What is a Fraudster?How to Identify, Anticipate, & Defend Against Scammers

What is a Fraudster? What Compels Them to Commit Crimes?

What do you picture when the word “fraudster” comes to mind?

Maybe you imagine a masked hacker sitting in front of a laptop. Or, perhaps you picture a group of co-conspirators working together as part of a sophisticated, organized fraud ring.

Here’s the thing, though: anyone can be a fraudster, even if they don’t have a record of bad behavior in the past. In fact, even once-legitimate customers can become fraudsters by filing so-called “friendly” fraud chargebacks.

Given the overwhelming threat of fraud, it’s a good idea to understand who fraudsters are, how they think, and how they operate.

What is a Fraudster in Online Commerce?

Fraudster

[noun]/frôd • stər/

A fraudster is anyone who deliberately deceives other businesses or people for personal or financial gain.

In the context of eCommerce, fraudsters can use a lot of different tactics. They may create new accounts using fake synthetic identities. They may use account takeover tactics to commandeer a user’s account and commit card-not-present (CNP) fraud at checkout. Or, they may carry out post-transaction scams, like chargeback fraud or return fraud.

Who fraudsters are, meanwhile, run the gamut from opportunistic individuals and disgruntled customers to organized crime rings that carry out massive targeted data breaches and other sophisticated scams.

In any case, online merchants are especially vulnerable to fraud because the card-not-present (CNP) nature of eCommerce provides a layer of concealment that physical retail does not. Fraudsters exploit this distance to test cards, takeover accounts, and resell stolen goods before they can be traced.

Worse, the cost of online fraud extends far beyond the initial loss of revenue. Whenever fraud occurs, eCommerce merchants must shell out money to investigate claims, and may face chargeback fees stemming from legitimate disputes filed by victimized cardholders. The resulting high chargeback rate can jeopardize a merchant’s relationship with payment processors and acquiring banks, resulting in higher long-term credit card processing fees.

How Fraudsters Target Online Businesses

Fraudsters don’t choose their targets at random. Instead, they methodically seek out vulnerable merchants who lack the means or infrastructure to defend themselves. This process of careful victim selection allows opportunistic fraudsters to maximize their chances of success while minimizing the risk of getting caught.

How Do Fraudsters Select Targets?

Any online business can become a target if it appears vulnerable. Merchants with outdated websites, generic checkout processes, limited customer support options, or a public history of data breaches are common targets.

Fraudsters may also gravitate toward vendors in high-risk industries like credit repair or adult entertainment. Or, they may target merchants that sell high-value goods that are easy to convert into cash, such as electronics, luxury goods, as well as gift cards.

How Do Fraudsters Prepare for Attacks?

Fraudsters begin by gathering information. They may purchase stolen credit card numbers and personally identifying information from illicit data brokers on the dark web.

Then, fraudsters may test the merchant’s defenses. For instance, bad actors may run card testing schemes, in which they place very small orders to see if the stolen payment information is valid and if the transaction is approved. If it is, the merchant is marked as an easy target.

For more sophisticated attacks, fraudsters may build synthetic identities or conduct presentation attacks to defeat a seller’s security systems at onboarding and checkout.

How Do Fraudsters Execute Their Attacks?

Finally, fraudsters wait to strike. Attacks are often timed for holidays, weekends, or overnight hours, which is when a merchant’s manual review and customer support teams are likely to be understaffed or offline.

Fraudsters exploit these windows of weakness to carry out their attacks before they’re discovered. For this reason, bad actors often take a high-velocity approach, placing numerous orders in quick succession to extract maximum value from stolen payment methods before the issuer or the merchant cuts them off.

To hide their tracks, fraudsters often spoof their location using VPNs or proxies. They may even use freight forwarding services to obscure the final destination of the goods they steal.

Profiles in Criminality: Examining Common Types of Fraudsters

As mentioned before, fraudsters range from customers-turned-fraudsters to criminals who operate as part of organized fraud rings. Below, we provide an overview of the most common fraudster personas:

The Opportunist

This is the everyday consumer who “dabbles” in fraud. They aren’t career criminals; they’re regular customers who, for one reason or another, are able to rationalize engaging in fraud of some kind.

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The Professional

These are career criminals who treat fraud as their full-time job. They invest in sophisticated tools, purchase high-quality stolen data from the dark web, and possess a deep understanding of how fraud filters work.

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The Cooperator

Fraud rings are collaborative criminal enterprises. They can involve anywhere from a few individuals to hundreds of co-conspirators.

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The Insider

Sometimes the call is coming from inside the house. An insider threat is an employee, contractor, or partner who uses their legitimate access to a merchant’s systems to commit fraud, or to work as a “man on the inside” on behalf of another fraudster.

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The Accidental Fraudster

Not all illegitimate chargebacks are malicious. Some stem from simple misunderstandings or genuine customer confusion.

Warning Signs of Fraudster Activity

To avoid being caught in the act, fraudsters will do their best to conceal their tracks. Still, fraudulent actions often leave behind a trail of data that looks different from legitimate customer behavior.

Recognizing these red flags can enable you to stop or mitigate fraud threats before they cause significant harm:

Understanding Fraudster Psychology & Motivation

To really understand what a fraudster is, you need to understand why fraudsters do what they do.

A scammer’s motivations are often explained by a well-known criminological framework called the “fraud triangle.” This idea suggests that fraud occurs when three elements converge: motivation, opportunity, and rationalization:

Fraud is often correlated with economic pressure, since individuals are more likely to rationalize “gaming the system” when they are struggling financially. It’s for this same reason that many fraudsters are located overseas in developing countries whose economies are volatile or unstable.

For individuals, meanwhile, fraud can beget fraud. One successful attack can cause them to rationalize further bad behavior. In some cases, it can even become an addiction. 

For merchants, understanding these drivers can aid in prevention. Notably, harsh consequences or penalties alone may be an inadequate deterrent, since some fraudsters may either believe they can perpetually evade detection, or may be driven by motivations that override the fear of punishment.

Real Examples of Fraudsters Caught & Prosecuted

Fraud happens in the wild all the time. When scammers strike, merchants can lose thousands or even millions of dollars. Here are a couple of notable recent cases:

5 Houston Men Caught in $1.2 Million Gift Card Heist

Five Houston men, ranging in age from 26 to 62, were arrested and indicted in December 2023 on charges of conspiracy, bank fraud, mail fraud, and identity theft.

According to the US Attorney’s Office for the Southern District of Texas, the five men stole mail containing newly-issued credit cards intended for their legitimate recipients. The fraudsters then “fraudulently activated at least 210 stolen credit cards over six months and caused approximately $1,230,542.92 in losses.”

As part of the scheme, the men called card issuers to increase their credit limits so that they could spend more. The fraudsters then used their expanded buying power to purchase goods, services, gift cards, cash and merchandise at retail stores across the area.

If convicted, the fraudsters could each face more than 30 years in prison, along with court-ordered fines of up to $1 million.

7 New York Residents Launder $20 Million Worth of Lowe’s and Home Depot Gift Cards

In June 2025, seven residents of New York state in their 30s and 40s were charged with mail fraud and conspiracy for their roles in a massive fraud operation involving more than $20 million worth of gift cards from Lowe’s and Home Depot.

The fraud ring, which operated between January 2023 and March 2025, was uncovered by the Nassau County Police Department and the FBI after a 15-month investigation.

According to Nassau County District Attorney Anne T. Donnelly, the “seven defendants used the stolen funds, obtained through a computer scam that targeted more than 1,800 victims in 45 states, to buy copper pipes, electrical wire, and other equipment for resale to local home improvement businesses in New York City. Search warrants coinciding with these defendants’ arrests recovered enough products to fill 12 box trucks, $100,000 in cash, and several of the defendants’ vans with merchandise still inside.”

If convicted, the defendants could each face between 5 to 15 years in prison.

How to Stop Fraudsters from Targeting Your Business

Remember: fraudsters are persistent, but very opportunistic. They’ll focus their efforts on easy targets. That means you can repeal fraudsters by making your business look like an unattractive, difficult target.

To do so, you’ll need to implement a layered defense that makes your business appear visibly secure. Specifically, you can deploy:

Displaying trust seals and logos of security partners (like PCI-DSS compliance or SSL certificates) acts as a psychological deterrent. They signal to fraudsters that you take security seriously and likely have robust backend systems.

Implement multi-factor authentication (MFA), alongside other tools like card verification value (CVV) checks and biometric verification. These intentionally add a little bit of reasonable friction, but send a clear signal that you shouldn’t be messed with.

Of course, this friction plays a practical role as well. While a minor inconvenience for legitimate customers, it’s a significant barrier for fraudsters, since stolen card lists often lack this complete information.

Maintaining and clearly communicating strict policies on returns, refunds, and shipping can defuse legitimate misunderstandings and clearly delineate what’s acceptable and what’s not. This removes the gray areas that opportunistic fraudsters exploit to rationalize their actions.

Deploying the Right Systems to Detect Fraudsters

In addition to visible security measures, you’ll also want to have fraud detection systems that work behind the scenes to analyze behavior and transaction data in real time. This allows you to identify suspicious activity as it happens. Consider:

Analyzing a combination of indicators simultaneously, such as geolocation data, device fingerprints, and transaction velocity, can help you spot anomalies that signal a coordinated attack.

Advanced fraud platforms use machine learning to analyze millions of data points and identify complex, non-obvious patterns associated with subtle or emerging fraud tactics. This allows your system to identify, block, and adapt to new types of attacks that more basic rule-based systems would miss.

Not every flagged transaction should be blocked outright. Set intelligent, fraud score-based thresholds for manual review. That way, your team can closely examine “gray area” transactions that could be misidentified by your automated systems.

Building a Fraud Prevention Culture

Ultimately, the most resilient defense against fraud is a business-wide culture of awareness and proactivity. When every team member is invested in protecting your business, you create an environment that is naturally hostile to fraudulent activity. Specifically, you should:

Upon detecting fraud, immediately cancel the order, void the payment authorization to prevent funds from being captured, and flag the associated customer account and device fingerprint to block future checkout attempts.

Go beyond standard security training. Conduct interactive workshops where employees from all departments learn to recognize the signs of social engineering, analyze suspicious orders, and understand the motivations behind fraud.

This empowers your team to see your business through the eyes of a potential fraudster. That may prime them to identify vulnerabilities that technical systems alone might miss.

Fraud isn’t just a problem for your finance or IT department. Share fraud-related insights across the company, from marketing (who might spot bot traffic) to customer service (who are on the front lines of social engineering attempts).

This cross-departmental awareness ensures that potential threats are identified and communicated quickly, no matter where they first appear.

Acknowledge and reward employees who spot and stop a fraudulent transaction or identify a new vulnerability. Celebrating wins reinforces the value of vigilance, encourages proactive behavior, and transforms fraud prevention from a chore into a shared responsibility that preserves and protects your bottom line.

Treat every fraud attempt — successful or not — as a learning opportunity. Conduct post-mortems to understand how the fraudster attempted the attack, why it was or wasn’t successful, and what processes or systems could be improved. Developing a continuous feedback loop can help you incrementally sharpen and adapt your defenses to evolving threats.

Fraudsters often target multiple businesses using the same methods. Actively participate in industry forums and fraud intelligence-sharing networks to exchange information about new fraud trends and bad actors. This collaborative approach keeps you informed about emerging threats and can help you benefit from the collective experience of other merchants.

Look beyond your chargeback rate alone and consider holistic measures of fraud prevention. For example, track metrics like your manual review approval rate to ensure you aren’t declining legitimate orders. Also, break down fraud attempts by type so that you can measure how successful you are at deterring specific threats.

For significant attacks, maintain detailed records of the fraudulent transaction, including timestamps, IP addresses, communication logs, and any other data collected. This evidence can help you file detailed reports with your acquirer, or with authorities like the FBI’s Internet Crime Complaint Center (IC3) or the Federal Trade Commission (FTC).

Participate in intelligence networks so that you can share and receive information about fraud attempts, tactics, and patterns. Doing so also helps the entire eCommerce ecosystem by notifying other potential targets of the fraudster’s activity, often before they are even attacked.

Taking the Next Step to Stop Fraud

Stopping fraudsters relies on strategically integrating complementary technologies and processes that function as a unified defense system. But, even the most well-designed framework can’t provide absolute protection against fraud or chargebacks.

That’s where we come in.

Chargebacks911® delivers industry-leading chargeback management solutions that set the standard for comprehensive protection. Our specialists continuously identify emerging fraudulent tactics and create cutting-edge countermeasures to address these evolving challenges.

We provide the solutions your business needs to combat fraud effectively. Reach out today to schedule your complimentary consultation and demonstration.