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Triangulation Fraud

Triangulation Fraud: A Fast-Growing New Fraud Scheme

As we’ve discussed on the blog before, fraudsters are a creative bunch. They’re always looking for new ways to steal and take advantage of merchants. So-called “triangulation fraud” is one of the fastest-growing tactics being employed against merchants.

What is Triangulation Fraud?

Triangulation Fraud

[noun]/* traɪ ● æŋɡjə ● leɪʃən ● frɔd/

Triangulation fraud occurs when a customer makes a genuine purchase on a third-party marketplace, like eBay or Amazon, but the seller fraudulently purchases the product from another merchant. The name comes from the tri-lateral relationship between three involved parties: the unsuspecting customer, the legitimate merchant, and the fraudster middleman.

First, the fraudster sets up operations on a marketplace site. eBay is a popular option, but any site with a marketplace that allows third-party sellers to operate will work. The criminal then lists products for sale at unusually low prices.

When a cardholder makes a purchase, the fraudster then turns around and buys the goods specified from a legitimate seller using stolen cardholder information, and sets the shipping address to match that of the customer. The merchant then ships the product to the buyer.

The problem arises, of course, when the owner of the stolen information notices unauthorized charges on their statement. The cardholder disputes the charges, and the merchant ends up facing a wave of chargebacks as a result.

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Common Signs of Triangulation Fraud

Triangle fraud is a serious threat. That said, it does have some clear, recognizable signs to watch for. Below are a few common warning signs associated with a triangulation attack:

New Customers

New Customers

A new account that suddenly starts buying the same items on a regular basis.

Conflicting Addresses

Conflicting Addresses

The buyer’s billing and shipping information will be different.

Low Dollar-Value Transactions

Low Dollar-Value Transactions

Triangulation fraudsters typically focus on commonplace items not usually targeted by fraudsters.

Invalid Contact Information

Invalid Contact Information

Invalid email or telephone numbers suggest fraud activity.

Transaction Velocity

Transaction Velocity

Triangulation attacks are usually committed by small groups operating repeatedly from a few devices.

As a merchant, you should watch for groups of transactions that display several of the warning signs outlined above. If you see these show up regularly, you may have a problem with triangulation fraud.

This threat source is like a parasite in many ways. A fraudster, or group of fraudsters, identifies you as a potential host, then latches on and submits fraudulent transactions over and over. They gradually sap your revenue and your productivity, while you end up facing a surge of chargeback issuances.

It sounds grim, but don’t worry: there is good news, too. Triangulation fraud is actually pretty easy to eliminate once you identify it.

Data is Your Friend

If you suspect fraudsters have targeted you for a triangulation scheme, the first step should be to review your analytics.

You want to look for those items which fraudsters seem to purchase repeatedly. Schemers involved in triangulation fraud are probably running a specialty operation, so they’re typically buying the same item (or items) over and over. Cosmetics, for instance, are a common target for triangulation fraud. If you identify problem items, you can refine your fraud scoring rules and set a lower threshold for these goods.

You can also look at the payment method used. Are all the suspect transactions coming from a specific banking identification number (BIN), or using the same payment tool? If so, this can be a sign of fraudulent activity. Another tactic you can employ if you suspect abuse is to put risky purchasers through additional checks. For example, you can charge two micropayments to the account in question, and ask the buyer to verify the amounts.

If you identify the purchase as fraud, you can try reaching out to the marketplace on which the items are being listed for sale. In many cases, marketplaces like eBay are willing to collaborate in order to stop fraud on their platforms. However, they can't easily identify bad actors unless they hear from merchants first.

Looking beyond individual transactions, you may also want to try leveraging historical data to map out and link common and recurring points. This kind of comprehensive trend and link analysis can expose common attributes in a lot of triangulation fraud. Although time-consuming and labor-intensive, this is critical work: analyzing data in this manner allows you to generate better data over time, which makes for more informed and intelligent decisioning.

A More Comprehensive Approach to Fraud

All the above-mentioned practices can help you sniff out and stop triangulation fraud. But, obviously, the best approach to fraud is to prevent it before it happens.

You can’t afford to appear vulnerable. Fraudsters know that the more people who are engaged in fraud against a single merchant, the harder it becomes to detect bad orders and identify fraudsters. So, your fraud losses will grow quickly once a criminal ring identifies your site as a target. This generates bad data, making fraud detection less accurate, and the problem worsens over time.

Overall, your best move is to stop fraud quickly and prevent it in the long term by adopting a multilayer strategy.

It’s true that adding more fraud tools to your screening process can be costly. However, you have to look at the overall cost to implement a solution and weigh it against the potential losses you could avoid. Think of fraud prevention tools like a net: the more tools you incorporate, the finer the mesh, and the finer the mesh, the more fraud you catch. And the more fraud you catch, the better your long-term performance.

A dynamic, comprehensive approach to fraud management should include:

All these tools work side-by-side with your fraud scoring process to deliver better decisioning. And, of course, third-party chargeback management tools like chargeback alerts and Intelligent Source Detection™ help eliminate genuine criminal fraud, while also identifying cases of friendly fraud.

Triangulation fraud is just one of many threats that can separate you from your hard-earned cash. But, with an effective approach to chargeback management at your disposal, you have the power to prevent losses, recover revenue, and protect the long-term viability of your business.


Prevent Chargebacks.

Fight Fraud.

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