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What Is Triangulation Fraud?


What Is Triangulation Fraud?

With the rise of online marketplaces, customers have hundreds, if not thousands, of opportunities to make a purchase. Sometimes, customers and merchants become unwitting participants in sneaky triangulation fraud schemes designed to exploit cardholders and these third-party marketplaces. Keep reading to learn the best ways to identify — and prevent — triangulation fraud from damaging your e-commerce business.

Shopping online seems easy enough. A customer places an order, a merchant fills it, and the customer receives their order. Everyone’s happy, right?

Unfortunately, it’s not always that easy. When it comes to making or fulfilling purchases online, anyone is subject to risk by the dark web. Retailers, customers, and cardholders can all be affected by triangulation fraud without raising any red flags.

What Triangulation Fraud Looks Like

Triangulation fraud happens when an innocent customer makes a purchase on a third-party marketplace, but the item they receive was fraudulently purchased from yet another retailer’s website.

Here’s how triangulation fraud happens:

  1. A legitimate customer purchases an item through an auction or on a third-party marketplace.
  2. The third-party marketplace seller (who is also the fraudster) places an order with a genuine retailer for the same product the legitimate customer just ordered.
  3. The fraudster uses stolen payment information (often purchased from the dark net) to pay for the transaction.
  4. The legitimate e-commerce retailer processes the fraudster’s order, shipping it to the legitimate customer’s shipping address provided during checkout
  5. The innocent customer receives the actual item they ordered.

Who Does Triangulation Fraud Affect?

What makes this type of fraud unique — and sneaky — is that the legitimate customer may never realize anything suspicious is going on. They placed an order, and they received the item they expected to. So they never have a need to complain to the company that sent the product. In fact, the transaction may have gone so smoothly that the customer leaves a positive review for the fraudster, boosting the fraudster’s ranking and increasing the likelihood of future sales.

The transaction looks just as ordinary from the legitimate retailer’s side, too, so these fraudulent purchases rarely raise any red flags. But they’re not nearly as innocent as they seem.

Here’s how just a few of the parties involved are affected with triangulation fraud.

Legitimate Retailers

Not only is the retailer out the cost of the shipped goods, but they’re also likely to be hit with costly chargeback fees and expenses. The e-commerce merchant’s reputation might also take a hit when the owner of the stolen credit card leaves a negative review for the retailer on social media.

Innocent Customers

Despite being an innocent bystander in the triangulation scheme, the legitimate customer now possesses stolen merchandise. And their customer data may now be added to fraud databases, which could make it harder for these consumers to make legitimate purchases in the future without their transactions being flagged for review. 

Legitimate Cardholders

The legitimate cardholder lost their personal data to the dark web and fraudsters, and it’s being used to make fraudulent purchases. While cardholders will be reimbursed for the cost of these transactions, they still take time and effort to sort out.

How to Reduce Triangulation Fraud Risk

Any merchant can be at risk of triangulation fraud, but those who sell products with a high resale value on the black market — like baby products, electronics and small appliances — are particularly at risk. Smart merchants can protect themselves with a few simple steps.

Have Customers Do Their Research

Encourage customers to do their research before buying from an unfamiliar third party. Check reviews thoroughly read product descriptions and take a close look at pricing. After all, if it seems like a too-good-to-be-true deal, it probably is.

Amp Up Fraud Filters

Simple fraud filters won’t be able to catch every instance of triangulation fraud, but they can help. Adding device IDs to the fraud filter mix may help increase the chances of catching fraud, since these fraud rings often place multiple orders from the same set of devices. Another fraud filter to consider integrating is link analysis to identify and connect common data points in order to use the results to strengthen data analytics.

Invest in Fraud Prevention

To reduce the chances of triangulation fraud damaging brand reputation and creating chargebacks, merchants must implement a robust fraud prevention strategy that can identify even the most subtle instances of fraud.

ClearSale’s comprehensive e-commerce fraud prevention program might be just what your business needs to protect itself against triangulation fraud. We use a unique combination of highly trained staff and advanced artificial intelligence to help companies around the world reduce their fraud risk. Contact us to see if our managed services solution is right for you, too.

Merchant Guide for E-Commerce Fraud Protection