With the correct practices in mind, businesses can catch fraudsters early and avoid scams and fraud for good

Businesses lose money every year due to fraud. But with the correct practices in mind, you can catch fraudsters before they even have a chance to exploit you, saving you time and money. This article will walk you through ways to avoid scams and fraud. This includes several types of fraud, like account takeover fraud, credit card fraud, synthetic identity fraud, bonus abuse, and friendly fraud.

What is fraud, and which businesses does it affect?

Fraud is when an actor deceives another person or company by presenting misleading information or pretending to be someone they’re not for their criminal financial gain. Fraud is illegal. However, some fraudsters are clever enough to go undetected.

Fraud can affect businesses of any size and type. The median loss of businesses to fraud is a considerable $120,000, according to GrowthForce. That’s because by the time you realize that your business has been impacted by fraud, it’s too late – you’ve already lost money. While financial losses might be at the top of your concerns, fraud can damage your reputation as a business.

This makes the fact that a 2022 PwC survey found that just over half of businesses had platform fraud – the highest level in their research. Therefore, knowing how to avoid scams and fraud is more important than ever.

Below, we’ll explore how to avoid scams and fraud. Many fraud detection and prevention tools help tackle several types of fraud at once, so you can tailor your approach to your business needs.

Account Takeover fraud

With the rise of online shopping and e-wallet, fraudsters have found new ways of taking advantage of this. E-Commerce sites, financial institutions, and iGaming operators are common targets of certain types of fraud like digital wallet account takeover fraud. That’s because these companies often use e-wallets so customers can access their funds more efficiently. Criminals gain access to a victim’s e-wallet by taking over their account, this can be done in various ways, from leveraging compromised login data to social engineering their way in. They might find this information when leaked password data from a data breach is sold on the dark web.

Credit card fraud

As SEON says in their guide to credit card fraud, account takeovers can lead to criminals gaining access to a customer’s credit card details – they can extract them and use them to commit payment fraud. This problem worsens if the account is an e-wallet, which means they can draw funds from them directly.

Fraudsters can also steal a customer’s credit card details through other means, such as physically stealing a customer’s card. This includes skimming, where criminals successfully capture information from a victim’s card using a skimming machine attached to a card reader.

Young man paying with a credit card. Shallow depth of field
© Kellydt

Preventing account takeover fraud

Below, we’ll explore a few ways that you can prevent account takeover fraud from affecting your business. You’ll be able to spot a criminal and blacklist them before they can make a transaction or even log into a victim’s account.

Device Fingerprinting

Businesses must protect themselves against account takeovers or credit card fraud as much as possible. One way is detecting suspicious logins and behaviour via fraud detection and prevention software. You might be able to blacklist a login attempt through device fingerprinting and IP analysis alone. What’s device fingerprinting? By assigning each user a unique hash, you can detect whether someone’s trying to access your website via emulators, virtual machines, or VPNs (which can be used to hide a user’s IP address).

Behavioural analysis with velocity rules

Behavioural analysis is another way to catch a criminal just by their suspicious actions on your site. Fraud detection software that incorporates behaviour analysis (with velocity rules) will be able to spot when a customer is requesting a large number of password resets (so that they can try to access a victim’s account) or have tried to log into an account hundreds of times.

For suspicious users, you can add additional friction during the Know Your Customer (KYC) stage. While adding this type of friction is usually too much for most customers (it can ruin their customer journey experience), it’s required to know whether a user is a person they’re claiming to be. KYC can include asking a customer for video verification, a selfie, or 2 Factor Authentication. This is known as hard KYC, as it creates a lot of friction for the customer in their journey.

Data Enrichment

Finally, data enrichment is a great way to get a better picture of a customer during the onboarding stage. Email and phone lookup tools use a customer’s email or phone number provided at registration as a primary data point. The data point is then enriched to provide an aggregate of information linked to it, such as whether it’s linked to any social media, disposable, or included in a data breach. For example, a suspicious user is more likely to use a disposable email address or one used in a data breach. You can then ban the user or ask them for additional information via a hard KYC check.

What is a bonus abuse scam, and how fraud prevention software can help?

Bonus abuse scams affect the iGaming industry. As a marketing tactic to attract new customers, iGaming operators often offer a signup bonus as a one-time offer. You can usually draw them without making a deposit. To stop customers from abusing this bonus, they’re usually only allowed to register one account per household or IP address.

Fraudsters use a technique called multi-accounting

Fraudsters get around this using a technique called multi-accounting. They’ll make as many new accounts as possible via synthetic identity fraud and stolen IDs while avoiding detection. Synthetic identities are a combination of fake and accurate customer information. For example, it could be a combination of an actual social security number with a fake address.

Bonus abuse isn’t new, but it’s recently become illegal because of how much criminals have exploited it in recent years. They even say it’s possible to abuse bonuses unintentionally, which is why it’s always good to read casino rules (or if you’re a casino, set out your rules clearly).

Ways to exploit sign-up bonuses include withdrawing the sign-up bonus without even playing the money. They might also engage in chip dumping, which means intentionally losing to another player to transfer the money to a different account illegally.

How to stop multi-accounting using device fingerprinting

How can you stop bonus abuse from happening? Like with e-Commerce sites or financial institutions looking to stop account takeover fraud using device fingerprinting, a very similar option applies to iGaming operators.

Data analysis tools that check a user’s IP address and assign a unique hash to each user via device fingerprinting are again helpful here. They can reveal multi-accounting attempts as a criminal is likely only using one device to create all of their accounts. Device fingerprinting will point out suspiciously similar hardware and software configurations, even if they’re trying to hide their accounts behind a VPN. You can blacklist the user or ask for further verification via a hard KYC check.

With the help of fraud detection and prevention software, you can stop fraudsters before they damage your company’s finances and reputation. Device fingerprinting, behavioural analysis, data enrichment, and KYC are a few methods for detecting suspicious or fraudulent users. You can either blacklist them or get them to provide even more information. These are useful whether you’re an e-Commerce site, financial institution, or iGaming site looking to up your protection.


Contributed and written by SEON


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