Fraud on the Internet – where to go and how to protect yourself

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Fraud on the Internet – where to go and how to protect yourself

With eCommerce booming due to the COVID-19 pandemic, internet fraud is on the rise too. For example, CNBC published an FTC report earlier this year, stating that citizens of the United States of America lost $5.8 billion to internet fraud in 2021. It was a sharp rise of more than 70% when compared to 2020. Wherever the money goes. online fraud follows so businesses and merchants in the US, EU, and worldwide must ensure they can protect their customers and prevent fraudulent activities. 

But doing so is not easy at all. Fraudsters are inventive and devise new ways to deceive businesses and their customers. As an online merchant, you should always be on the lookout for new fraud schemes that might unfold at your website at any moment. Doing so manually is literally impossible, which makes investing in a reliable anti-fraud tool worthwhile.

Covery, an enterprise-grade antifraud system specializes in KYC/KYB automation, risk mitigation, transaction monitoring, fraud prevention, and chargeback management. We know a good deal about fighting online fraud in order to protect you and your customers. Read on to discover the basics and best ways to detect and prevent internet fraud.

What is fraud on the Internet?

By definition, internet fraud is any illegal activity committed using the internet to hide or steal information, identity details, or money. As such, online fraud is split into identity theft and financial fraud.

Identity theft involves all activities aimed at deceiving merchants or other customers using forged identities. It involves phishing, spear-phishing, whaling, account takeover, and other types of fraud, which we covered on our blog.

Financial internet fraud is called CNP or Card Not Present fraud and involves using various schemes (stolen credit card details, friendly fraud, affiliate fraud, bonus abuse, referral fraud, triangulation fraud, and others) to steal money from merchants and/or customers.

What types of internet fraud are most common?

As listed above, these are identity theft, affiliate fraud, friendly fraud, triangulation fraud, and chargeback fraud. We covered them in more detail in this article, but will briefly depict them here too.

  • Synthetic identity theft is aimed at defrauding merchants by creating fake accounts using personal details stolen by phishing and purchased on the Dark Web. Such accounts are harder to identify, as their details are partially legitimate. But their final goal is to steal money from businesses and issue chargebacks.
  • Chargeback fraud. Unscrupulous customers can start chargeback claims against you after purchasing your products online. They can state the delivered goods look significantly not as promised, don’t work well, were damaged during transportation, or were not delivered at all. They can also claim they did not initiate the payment in the first place. Covery helps identify all the details of such transactions to help you stand your ground, prove your right and reduce the numbers of chargebacks by up to 80%.
  • Affiliate fraud. There are many affiliates who provide sub-par traffic, so you pay commissions for leads that result in no revenue. It is important to identify such cases asap to minimize your potential losses.
  • Triangulation fraud. Scammers create replicas of your website and lead potential buyers there with a promise of huge discounts. Once the customers make the order, they are redirected to your cart, where they finish buying the intended goods. In fact, the scammer buys your products for full price, so neither you nor the customer notes anything strange. But the fraudsters now have the customer’s credit card details and in some time they will steal all their money.
  • Friendly fraud or pure fraud. One of the most widespread approaches to online fraud is to claim that the payment was performed without the customer’s consent. It could have been done by a child shopping without their parent’s permission, or be a case of chargeback fraud. As banks always trust customers first, most such claims are solved in their favor.

How to withstand fraud on the internet then?

What happens if you get scammed on the Internet?

If you are a citizen of the United States of America, you can file a report to FTC. If you are an individual living in Europe or anywhere else, contact your local governmental anti-fraud entity. 

But, if you are an online merchant, things get a lot more complicated. It is your sole responsibility to detect and prevent online fraud at your website, as well as to protect your customers, their sensitive data, and money.

The best way to do so is by partnering with an anti-fraud system like Covery. Here is how we help deal with the aforementioned fraud cases:

  • KYC/KYB automation. Covery helps enable automated KYC verification and validation of submitted IDs through Onfido integration. In addition, Covery automatically checks the submitted details against Dow Jones watchlists for PEPs, sanctioned persons, and more. This helps dramatically reduce synthetic identity theft.
  • Chargeback management with RDR, Order Insight, and Ethoca. Covery helps minimize the impact of the chargeback management routine on your business. With these services, you can either automatically refund transactions that fall under certain conditions, or perform in-depth chargeback dispute investigations to stand your ground and reduce the total number of chargebacks you have to deal with. Both approaches help keep your chargeback ratio under control.
  • Affiliate fraud prevention. Covery fields in-depth device fingerprinting technology that helps identify bad traffic and reduce the time needed to block the fraudulent schemes at your website.
  • Behavioral analysis. Due to a supervised Machine Learning algorithm coupled with a rule-based risk logic engine, Covery is able to detect even the most elaborate fraud schemes like triangulation fraud.
  • Transaction monitoring. With information from device fingerprinting technology, behavioral analysis, and Trustchain, we are able to identify friendly fraud cases and implement countermeasures that ensure these schemes don’t work again on your website.

Feel free to browse our website and blog to learn more about how Covery can help you detect and prevent internet fraud on your website.

Should you want to see how Covery can protect your revenues and customer data — order a free demo and let’s talk business!