What is triangulation fraud?

Understanding Triangulation Fraud

Triangulation fraud is a complex scam that involves three parties:

• An unsuspecting customer who places an order on a marketplace or auction site.
• A fraudulent seller who takes this order and then purchases the actual product from a legitimate eCommerce site using stolen credit card information.
• The legitimate eCommerce site that processes the order placed with stolen card details.

How triangulation fraud works

A fraudster creates a fake online store or lists items at attractive prices on legitimate marketplaces to lure customers. The unsuspecting customer, enticed by the deal, purchases from this fraudulent store. The fraudster then uses stolen credit card information to buy the same item from a legitimate online retailer, providing the customer’s shipping address for delivery.

When the legitimate retailer ships the item to the customer, the fraudster collects the payment made by the customer. However, when the legitimate cardholder notices the unauthorized charge and disputes it, the retailer faces a chargeback, losing both the product and the money. Meanwhile, the fraudster profits from the customer’s payment.

Imagine Jane sees a high-end smartphone offered at a significant discount on a website she’s never visited before. Eager to grab the bargain, she places an order. The fraudster, who set up the fake store, uses stolen credit card details to buy the same smartphone from a reputable electronics retailer, entering Jane’s address for delivery.

Jane receives the smartphone and is happy with her purchase, unaware that the transaction was part of a scam. When the legitimate cardholder spots the fraudulent charge and reports it, the retailer faces a chargeback and loses the product and the payment. The fraudster walks away with Jane’s money, leaving the retailer to handle the fallout.

Triangulation Fraud Red Flags

Triangulation fraud isn’t easy to detect and is often underreported. Some individuals might be tempted to overlook the fraud if they receive the items they want at unusually low prices. Also, older or less tech-savvy people whose credit card details are stolen might not recognize the signs of fraud or initiate a chargeback.

These are the key triangulation fraud red flags you should look out for:

• Prices that are significantly lower than market value for high-end or popular items.
• Sellers posting numerous ads for the same product or brand.
• New seller accounts with limited or no transaction history.
• Sellers with no reviews or ratings.
• Sellers who do not respond to inquiries or use fake contact details.

For retailers and businesses, in turn, some triangulation fraud signals include a sudden spike in transaction volume or rapid purchase patterns and mismatches between billing and shipping addresses. 

How Businesses Can Prevent Triangulation Fraud

Implementing effective anti-fraud strategies can significantly reduce the risk of triangulation fraud. Here are key measures you can take to protect your business and customers:

• Educate your customers. Explain to customers how to recognize and report fraud. Warn them of suspicious requests and deals that seem too good to be true. Awareness is key to reducing vulnerability.
• Implement risk-based authentication (RBA). RBA requires multiple verification steps, like email or phone validation, before completing transactions. This ensures only legitimate users access your services.
• Monitor and investigate suspicious activity. Look out for unusual transactions and behaviors. Act quickly to address and resolve any potential issues to prevent escalation.
• Use digital identification solutions. Deploy digital identification technologies, such as browser fingerprinting, to detect and prevent fraudulent activity. This strengthens security and protects customer data.
• Behavior tracking. Track and analyze seller behavior and profiles to identify patterns that may indicate fraud. Look for commonalities between seller accounts, such as IP addresses and information provided.
• Deploy secure payment gateways. Secure payment gateways protect customer transactions from fraud. This adds an extra layer of security and ensures that payment information is handled safely.

By implementing these strategies, you can build a robust defense against triangulation fraud for your business. Proactively addressing these areas can keep your business safe from fraud and builds trust with your customers, ultimately creating a safer and more secure online environment.

Summary

• Triangulation fraud involves a scam where a fake seller lures customers with attractive prices and uses stolen credit card information to purchase the same items from legitimate retailers.
• Look for unusually low prices, new or unreviewed seller accounts, and mismatches between billing and shipping addresses.
• Educate customers, implement risk-based authentication, and monitor suspicious activity to protect your business from triangulation fraud.