eCommerce Fraud involves the use of stolen or counterfeit payment cards to make direct purchases or cash withdrawals. It also includes the use of stolen card data to buy items over the phone or via the internet. Fraud perpetrators will target retailers that sell goods and services online using stolen credit card details. Online business appeals to those fraud perpetrators, because there is no physical contact with the business or the legitimate cardholder. Businesses should be fully aware of the risks otherwise they are more likely to be targeted.

1. Classic fraud

Classic fraud is generally committed by unsophisticated fraud perpetrators. Stolen credit card credentials are purchased on the dark web, and goods are sent to re-shipper in an attempt to retrieve the stolen merchandise. Often, internet proxies are used to mask the international IP where a majority of this type of fraud originates.

2. Triangulation fraud.

Triangulation fraud involves three parties — the fraud perpetrator, the unsuspecting legitimate shopper and the ecommerce store. An online front-store is created by the scammer, that offers high-demand goods at extremely low prices. The store collects payment for the goods it sells. The fraud perpetrator then uses other stolen credit card data and the names collected in orders on his online front-store to purchase goods from a legitimate website and ships them to the customers that purchased on his new online front-store. Triangulation fraud can usually be identified by the products that are targeted as well as some investigative work by locating the unsuspecting shopper who can identify the front-store where the stolen goods were purchased.

3. Interception fraud.

Fraud perpetrators will create orders where the billing and shipping match the address linked to the card. Their goal is to intercept the package in any of the following ways: a) Asking a customer service rep to change the address on the order before shipment; b) Contacting the shipper to reroute the package to an address where they can retrieve the stolen goods; or c) In cases where the scammer lives in close proximity to the cardholder’s billing address, physically wait near the address for the delivery to arrive and offer to sign for the package as the homeowner is not available.

4. Card testing fraud.

This is the practice of testing the validity of a credit card number, with plans to use valid credentials at another website to commit fraud. Fraud perpetrators target websites that reveal a different response for each type of decline. For example, when a card is declined due to an incorrect expiration date, a different response is given, so fraud perpetrators know they just need to find the expiration date. This is generally done by bots, and transaction attempts happen quickly, in rapid succession. The data on the orders will often be identical, either all the data or just a subset of data — like the shipping address.

5. Account takeover fraud.

This occurs when fraud perpetrators get hold of a legitimate customer’s login credentials and take advantage of stored credit cards to purchase goods. An update on the shipping address will usually occur shortly before purchase so the fraudster can retrieve the stolen goods.

6. Fraud via identity theft.

In this case, the fraud perpetrator assumes another person’s identity, creates credit cards in the victim’s name and goes on a shopping spree. Fraud via identity theft is increasing rapidly as the number and scope of data breaches increase. It is also the most difficult to identify as the fraud perpetrators behind identity theft are quite sophisticated.

7. Friendly fraud, also called chargeback fraud.

An online shopper will make a purchase, then issue a chargeback, claiming their card was stolen. The chargeback usually occurs after the goods are delivered. This type of fraud is traditionally not carried out by hard-core scammers but rather by consumers who are clearly aware of what they are doing. Chargeback fraud is difficult to detect but can often be won via chargeback representing.

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