How to Ban Fraudsters from Your Site

October 13, 2020/ Jarrod Wright /

Online fraud is a threat to businesses from all industries, and it carries devastating consequences. If there’s one positive takeaway from this ugly truth, it’s that once you’re aware of individuals who are engaged in fraudulent activities, you can prevent them from making attacks in the future.

Follow these six steps to reduce the risk of fraud and protect your business.

Create a Blacklist

A proactive approach is one of the best strategies to prevent fraud. Creating a blacklist essentially bans a person based on their name or IP address. By working with your merchant processer, you’ll be able to prevent criminals on the list from ever shopping with you again.

The scope of a blacklist goes beyond just one person. If desired, you also have the bandwidth to ban an entire region or country, including any customers from countries known for high levels of criminal activity.

A blacklist is a step in the right direction, but unfortunately, it’s not entirely foolproof. Criminals have found ways to bypass these restrictions by using a different email address, shopping on a public computer with a different IP address, or using VNPs.

Create a Whitelist

Think of a whitelist as the inverse of a blacklist. When implemented, a whitelist will block everyone and only allow a select list of people through based on predetermined factors. For example, using this tool would allow you to block everyone except customers from the US and Canada.

There are numerous studies showing which countries have the lowest fraud risk which can serve as a guideline. However, it should be noted that automation without human oversight can lead to unexpected issues.

Set Velocity Limits

A fraudster with stolen credit card information will usually attempt as many transactions as possible before detection. The same is true even for those in possession of only one credit card number. You can prevent this by setting a limit to how many purchases a person can make from a single IP address within a set time period.

If you decide against imposing automated velocity limits, there are still ways to prevent bad actors from committing fraud. You should be on the lookout for customers attempting to make multiple large purchases in quick succession. Big-ticket items are hot spots for potential fraud, as they offer the best resale potential and quickest return.

Detect Affiliate Fraud

Affiliate marketing is a growing trend that promises the increase of sales. At the same time, it opens the door for fraud. In the wrong hands, fraudsters can use this opportunity to trick merchants for personal gain.

Affiliate fraud can result in unwanted chargebacks. Merchants run the risk of losing revenue, racking up fines, and jeopardizing their processing abilities. Even if this fraud doesn’t lead to chargebacks, merchants will be forced to face the consequences of an uncertain business future.

To ensure that affiliate marketing remains a trustworthy source, merchants should carefully screen all publishers beforehand. And use tools specifically designed to detect and block bad affiliate traffic.

Use Multilayer Fraud Detection Tools

When it comes to preventing fraud, you have the ability to ban fraudsters before they ever get an opportunity to steal from you. For example, card-not-present merchants have the following tools on hand to stop fraud before it happens:

• Address Verification Service: This is one of the most widely used prevention tools in the US. It’s an automated program that compares the billing address used in a credit card transaction against the information the bank has on file.
• Card Security Codes: This safety feature helps improve customer confidence and protect merchants. A security code is the 3- or 4-digit number that helps authenticate transactions on card-not-present transactions.
• 3-D Secure: Branded as both MasterCard SecureCode and Verified by Visa. This technology prompts customers to enter a unique identification code during the checkout process. It’s designed to help block online fraudulent card use.

In addition to these three tools, there are multiple issuing banks that utilize chargeback alert networks. In this case, banks alert the merchant whenever a transaction is disputed based on claims of criminal activity. The merchant can then issue a refund to customers before they file a chargeback. To use this service, though, merchants must sign up for chargeback alert service from a third-party provider.

Get professional Help

It’s worth repeating that while all of these options are worthy ventures in the fight against fraud, they aren’t perfect. Fraud is a human invention, and preventing it requires human oversight.

Merchants can consult with third party solution providers that combine expert human analysis with leading edge technology. This will offer the most effective chargeback and fraud management solution.

Last Update: October 13, 2020