for suspicious patterns without compromising the privacy of legitimate customers.
3. Creating trusted data brokers: Developing independent, highly regulated cyber intelligence centers that aggregate anonymized fraud signals (data hashes, behavior patterns, digital fingerprints) and distribute alerts to market participants without sharing personal data.
4. Reconsidering the 'right to erasure' principle: Perhaps a grace period for the right to erasure should be introduced for data involved in the investigation of security incidents, similar to the way in which physical assets are seized.

Epilogue: A New Paradigm: Security Through Privacy, Not Despite It​

The paradox that regulators find themselves in is a symptom of a deeper problem: the archaic dichotomy between privacy and security. In the digital age, these concepts are not mutually exclusive, but interdependent. True security is impossible without respect for privacy, and genuine privacy will not survive in the chaos where carding reigns unchecked.

The challenge for the coming years is to develop a third wave of regulations that takes this symbiosis into account. Regulators, banks, and tech companies will need to create complex, technologically savvy systems that, like an immune system, can detect and neutralize threats without compromising the integrity of the "cells" — the privacy of individual citizens.

Until this balance is achieved, carding syndicates will continue to exploit the divide between the two sacred cows of the digital age — security and privacy — to their advantage. The siege of regulators will continue, and its outcome will determine who ultimately controls the digital space: the defenders of the law or those who have masterfully learned to use its letter against its spirit.