The fraudster, who has purchased stolen credit card information on the black market, lists a popular electronics item (such as a computer or a mobile device) for sale on an online marketplace such as Craigslist. When an unsuspecting consumer pays the fraudster for the item, the fraudster uses the stolen card information to purchase the item from a retailer and ship it to the consumer. The fraudster pockets the money and both the retailer and the consumer become fraud victims.
Fraudsters go to retail stores, find high-priced items, and place fake barcodes on top of the actual barcodes to artificially lower the product cost. The fraudster purchases the item at the reduced cost, and then resells it online for at or near the actual price.
Fraudsters purchase a consumer’s information on the black market and take over that consumer’s mobile phone account. The fraudster then contacts the phone carrier and poses as the consumer to purchase new phones at low or no cost through the carrier’s subsidized purchase program. The fraudster can now quickly sell the new phones for a profit.
The fraudster places an order and initially sets the delivery address to match the billing addresses. Once the order is approved, the fraudster contacts the merchant and changes the delivery address. Alternatively, if the fraudster is located in a country known for fraud, the fraudster might use the delivery address for a freight forwarder. This can mask the true destination of the package and prevent the merchant’s fraud filters from flagging the order as suspicious due to the country risk.
Fraudsters know that many electronics retailers won’t be prepared to handle big spikes in sales volumes during the holiday shopping season, particularly Black Friday and Cyber Monday. They’ll use this opportunity to step up their testing of merchants, and once they find a chink in the merchant’s armor, they’ll attack with full force.
Pay attention to your sales patterns. Fraudsters are smart, and they’ll probe your defenses with a series of small transactions so they can learn where your limits are on the types of transactions you’ll automatically approve. If you’re not proactively looking for fraud, you’ll never notice these odd small purchases that can indicate you’re about to be hit with a larger fraud attack.
If you wait to report a fraudulent transaction until the order has processed, it’s too late — you’ve already lost money on that order, and you’ll have a harder time stopping that fraudster the next time. This is because once a fraudulent order is approved, many online systems incorrectly recognize the fraudster as a legitimate customer. This makes it harder to flag and stop any future fraud attempts by that fraudster. Instead, identify and flag suspected fraud attempts immediately so you can review the transactions, verify the fraud, and minimize your current and future losses.
Small, lightweight items (such as GoPros and iPads) are easier to resell and therefore will be a bigger target for fraudsters than large, heavy items (such as printers and plasma televisions). Establish risk profiles for each product category you sell, so you know which orders you need to examine more carefully.
Because shipping scams are common in electronics, monitor changes made to delivery addresses after the order has been approved. If packages are being rerouted, ask carriers to return packages to you when an in-transit reroute is requested.
Sometimes fraud patterns only become visible when you’re looking at the big picture. For example, an order of one laptop to a home on Cherry Hill Drive doesn’t raise any red flags. But when you see that ten homes on Cherry Hill Drive have each purchased a laptop within days of each other, you know that something is afoot. If your fraud program isn’t reviewing every transaction, you won’t be able to spot these patterns and you’ll fall victim to the fraud attack.
