According to a recent study, eCommerce merchants in the US have experienced a 140 percent increase in fraud attacks relative to 2020, while every dollar associated with missed fraud costs organizations $3.60 on average, up 15 percent from before the pandemic.
Fraudsters use money mules for laundering as well as to receive and reship goods purchased with stolen identities. A large mule network provides more low risk shipping addresses for fraudsters to utilize as well as more options for strategically chosen shipping locations less likely to trigger fraud detection systems. A down economy and millions of people out of work makes it easier for fraudsters to recruit money mules with work-from-home schemes.
Money mules range from knowingly complicit to those duped by fraudsters. Whether they believe they are a holiday gift wrapper or know they are aiding and abetting fraud, these mules become more willing to participate in activity they know, or even think might be, illicit when out of work or when times are tough.
The number of order attempts declined for suspected fraud increased by nearly 30 percent year-over-year for orders between Thanksgiving and Cyber Monday, according to data from iovation, that also found a fraud decline rate 50 percent higher than the yearly average (15 percent vs. 10 percent). Likewise, a cyber security firm found a 63 percent increase in malware while phishing attacks jumped 51 percent on Black Friday.
According to recent data and studies, identity fraud and new account fraud continue to plague both banks and consumers, with 80 percent of fraudulently opened credit card accounts in the U.S. applied for with synthetic identities and new account fraud on payment cards increasing by 11 percent in the UK over the last year.
New account fraud is an issue worldwide. According to Financial Fraud Action UK, a consortium of banks, issuers and acquirers fighting the collective issue of payment fraud, new account application fraud grew to £15.6 million last year, an increase of 11 percent from 2015.
According to forecasts from Aite Group nearly all credit cards issued in the U.S. will have EMV capabilities by 2018 when CNP credit card fraud losses are expected to reach $6.4 billion in the United States. As EMV cards become commonplace among U.S. cardholders it will make counterfeit card fraud more difficult and drive more fraud attempts to the online channel. CNP merchants should already be preparing for increased fraud attempts, considering how it may impact manual review loads and if current risk management strategies should be supplemented with additional tools and techniques.
As EMV or Chip-and-PIN cards began to phase out magnetic-stripe payment cards in the UK, Canada and several other countries, fraudsters started migrating online and to other Card Not Present channels. While counterfeit card fraud in Canada fell from $245 million CAD in 2008 to $112 million CAD in 2013 after five years of chip cards, CNP fraud increased from $128 to $299 million CAD over this same time frame. Card Not Present fraud increased more than 300 percent in the UK following the rollout of Chip-and-PIN. A similar sequence of events is expected in the U.S. as banks issue EMV, or chip, cards to replace the less secure magnetic-stripe predecessors in time for the October liability shift deadline.
The Fraud Practice discusses the importance of taking the time to consider the options for performing manual review as it is a good way to protect the two most important assets a merchant has: their customer and their brand.
When an order has a mix of high and low risk signals or the merchant just isn’t sure about the true level of risk, manual reviews provide a better alternative to either refusing the sale or accepting it blindly. When these orders are all declined merchants miss out on the potential lifetime value of many customers they wrongly turned away. Whereas one good purchase experience can lead to many more down the road, falsely labeling a transaction as fraudulent and refusing the sale can lead to that customer never coming back. On the other side of the spectrum, accepting all of these orders and hoping for the best can lead to significant brand damage from high fraud losses and consumers associating the merchant with a fraud problem, both resulting in a negative impact on the merchant’s bottom-line. In this context manual reviews protect both the brand and the merchant’s customers.
According to estimates from fraud prevention startup Trustev, there are 250 million compromised payment card numbers for sale in the online black market. The ease with which fraudsters can obtain this information emphasizes the importance of being able to effectively authenticate and verify identity information provided online.
Trustev, an Ireland based startup and fraud prevention vendor, released a Global Fraud Monthly Threat Briefing for the month of April. In addition to finding that there are currently more than 250 million stolen credit cards for sale online, the briefing included several interesting fraud statistics based on Trustev’s client base of over 100 customers based on activity seen during March.
A recent report from FICO found that the incidence rate of credit card fraud on U.S. issued cards increased by 17 percent over a nearly two-year period while card not present fraud grew at the fastest rate.
According to CIFAS, a fraud prevention membership association in the UK, both fraud involving payment cards and identity fraud increased in the first half of 2013 while 82 percent of identity fraud cases occurred online.
According to data from FICO and Euromonitor International, card fraud losses increased 6 percent in 2012 from 2011 while 80 percent of this increase came from Russia, France and the United Kingdom.