With the UK set to shatter previous online shopping figures in 2007, online fraud is an ever-growing problem - a problem that cost businesses and consumers an estimated £155m in 2006, a 32 per cent jump from the year before.
The latest APACS statistics show that the betting market accounted for £17m of card not present fraud on UK issued cards in the 12 months to June 2007. This makes the gaming sector the single most heavily targeted vertical market by fraudsters.
Recent phenomena such as fraudulent ‘gold farming’ and the storage of illegal funds in traditional gaming funds pose a growing threat to both businesses and consumers alike. Fraud is a global phenomenon and operators with global customer bases need to equip themselves with global identity verification tools.
Some operators are still experiencing up to a two per cent chargeback to revenue ratio. Of course, those operators using fraud prevention systems such as ID verification have driven their fraud levels well below the two per cent mark.
We think that the key to beating fraud is putting as many hurdles in front of the fraudster as possible without detracting from the customer experience. Name, address, home phone number and date of birth checks will beat most fraudsters, but often additional hurdles such as IP address validation and voice verification solutions are needed to stop the fraudster.
Our latest weapon in the fight against fraud is shared fraud alert data. The concept is simple: get operators to pool all of their fraudulent transactions in a central database so that they can benefit from shared knowledge.
We have recently completed a white paper detailing the modus operandi of an online fraudster. The report draws on interviews taken with convicted and unconvicted fraudsters and we have come up with the four stages a fraudster moves - from initial theft of the identity to how they profit from their activities.
As leaders in this field, we find it essential to try to understand how fraudsters operate, so that we may better develop our ID check solutions and so enable retailers, ecommerce operators and financial institutions to defend their operations against the fraudster.
Of course, it is well worth seeing what happens on the ‘other side of the fence’. I was recently lucky enough to work an operation with the Metropolitan Police, where a specialist trial fraud unit was working with a retailer who had been serially defrauded by a fraudster based in Ilford, London.
Although I still believe that the UK Government doesn’t devote enough policing resource and training to targeting, arresting and prosecuting CNP fraudsters, I must report back from my secondment that it’s no small feat to run controlled delivery programmes.
The briefing for Operation Insignia took place at 7am over at Ilford police station and I couldn’t help but wonder at the cost of 15 officers all working on an operation to target one fraudster. And that didn’t count the undercover observation officers that had been in post since 6am.
It is becoming increasingly apparent that small frauds can lead to large fraud rings. One operation that the Met had recently been working on involved a £250 fraud, but when the Met searched the suspect’s house they also found a passport factory with over 200 fake passports.
E-commerce operators know where fraudsters live; they know what email addresses fraudsters use, what their phone numbers are, where they connect to the internet and many other important details. By working with e-commerce operators, CNP fraud is one of the only crimes that affords law enforcement the intelligence to lie around and wait for the crime to be committed.
CNP fraud is not a victimless crime: both operators and consumers are targeted in every instance of CNP fraud.
One of our clients uses our technology to capture customer voiceprints when they deposit large amounts onto their account or wager outside of their spending patterns. Our technology can be used to call the customer in real transaction time on their mobile phone and capture a voiceprint. If the customer’s bets don’t win out and they try to insist that it wasn’t them transacting, then the operator can present the voiceprint to prove customer identity when the transaction took place.
At 192.com Business Services we believe in putting as many hurdles in front of the fraudster as possible. We know that they are using increasingly sophisticated techniques to commit fraud and share their information via online fraudster forums. However, there are various solutions that can significantly decrease the risk of fraud that an operator suffers from. Name, address and date of birth checks can be supplemented with IP address validation and voice verification. Further fraud prevention tools such as fraud alert data will enable operators to get closer to that silver bullet.
