The bomb threat hoax from Thursday, December 13, 2018 was easily detectable as fraud.

There were several smoking guns that could have quickly identified the bomb threats as bogus. The leading indicator of fraud was the IP block from which the emails were sent. Emails associated with this bomb threat hoax were sent from the 194.58.x.x address range. This address range is well known in Internet security circles as malicious. IP reputation databases show this range was identified as fraudulent as early as March of 2015. Internet traffic originating from this range was commonly known to place fraudulent orders on e-commerce sites. This IP range was also seen often in fake reviews, instances of click fraud, and hacking attempts.

Further investigation of the 194.58.x.x address block shows with near perfect certainty the range was a manually banned, well-known public proxy. Said another way, this IP range was known to be among the worst of the worst, and clearly its originating messages should have been ignored.

Internet security professionals need to use IP reputation services to determine if an IP address is a proxy or VPN. Lookup tables with this information have existed for years. IP reputation services use machine learning and probability theory to infer a trust score on IP addresses. IP addresses with poor trust scores are behaving badly in an automated manner. Online merchants and video streaming services already utilize advanced mathematical and modern data science to identify malicious Internet addresses, and e-mail providers should too.

In the Internet of Things (IoT), with 11 billion smart devices connected, we can’t allow hospitals, schools, and emergency services to be distracted because of a dozen rogue devices like this. In life reputation matters, but on Thursday we let a few well-known bogus devices in Russia cause panic and fear.

We can do better — the data already exists.

Service Objects is committed to fighting fraud and bad data wherever we see it. Through our APIs, best practices when handling sensitive data, or through recommendations on clients’ business logic, we are here to help enhance data quality and eliminate fraud.

A good example of the latter is educating our customers about how to avoid fraud losses. One way is by paying closer attention to orders using freight forwarders – which are legitimate services that are often misused by fraudsters. At the end of this post, you will find a free resource to make this easier: an extensive list of shipping and freight forwarders that you can use to help fight fraud when fulfilling orders.

What is a freight forwarder?

Freight and shipping forwarders arrange for the exporting and importing of goods. These companies often specialize in storage and shipping of goods on behalf of customers. In short, they help arrange for goods to get from point A to point B.

Are all freight forwarders associated with fraud?

Absolutely not! There are many reputable freight forwarders that do great work in coordinating the shipping of goods between consumers and sellers. When fraud is perpetrated, they are co-victims along with the seller. That being said, freight forwarders are often a go-to-tool for duping vendors and sellers into footing the bill for fraudulent purchases.

The typical process may go as follows:

• A customer will place a large order, and ask that the product(s) be shipped through a specific freight forwarder.
• The customer will offer to reimburse the seller for shipping through the freight forwarder – and normally wants the order shipped quickly, before the scam is discovered. (Money is no object for orders like these, because they are usually being placed with stolen or compromised payment methods.)
• Often the fraudster will have set up a legitimate-looking website ahead of time to give the appearance of a legitimate and trustworthy business.
• After the seller ships the goods and they are picked up by the fraudster, the payment for the shipping fee and the products itself usually falls through, leaving the seller to foot the bill for both the freight forwarder’s services and inventory loss.

How do I avoid fraud where freight forwarders are used?

Great question! One of the best and easiest ways to help mitigate this type of fraud as a seller of goods is to pay extra attention to orders using a freight forwarding company’s address. For PO’s like these, it would be smart to build in business logic for some extra vetting to ensure the purchaser’s legitimacy and help prevent fraud from the start.

That is why we are providing a list of all the freight forwarders we could find. We recommend using this list to detect matches between an order’s shipping address and a freight forwarder’s. To do this, run an order’s shipping address through our DOTS Address Validation – US service and use the BarcodeDigits field as a unique identifier for an address. If the BarcodeDigits address matches a freight forwarder’s address, the order should be flagged for some additional vetting to verify its authenticity.

Service Objects is committed to helping our clients avoid fraud however we can, and this list and the business logic is just one strategy that can make a real difference. If you need help setting up our address validation tools, please feel free to contact us, we are always happy to help.

Most ecommerce merchants learn the hard way; orders and registrations from fraudulent sources cause financial, merchandise, and time losses. With the rise of mobile ecommerce and the proliferation of high-profile data breaches, you’ll need the best information and tools available to combat fraud in your marketplace. The October 2017 Global Fraud Index reported a total of $57.8 billion in ecommerce fraud losses in eight major industries.

Ecommerce fraud continues to grow, and the best way to protect yourself is a good defense. Here are some of the most troubling fraud issues ecommerce merchants face, and how to limit your exposure.

Identity theft

Identity theft is defined as the fraudulent acquisition and use of a person’s private identifying information, usually for financial gain. Financial identity theft through credit card fraud is what most people envision when they think of identity theft.

Identity thieves use a person’s identifying information, such as name and address, or an existing credit card to make a purchase on your website. Frequently, this data is acquired in a breach or skimming scam and sold on the black market before a victim even knows they’ve been compromised.

DOTS Order Validation can help identify if a user is who they claim to be by cross-checking the information provided at the point-of-sale, such as Ship To and Bill To address, phone number, and Banking Identification Number (BIN). IP address location is also compared to the billing and shipping addresses to determine if the order should be flagged.

Order Validation assigns individual quality scores to each input and a composite quality score to the overall transaction. You determine your quality score threshold, which is used to flag suspicious transactions for your team to review or reject.

Here are a few examples of transactions that might be flagged for additional review:

• Phone number not matching the name and state on the order
• Issuing bank (via BIN) in a different country than shipping address
• IP location not close to shipping address

Your team can review and manage flagged transactions before the order is fulfilled.

Chargebacks

A chargeback occurs when a customer disputes a transaction and their payment is returned to their account. Sometimes this is referred to as “friendly fraud,” meaning it was a misunderstanding on the part of the consumer. Perhaps they didn’t read the fine print to see that they were signing up for a subscription with recurring fees, for example.

Frequently, chargebacks are caused by a fraudster either using stolen financial information to make a purchase or by lying and claiming they never received the product. Friendly or not, chargebacks cost your customer service team time, both interfacing with the customer and researching the issue.

Chargebacks are particularly nasty because you lose product, incur shipping costs, chargeback fees AND they hurt your standing with creditors over time. If your business reaches the high-risk threshold for your industry your processing rates will increase, or worse – your processor could drop you.

DOTS Order Validation can again flag risky transactions by cross-checking customer information and location elements through more than 200 proprietary tests, resulting in a quality score based on the validity of the information. Order Validation also provides a record of the order with all the information you need to argue a chargeback should one occur.

Order Validation also helps your customers correct typos in shipping info at the point of entry, so you can avoid chargebacks from misdelivered shipments and any related customer service headaches.

High risk cards

With the rising sales of prepaid credit cards and gift cards, the frequency of scams involving these cards has risen. There are many types of prepaid and gift card fraud, involving both the sale or loading of cards, and using prepaid or gift cards to make a purchase. High risk cards can cost you on either end of the transaction.

High risk cards can also hurt you if your product or service is offered on a payment plan. The first payment on a prepaid card might be approved, but subsequent payment transactions could return insufficient funds. Not only do you have product loss, you’ll incur additional costs attempting to collect the debt internally or settle for a fraction of the debt through a collections service, if you can collect at all.

DOTS BIN Validation uses the Bank Identification Number (BIN), comprised of the first six digits of a card number, to identify the issuing bank and card-type, including those higher risk prepaid and gift cards. Cross-referencing the BIN with user phone and address information can help you identify a high-risk transaction.

Your team creates protocol to manage these transactions, such as:

• declining prepaid cards outright at point-of-sale
• requesting a secondary form of payment in real-time
• simply flagging the order for review before fulfillment

BIN Validation also provides the name and phone number of the issuing bank, so you can call to verify flagged transactions.

Validation services help your team stop wasting time identifying and troubleshooting fraudulent transactions, and spend more time managing transactions flagged as high-risk before they become a problem.

It’s increasingly important to protect your business from fraudulent transactions. Implementing an API can literally stop fraud before it even begins, right at the point of sale, and in real-time. Learn more about how Order Validation or BIN Validation can help you prevent fraud and enjoy the benefits of improved customer satisfaction and more efficient resource management.