Free e-mails are easy to setup than domain names/web sites. Any order from a free e-mail service must alert you (+1 fraud score).  Fraudsters will try to hide after a free e-mail service.

As I noted previously all orders are done from well know ips. If the ip maps to a proxy address, this is 100% fraud. If it does not map to a proxy server address, you can check

1. IPlocation country to billing address country
2. IPLocation city to billing address city
3. IPLocation provides some Latitude and Longitude value. You can calculate the distance to billing address. Any distance bigger than 1000 kms must warn you (+1 fraud score)
4. You can also check phone number against valid prefixes for IPLocation city/country and billing address
5. You must check zip code against city/country of billing and IPLocation address

Customer’s do connect from an internet connected device; meaning it has got a unique ip. Customer’s ip is really important, you much check and watch:

1. If the ip you catch is a valid ip
2. If ip is proxy ip (+1 to your fraud scoring system). Some fraudster will try to use anonymous proxy servers to be anonymous and untracable.
3. All ips converts to country (%98) and city (more than 70%). The must match billing and/or shipping country and city. A mismatch must alert you (+1)

There are several companies that provide ip to location services. Two of the most noticable ones are: www.ip2location.com and www.maxmind.com.

Customers usually use different addresses for shipping and billing.  A Fraudster will also do the same, and more. An order of a valuable item to some mailbox, must catch your attention. (+1 to your fraud scoring system)

So you must validate and correlate shipping and billing addresses and information (Address Line, City, State, Country, Zip Code, Phone):

An address can be checked in itself as:

1. Address can be validated from some web services. For USA orders USPS apis can provide you more information if this address is valid or not. Google Maps or Yahoo Maps provide similar information.
2. There are databases for Zip Code to Area Code and visa verso.  In a given zip code area code of the phone numbers are known before (except mobile numbers)
3. Ip Address to Country and even City Check. When order is done, it’s done over a well known IP (If it’s done over a proxy address you can totally discard the order, no need to go further). There are several solutions that map an IP to Country and City level in address. So a check for IP Address mapping will help

Shipping and Billing Address can be checked for:

1. Country check. It’s very low probable to order to another country from another country. +1

An order of 75 pair of shoes must alert you. Fraudsters will try to order in bulk, so that they can turn these products into cash in bulk. Remember to investigate multiple orders given in a short time; total of 75 pairs of shoes in 24 hours by 30 seperate orders (to same shipping address or from same ip) is another alert and another point to your own fraud monitoring system. The main difficulty is the ability to distinguish last minute orders in high season, here your experience will work

Doing overseas business may seem advantageous;  some good or services can be unavailable locally, so you may hit a sudden demand. But the main drawback in overseas sales is that, you are not protected by your own judicial system for an order done from another company. It will be hard to force someone to pay some $1,000, via laws.

Some countries have much higher risks than others. Here’s a list of countries you must add a point to your own fraud system. They all have abnormally higher instances of credit card fraud:

• Indonesia
• Ghana
• Malaysia
• Nigeria
• Benin
• Pakistan
• Israel
• Egypt
• Romania
• Russia

There are other Eastern European countries that suffer from the same problem.

My personal advice will be to build up a scoring system for your online business. It’s not done overnight but can be done by time;  either manual or automatic, depending on the size of your business.

Each of the items I placed on the list here, give you a negative point about the order. But again it’s all about experience, very much depends on your online business and industry you work. For each item I will be telling more, and how to do it.

Fraud

1 a : deceit, trickery; specifically : intentional perversion of truth in order to induce another to part with something of value or to surrender a legal right b : an act of deceiving or misrepresenting : trick
2 a : a person who is not what he or she pretends to be : impostor; also : one who defrauds : cheat b : one that is not what it seems or is represented to be

Credit Card Fraud