Fraud as a Service (FaaS)5 Basic Practices to Stop Professional Fraudsters

September 29, 2022 | 12 min read

Fraud as a Service FaaS

In a Nutshell

"Fraud as a service," or "FaaS," may represent the future of online fraud. Are you ready to deal with this threat? In this article, we examine the leading FaaS tactics and explore what you can do about them.

Is “Fraud as a Service” (or FaaS) the Next Big Threat Facing Your Business?

What comes to mind when you think about organized crime? Maybe you imagine an old-fashioned mobster in wing-tip shoes cackling over a tommy gun. Well, times have changed since the days of The Godfather.

Modern organized crime is a lot more banal… but no less dangerous. Professionalized criminals can leverage new technologies to infiltrate every corner of our lives, from personal banking to high-powered corporate databases.

Unfortunately, the existence of the dark web encourages and insulates many criminal practices that might otherwise be impossible. “Fraud as a service,” or “FaaS,” is going to be a major force shaping the future of online fraud. 

How ready are you to fight back?

What is Fraud As a Service?

Fraud as a Service

[noun]/frôd • əz • ā • sərvəs/

Fraud as a Service is a process by which an individual bad actor provides tools and services to others to facilitate their commission of fraudulent online activity. FaaS can involve diverse tactics for perpetrating fraud.

You’re probably familiar with specific fraud strategies like account takeover fraud or friendly fraud. There are tools and tactics available to address these problems. At Chargebacks911®, for instance, we offer full-service chargeback management that targets disputes by their authentic source.

What’s different about Fraud as a Service is that FaaS is not a specific fraud tactic. Rather, it is an online business model. It lets criminals buy or subscribe to the tools or data needed to commit fraud.

While it's relatively easy to attempt a single act of fraud, creating a fraud operation large enough to make it worth the risk requires time, money, and tech expertise. Thus, much like Software as a Service (SaaS) providers provide access to software on a subscription basis, FaaS services offer a wide range of tactics and personal information that can be used by their subscribers to commit fraud.

How Does FaaS Work?

FaaS is not limited to a single tactic. For example, a service provider may conduct distributed denial of service (DDoS) attacks on behalf of their customers. Or, they might rent botnets to criminals, who can then use the botnet to conduct their own attack.

FaaS providers may have access to stolen payment card information, healthcare records, or social media accounts. They can use this data to create fake users (which are then sold or rented to subscribers) or simply sell the raw data and let fraudsters create their own faux accounts.

The aims of individuals and organizations who run FaaS platforms are to:

  • Organize global networks of experienced cybercriminals for collaboration
  • Build and maintain dark web platforms from which FaaS scams operate
  • Market FaaS to other bad actors as a viable product
  • Network with other criminals and companies to convert stolen goods into cash
  • Develop and use international law-enforcement avoidance software

It’s even possible for fraudsters to purchase complete, pre-populated social media accounts with a single click. It really doesn’t matter what type of attack a criminal wants to commit or what level of technical skill they possess. Chances are high that there’s a turnkey solution available to facilitate their crimes either way.

Remember!

All these transactions take place on the dark web. This makes FaaS operations especially difficult to trace and disrupt. While you might be able to intercept an individual fraud attack, the service provider is still out there, offering the same tools and services to other fraudsters.

What Makes FaaS Harder to Identify?

The fraud-as-a-service product model is believed to be a key factor contributing to online fraud and cybercrime in recent years. No one can say for certain, though. As mentioned above, FaaS is very difficult to track and eliminate.

Modern-day online criminals are smart and professionalized. They work with one another to brainstorm new tactics and refine their techniques. That’s bad news for consumers and sellers alike.

If you find yourself a victim of this type of attack as a consumer, your identity could be roped into a fraud attack without your knowledge. The stakes are even higher if you’re a merchant, though, as you could face multiple different points of vulnerability. If you’re in that boat, it could have substantial ramifications for your reputation and customer confidence.

Forward-thinking fraudsters could also view you as an opportunity to leverage stolen information. An FaaS user could leverage new tactics with bought or rented technology to overwhelm your systems with bad traffic and complete fraudulent transactions.

Is Fraud as a Service (FaaS) a Growing Threat?

FaaS is not only a growing threat. It’s likely to be the next big fraud trend for the foreseeable future. When criminals team up and organize, the number of scams they can perpetrate increases exponentially.

FaaS reveals a seedy underbelly of critical cloud service technology. While a lot of widely-used platforms and systems are dependent on the cloud, the same technology provides opportunities for criminals to exploit. FaaS providers deploy tactics across every system that even nominally interacts with cloud-based software. Social media platforms, email hosting sites, online dating forums, content management systems: no platform is safe.

Every move you make…fraudsters are going to look for a way to respond. You need to stay two steps ahead at all times.REQUEST A DEMO

Individuals can be targeted on social media platforms like Facebook and TikTok, which feature many sales and marketing outlets for consumers and small businesses. As the user bases in question grow in size and diversity, we can expect a corresponding rise in fraudulent attacks.

  • Today’s cybercriminals are educated, informed, and sophisticated.
  • Fraud is subject to market forces; where a need is found, someone will emerge to leverage the opportunity by fulfilling that need.
  • The most popular products sold by fraudsters on the dark web are account details, credit card numbers, and customer profiles.
  • FaaS develop online forums that function very similarly to legitimate online marketplaces. Individuals can brainstorm and collaborate on projects, share information, and split profits from scams.

Think about it this way: companies have developed software as a service (SaaS) solutions to identify, mitigate, and recover from fraud in response to a market demand. With FaaS, fraud communities have developed in response to the same pressure, but exerted from the other end of the process.

Detecting & Preventing Fraud as a Service 

The techniques and software you use to prevent fraud are more important than ever before. Now is an excellent time to ensure your daily practices align with an effective fraud management strategy. 

Examples of fraud prevention best practices include:

Deploying Velocity Checks

The speed, or velocity, at which transactions occur can be a dead giveaway for fraud. Using bots, fraudsters can generate and enter a multiplicity of passwords and login credentials until they find the right one. Bots can also create orders and initiate checkout much faster than human beings and repeat the process dozens of times in just milliseconds. 

The goal here is to attack with speed, rather than accuracy, in hopes that one or more of their credentials proves fruitful. 

Velocity checks limit the number of transactions that a user is allowed to attempt in a given timeframe. The software will decline any successive transactions that seem suspicious and flag that user or IP address for suspected fraudulent activity.

Verify Every Customer… Every Time

It’s no longer safe to accept automatic payments without redundant verifications, even from regular customers. You just never know whose data has been compromised.

You should integrate customer authentication software with your regular checkout processes, or ask your processor if you can upgrade to a more secure platform. You should also deploy multilayer detection software, with multiple fraud detection tools to verify your customers, including:

  • CVV Verification
  • 3-D Secure Technology 2.0
  • Geolocation
  • IP Tracking

Maximize Data Analysis

Batch analyses could be your secret weapon against bot attacks. The information you reveal by running frequent checks for behavior and spending patterns could reveal fraudulent activity. 

If you add machine learning to your arsenal of anti-fraud mechanisms, the system will immediately begin to search for patterns that present red flags, such as a multiplicity of orders originating from the same IP address or sharing the same bank identification number. Either case could be an indication of synthetic fraud

Machine learning is an AI-driven tool that can learn which activities and patterns to watch for. It can also improve detection capabilities over time. To accomplish this, however, it requires continual updates and training and a reliable and consistent stream of new transaction data.

Beware of False Declines

According to our internal research, the average merchant can experience false decline rates of 20-30%. The total cost of false declines is projected to reach $443 billion every year. That’s substantially higher than the actual cost of credit card fraud.

We are urging you to ramp up your anti-fraud efforts and verify every one of your customers before purchase. At the same time, a balance must be achieved. Here again, machine learning may offer a potential solution.

We’re talking about a process called dynamic routing. Here, machine-learning technologies can route transactions to the bank in order to clarify details and improve the odds of authorization. It can let you route a cross-border transaction through a processor located in the same country as the buyer, for instance.

Employ Manual Review

There comes a point when a machine is incapable of discerning potentially fraudulent behavior from unusual but valid customer activity. In order to stave off the false declines mentioned above, it might be necessary to designate a fraud manager within your own company to manually review flagged orders before approving or denying them. 

This isn’t always easy, though. Fraud management demands specific expertise. There may not be anyone within the organization with the skills and experience necessary to oversee this process.

If you struggle to find a happy balance between false declines and stopping fraudulent transactions, perhaps it’s wise to consider hiring a third-party expert to help you optimize both.

When it’s Time to Turn to the Experts…

Stopping criminal fraud offers compound benefits.

First, you’re protected against chargebacks resulting from the fraud itself. Plus, when you eliminate the prospect of criminal fraud, you get better and more accurate data. This allows for more informed decisions. You’re able to identify errors, as well as chargeback abuse in the form of friendly fraud.

Fraud as a service is a problem, but it’s nothing new for fraud management. Protecting yourself, though, means identifying fraud based on true sources rather than unreliable chargeback reason codes. Otherwise, you end up developing strategies based on increasingly-inaccurate data.

Chargebacks911® solutions can integrate seamlessly into your existing fraud prevention strategy. We can help you leverage data more effectively and offer a better return on your fraud management investment. Then, once we eliminate the possibility of criminal fraud, we can deploy targeted solutions to eliminate chargebacks caused by merchant error or friendly fraud.

Fraud as a service might be draining your revenue as we speak…but you don’t have to accept it. Contact us today and learn how much you stand to save with more effective chargeback management.

FAQs

What is fraud as a service (FaaS)?

Fraud as a Service is a process by which an individual bad actor provides tools and services to others to facilitate their commission of fraudulent online activity. FaaS can involve diverse tactics for perpetrating fraud.

How does fraud as a service work?

FaaS is not limited to a single tactic. For example, the perpetrator may conduct distributed denial of service (DDoS) attacks on behalf of their customers. They may also rent botnets to criminals, who can then use the rented tools to conduct their own botnet attacks.

FaaS providers may have access to stolen payment card information, healthcare records, or social media accounts. They can use this data to create fake users (which are then sold or rented to subscribers) or simply sell the raw data and let fraudsters create their own faux accounts.

What makes FaaS harder to identify?

Modern-day online criminals are smart and professionalized. They work with one another to brainstorm new tactics and refine their techniques. That’s bad news for you as a business because you face multiple different points of vulnerability.

The last decade has produced numerous high-profile data breaches involving still-unidentified criminals who compromised millions of customers’ records. If you find yourself a victim of this type of attack, it could have substantial ramifications for your reputation and customer confidence.

Is fraud as a service (FaaS) a growing threat?

FaaS is not only a growing threat, it’s likely going to be the next big fraud trend for the foreseeable future.

Frankly, the difference between lone-wolf cyber attacks and organized crime is glaring. A single criminal is concerning enough, but the average number of scams they can perpetrate on their own isn’t typically that high. However, when criminals team up and organize, the number of scams they can perpetrate increases exponentially.

How do I detect and prevent FaaS attacks?

Fraud prevention best practices include deploying velocity checks and other verification tools, as well as maximizing data analysis, avoiding false declines, and employing manual reviews for flagged transactions.

We’ll run the numbers; You’ll see the savings.
Please share a few details and we'll connect with you!
Over 18,000 companies recovered revenue with products from Chargebacks911
Close Form