David Anderson is principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation, forensic accounting, and marital dissolution services in Philadelphia and the Delaware Valley.

If you sell goods via your website or via other websites (such as Etsy, Amazon, eBay, etc.), you need to be aware of fraud schemes that are perpetrated against sellers such as yourself.  In this week’s blog, I discuss articles about such fraud schemes and how to fight them which have been recently featured on the business website entrepreneur.com.

These fraud schemes include:

• Classic Fraud: Under this scheme, fraudsters purchase stolen credit card credentials on the dark web, and place orders using the stolen information. The fraudsters arrange for you to ship your product to a P. O. Box or other location from which they can retrieve the product (such as a re-shipper).  They then sell locally the fraudulently obtained items.
• Triangulation Fraud: The fraudster creates a storefront on Etsy, Amazon or eBay, and offers high demand goods at very low prices. He/she fulfills orders by using the Classic Fraud scheme to purchase these goods from legitimate vendors, and has the goods shipped to the customer who purchased from his/her store. This fraud scheme also allows the fraudster access to the credit card information of the customer who placed an order on his/her website.
• Interception Fraud: Most common during the winter holidays, fraudsters steal packages from the front porch of houses. Also, if fraudsters have gained access to a victim’s computer, they can monitor for e-commerce orders, and arrange to have the purchases rerouted.
• Card Testing Fraud: Under this scheme, fraudsters test the validity of credit card numbers by visiting websites which provide information as to why a card purchase was declined (such as exceeds credit limit or incorrect expiration date). They then use this information to make purchases on a different website under the Classic Fraud scheme.
• Account Takeover Fraud: The fraudster, often using phishing, obtains the logon ID and password of a customer. The fraudster then logs on as the customer, looking to see if credit card information has been stored by the customer for that website.  If so, the fraudster initiates purchases and changes the shipping address (as per the Classic Fraud scheme).
• Identity Theft: This type of fraud has become prevalent. Under this scheme, the fraudster obtains the personal identification of a person, and either creates credit cards in the victim’s name or opens new credit cards in the victim’s name.
• Chargeback Fraud: This type of fraud is most often perpetrated by consumers. The consumer makes an online purchase.  He/she then contacts the vendor (after the purchased items have been delivered) and states that his/her credit card was stolen or otherwise misappropriated and that he/she did not make the purchase or receive the items. Alternately, the customer claims that they are a victim of Interception Fraud because they never received the goods ordered.

So, how do you fight such fraud?  Here are three possibilities:

• Turn On Gateway Fraud Filters: You work with your payment gateway vendor to set up basic fraud prevention rules to block or flag transactions that may be fraudulent (for example, an AVS mismatch – where the billing address entered does not match the billing address on file with the credit card company, or declining all transactions originating from certain countries). However, this can create false declines which could prevent you from certain non-fraudulent transactions.
• Manual Review: You assign one or more employees to check out every transaction or ones that are above a specified dollar amount or ones for which the items purchased are not shipped to the same address as the billing address. Your employee may use Google and social media to check the legitimacy of the shipping address.  However, this can be very time consuming, and the online research tools available are limited.
• Use of Third-Party Fraud Prevention Companies: Such companies provide online solutions to reduce or eliminate fraud. They can be very effective and can significantly reduce chargebacks.  However, they can be expensive and may require fraud expertise to set up and maintain.

If you would like the opinions of an expert in the field of fraud prevention, a Certified Fraud Examiner from an experienced firm that provides forensic accounting services in Philadelphia and the Delaware Valley can help. For details, contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at david@davidandersonassociates.com.

About David Anderson & Associates

David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley.  The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services.  Company principal David Anderson is a forensic accounting expert who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Fraud Examiner and a Certified Valuation Analyst.