Semalt Expert: Why Does Online Fraud Appear?

Online fraud has become a major threat to the e-commerce industry. Normally, webmasters become aware of the risks of fraud when they get the first chargeback. While this form of fraud is common in many regions of the world, the U.S bears the burden of most of the losses from online scams.

Internet fraud is common for various reasons. Max Bell, the Customer Success Manager of Semalt, has tailored the most significant online fraud facts with the aim to help you tackle the attacks.

Stolen credit card data is easy to purchase. Internet fraud is not a high priority issue on the list of law enforcement agencies because gathering enough evidence and the resources to prosecute such cases is hard. As a result, the prosecution is very rare.

How online fraud works

Stage 1:

Credit card information is stolen by solitary cyber criminals or a large network of professional hackers.

Normally, individual hackers or criminal syndicates attack businesses and organizations to get any form of financial or personal data. Once they acquire the necessary data, they sell it off on the black market. The more data the hackers have about a cardholder, the higher the price of the information on the black market.

Stage 2:

Stolen data is sold to a 3rd party.

Most of the time, the people who steal personal or financial data are not the same people who use the information. Normally, the larger the attack, the less likely the initial hacker is likely to use the data to commit a fraud.

Stage 3:

Fraudsters test and exhaust the card.

When fraudsters get credit card data, they separate active cards from dormant cards. To know whether a card is active, fraudsters make a small purchase online. If the transaction is successful, they embark on exhausting the credit card.

Depending on how much data hackers have in their possession, they can pass off as legitimate owners of the card and even beat online fraud filters at their game.

Why prosecution of internet fraud is rare

Bringing hackers to book is often an uphill task for many reasons. First, an investigation has to cross state and international borders which cause jurisprudence problems.

Secondly, gathering evidence on online fraud is always difficult. A fraudster who impersonates a cardholder registers a new email address and rents a mailbox under a false name. This leaves very little evidence to link the crime to the fraudster. As a result, law enforcement agencies may not have enough evidence to prosecute the crime.

In addition, e-commerce crime is often perceived as a low priority problem. This is because the average amount of money stolen is often low. At the same time, the victim may not be willing to pursue the fraudster especially if the owner of the card is assured of getting a refund by the bank that issued the card. And when you compare the average amount of money e-commerce sites lose to fraud to the cases the FBI and other law enforcement agencies discuss on their sites, you begin to understand why e-commerce fraud is a low priority concern for these agencies. In essence, it is not that agencies such as the FBI ignore such cases, rather they do not have enough workforce to pursue these cyber criminals.