Triangulation fraud

Online transactions via tap, swipe, and click have enabled fast shopping, but they’ve also become a playground for online fraudsters eager to exploit any oversight. Triangulation fraud is one such intricate method used by fraudsters, which can cause significant financial damage to the e-commerce industry. 

A report predicts that the scale of these frauds will surpass a staggering $10 billion in the U.S. alone by 2024, a figure that should not be taken lightly. 

This post examines how triangulation frauds work, their impact on online retailers, and how to protect your business from triangular scams.  

Understanding Triangulation Fraud and How It Works 

Steps of Triangulation Fraud

  • Establishment of a Fake Storefront: The scammer sets up an online storefront. This could be their own website or a listing on a marketplace like eBay or Amazon, pretending to be a legitimate seller.
  • Product Listing and Customer Luring: The fraudster lists various products on their storefront at attractive prices to entice customers.
  • Order Placement and Fulfillment: When a customer places an order on the fraudulent storefront, the scammer uses stolen credit card details to purchase the same item from a legitimate seller. The legitimate seller ships the item directly to the customer’s address.
  • Consequences and Chargebacks: The customer receives the item but is unaware of the fraudulent nature of the transaction. The real cardholder, whose information was stolen, notices the unauthorized charge and files a chargeback against the legitimate seller. As a result, the merchant is forced to refund the amount to the cardholder but cannot retrieve the shipped item, leading to financial losses.

Implications

  • For the Customer: Receives the product but is unknowingly involved in a fraudulent scheme.
  • For the Fraudster: Profits from the initial transaction while using stolen credit card details to fulfill orders.
  • For the Merchant: Faces financial loss due to chargebacks and cannot reclaim the shipped product.

Impact of Triangular Fraud

The consequences of triangular frauds can have a significant impact on businesses:  

ImpactCauseConsequences
ChargebacksTriangulation fraud causes transaction-related disputes and chargebacks when customers face fraudulent charges on their credit cardsFinancial losses are caused by credit card refunds. 
Product LossMerchants lose both the product and money due to chargebacks Inventory shrinkage
Time & ResourcesThe chargeback process is time-consuming and resource-intensive for businesses to dispute and resolveDiverts resources from the core business operations
PenaltiesHigh chargeback rates can lead to penalties, fines, and even account termination from payment processors and card issuer networksIncreased operating costs 

How Can Businesses Prevent Triangular Fraud?

To minimize the perils linked to triangulation fraud, businesses should employ a comprehensive, multi-layered strategy. Here, we have provided a list of a few critical suggestions that could help you prevent such frauds:

Preventing triangulation fraud
  • Closely watch coveted merchandise: Monitor sought-after items that triangulation scammers commonly target, such as high-end cosmetics, electronics, and gift cards. For example, a sudden increase in orders for a specific brand of luxury skincare products could indicate potential fraudulent activity.
  • Pay close attention to seller profiles: Set up automated protocols to flag newly established seller accounts with substantial inventories but lacking sufficient customer feedback in the form of reviews or ratings. Plus, cross-check account information (like email addresses, payment methods, and BINs) to detect possible clusters of related fraudulent accounts. For example, multiple accounts sharing the same billing address or phone number might signify a coordinated fraud scheme.
  • Validate suspicious merchants: Implement additional verification measures for high-risk seller accounts. An impactful tactic involves charging a small, temporary fee (e.g., $1) and then asking the merchant to specify the amount charged. The inability to provide the correct amount should trigger account suspension or further investigation.
  • Carefully analyze historical trends: Regularly scrutinize past transaction data to detect patterns suggestive of triangulation fraud. Watch out for anomalies such as sudden spikes in orders for specific products from new accounts, transactions originating from high-risk IP addresses or locations, or multiple orders shipped to the same address within a short time frame. 
  • Deploy robust solutions: Employ advanced fraud prevention tools that leverage machine learning for real-time risk assessment and decision-making. These tools utilize features like email address longevity checks, device fingerprinting, IP geolocation, and behavioral analytics to identify anomalous patterns, and enforce velocity rules for swift, high-volume transactions.  

How Sensfrx Can Help Against Triangulation Fraud 

Sensfrx is not just fraud detection software; it’s a proactive shield against fraudulent online activities. Packed with powerful features like credential stuffing, fast geolocation, and IP address risk detection, it minimizes the probability of triangular fraud activities. This can assist in preventing triangulation fraud in the following ways:

Detects Suspicious Patterns

 Sensfrx’s fraud detection systems are modern and operate in real-time. Powered by the latest AI and machine learning models trained on extensive datasets of similar transaction frauds, our system swiftly identifies suspicious activities involving user behavior, device fingerprints, IP addresses, and more.

For example, the algorithm instantly identifies sudden spikes in orders for high-value items or if such transactions are conducted through newly created accounts. 

Its advanced system can also detect patterns like multiple orders placed from different credit cards within a short time, but but the shipping order for each item is the same. 

These are common fraudulent tactics used by triangulation fraudsters. Additionally, Sensfrx can detect if a buyer and seller are using the same IP address, a clear indication of triangulation fraud.

With Sensfrx, you can rest assured that your fraud detection capabilities are always up-to-date. Its AI models are continuously honed, trained on new datasets, and reviewed, updating rules and models to deal with emerging fraud trends effectively.

Analyzes Behavior Anomaly

Sensfrx also employs advanced techniques, such as device fingerprinting and behavioral biometrics, to identify suspicious transactions from unfamiliar devices or determine whether the device has been used in previous fraud attempts. 

For example, it analyzes user interactions like keystroke patterns, mouse movements, and touch gestures to verify the user’s identity throughout the session. This allows the system to identify whether the fraudster has made any previous account takeover attempts.

Assesses Historical Data 

The Sensfrx fraud detection system continuously analyzes historical transaction data and other factors, such as targeted product categories, account creation timelines, shipping routes, and payment methods, to detect new and relatively unknown fraud patterns. These datasets are fed into the fraud detection model to adjust its rules and risk threshold. 

For instance, if the system notices unusual activity in a brand’s particular product category, it instantly lowers the risk tolerance threshold for those items.

Ensures Browser Safety

In triangulation fraud incidents, third-party actors often try to exploit browser vulnerabilities to inject malware or launch phishing attacks to gain unauthorized access to login credentials or other payment information. Sensfrx ensures browser safety by constantly monitoring and patching known vulnerabilities in popular browsers.

 It also uses advanced encryption and authentication methods to protect user data and prevent unauthorized access. 

Provides Real-Time Insights and Visual Analytics

 The Sensfrx platform has a unified and intuitive dashboard that provides real-time insights and visual analytics. This dashboard is like a search engine for fraud data. It allows users to identify triangular fraud activities immediately, prompting them to take immediate action to prevent fraudulent transactions

The dashboard provides a comprehensive overview of all transactions, highlighting any suspicious patterns or activities. This also allows users to drill down into specific transactions or data points for more detailed analysis, making it easy to identify and investigate such frauds.  

For instance, if Sensfrx detects a sudden surge in transactions involving commonly targeted items like cosmetics or electronics, mismatched billing and shipping details, or multiple purchases from the same device or IP address within a short timeframe, these suspicious patterns are immediately flagged and visualized on the dashboard. 

Sensfrx Fraud Detection Software: Features and Benefits 

Sensfrx AI offers comprehensive features that ensure proactive fraud prevention for organizations:  

FeatureBenefit
Device FingerprintingUniquely identifies devices previously used for fraud detection
User and Entity Behavior AnalyticsDetect abnormal activities and potential threats
Device Risk ScoringEvaluate the risk associated with devices 
Automated Risk MitigationQuick response to identified risks 
Adjustable Risk ThresholdCustomizable risk levels to adapt to varying threat levels
Payment Risk ScoreEvaluates  the risk associated with payment transactions 
Bot Risk IntelligenceIdentifying and mitigating risks posed by automated bots 
IP Risk IntelligenceAnalyzing and managing risks related to IP addresses 
Phishing ProtectionPrevents phishing attacks by blocking fraudulent attempts
Fraud Data AnalyticsUtilizing data analytics to identify patterns and trends 
Rules & Policies EngineImplementing custom rules and policies 
Custom Validation RulesTailoring validation rules to specific business needs for accurate fraud detection.
IntegrationsSeamless integration with various platforms and tools for comprehensive security measures
Green, Yellow, and Red ZonesCategorizes varying risk levels to prioritize responses. This helps you to allocate resources effectively

Conclusion 

In summary, as ecommerce has experienced exponential growth, incidents like triangulation fraud have also risen sharply. While the modus operandi of this fraud seems intricate, many businesses tend to ignore the threat and focus solely on business expansion. That’s not a good approach, as fraudsters constantly look for lapses or vulnerabilities they can exploit. Therefore, it is crucial for businesses to remain vigilant, stay updated on emerging fraud trends, and take proactive measures to safeguard themselves against these threats.  If your ecommerce business is suffering If you suspect your credit card has been used in triangulation fraud, there is a possibility of triangulation scams. Get in touch with us, our experts can help you handle such issues with ease.

Reference

https://www.emarketer.com/content/spotlight-us-card-payment-fraud-losses-forecast-2022