Need to Know: Fraud Rings

Fraud rings thrive on consumer and merchant complacency. These sophisticated fraudsters are looking for merchants who are naïve to fraud ring threats and do not have the best-in-class payment solutions in place.
Fraud ring attacks can include a range of tactics, including paying with stolen credit cards, chargeback fraud involving complicit cardholders, selling fake e-gift cards, or creating schemes to create large-scale layered fraud against multiple merchants.
The main feature of a fraud ring is the coordinated and linked efforts of multiple fraudsters to steal from and defraud merchants. These are deep, premeditated fraud attacks that can last for years before being detected.
What differentiates a fraud rings from a small-time criminal is the level of sophistication involved in fraud ring attacks. Think of the people behind fraud rings as professional fraudsters – they approach their “job” just as seriously as anyone else. They take advantage of the latest in technology, communication, and payments to make it easy for them to succeed at defrauding merchants.
The good news is that even with a high-level of professionalism and technological superiority, fraudsters do get caught. Thanks to the high-level of scrutiny and sophistication in modern payments technology, it’s getting harder for fraud rings to go undetected.
Merchants using payments solutions that monitor for out-of-context sales, IP address data and traffic, frequency of sales from one device or cardholder, or other high-risk sales indicators are able to beat fraud rings at their game. Remember, fraud rings look for merchants who are not using the latest in modern payments solutions.
Fraud Rings: How They Operate
Fraud rings typically involve a deep web of fraudsters and merchants. It takes coordination, precision, and the promise of untold millions of dollars to develop and manage such large-scale, sophisticated fraud. However, just as these criminals use more complicated methods to commit theft and fraud, payments experts and criminal investigators use similar tactics to detect and catch fraud rings in action.
One common tactic used by fraud rings is to test merchant payment solutions and fraud detection software, seeking holes in the technology. A fraud ring may test the technology with fake e-gift cards, making small purchases and when these go undetected, advance to more frequent and larger purchases with both e-gift cards and fake credit cards. Once the fraudsters know how to get past the security measures and fraud detection signals, they have freeaccess to commit their crimes undetected until the victim discovers the crime.
In a recent blog, Riskified identified a tech support scam run by a fraud ring that convinced innocent victims to give fraudsters access to their computers. “Fraudsters were contacting their victims over the phone, posing as tech support agents. They informed their victims that they required access to their computers to correct a technical error. When the victims gave them permissions, the fraudster made purchases using the victim’s computer and credit card details.”
Fraud rings use the same tactics as smaller, less-sophisticated organized crime; however, they are doing it on a scale that can be hard to comprehend and imagine. The key for merchants to recognize they can be a target is to have the right fraud detection and prevention software working behind-the-scenes to monitor transactions, analyze purchases, and building a databases of customer habits.
Stopping Fraud Rings
Stopping fraud rings begins with fraud detection and prevention best-practices. Merchants must use multi-layered fraud detection technology that is smart and flexible, and employ a range of technologies that can stop everything from the most basic theft attempts to the most sophisticated.
Remember, these fraudsters want to do more than commit chargeback fraud, they seek ways to attack your business and your customers repeatedly. Once they identify a hole in your fraud detection solution, they’ll use numerous methods to penetrate your customer database to get exactly what they want.
The best thing you can do is to be proactive against the threat of fraud rings. Make sure your payment solution can analyze customer data, detect new or unknown IP addresses, and has the technological sophistication to avoid being outsmarted by criminals. Using a solution such as Order Insight allows you to protect your business from both fraud rings and those cardholders who think nothing of committing friendly or chargeback fraud. The more data you can collect and analyze, the easier it is for you to outsmart even the most committed of fraudsters.