Triangulation Fraud

In triangulation fraud, the criminal uses stolen credit cards to make the purchase, and the customer becomes the mule. There are two ways this can happen: 

• By using a fake storefront to intercept customer payments and steal their card info.
• By using a fake seller account on a third-party marketplace to collect the payment without accessing card info. 

Triangulation scams are an issue because they affect both retailers and customers, bringing financial loss, loss of trust, and damage to the store’s reputation. 

Customers are attracted by the low prices that the criminals offer for the items on the online marketplace. Typically, they get tricked by not realizing that the seller or the online marketplace is fake; therefore, they use services like PayPal or their credit card to make the purchase. 

The criminal steals the victim’s credit card information to make another purchase from a legitimate retailer this time. Alternatively, they can sell the customer’s stolen credit card details and still make a profit. 

Chargebacks in triangulation fraud are very common. Victims who have their credit card details stolen can later request a chargeback for an item that they didn’t actually purchase. Online marketplaces, on the other hand, lose both the money and the item. Business-wise, chargebacks are an issue because they require time and resources. 

High chargeback rates, typically those over two percent, aren’t acceptable and can lead to penalties.

Fraudsters target mediocre retailers that offer their customers a semi-luxury shopping experience, meaning they might have loopholes in their security and fraud prevention systems. Such online stores often focus more on automating the user journey and the whole end-user experience, caring more about a smooth checkout process, a quick item delivery process, etc. Naturally, criminals avoid retailers that have human salespeople involved, such as luxury cars. 

There are warning signs that users need to look out for. 

Red flags indicating potential triangulation fraud on marketplaces include:

• New seller accounts without proper history, for example, all items are listed very recently. 
• Seller accounts without any reviews or ratings. 
• Unresponsive seller accounts that use fake phone numbers or other details, like email addresses.
• Accounts that get quickly deleted and then reappear under a similar name. 
• Low prices for relatively expensive items. 
• Multiple listings for the same item or a bunch of items that seem fake. 
• Images on listings that aren’t original, for example, taken from another site.

To prevent triangulation fraud, there are special fraud prevention solutions and automation tools that help Trust and Safety teams monitor suspicious behavior on online marketplaces. 

These are the most common solutions: 

• Address verification. This involves checking if the address is legitimate. This step can also be prompted in high-risk situations, for example, if the seller wants to change the personal data on their profile. In this case, a utility bill check is necessary. 
• Phone number verification. This is the process of assessing the person’s phone number and checking if it’s legitimate. Some marketplaces use this method as two-factor authentication; however, some phone verification solutions offer extra risk signals, such as determining the phone number’s country, type of network, etc. 
• Behavior tracking. This helps monitor seller activities and changes in their profile, sometimes also helping teams to detect similar behaviors, multiple accounts through the same IP addresses, email data, and so on.