Triangulation Fraud: What Is It and How to Protect Your Business

Triangulation fraud is prevalent and appealing to fraudsters because it’s a clean transaction. There’s no need for them to warehouse, ship, or ever handle any products. Fraudsters essentially use the legitimate brand’s website for free fulfillment of orders purchased through their illegitimate online storefront. Triangulation fraud has been around for years, but NoFraud has seen a 70% increase in this type of fraud within the past year.

Triangulation fraud is a type of scam that involves three parties: a scammer, an innocent consumer, and an unsuspecting online marketplace or eCommerce shop. This fraudulent scheme typically occurs in the context of online purchases.

eCommerce triangulation fraud, also known as shipping or delivery fraud, is a deceptive scheme where fraudsters exploit legitimate online transactions to facilitate the purchase and shipment of stolen or counterfeit goods. This type of fraud typically involves three parties: the fraudster, the victim (an unsuspecting online shopper), and the eCommerce platform or marketplace.

1. The Fraudster: The scammer acts as an intermediary or a seller on an online platform. They create a fake listing for a popular or high-demand item at an attractive price.
2. The Innocent Consumer: The unsuspecting consumer is interested in purchasing the item and comes across the scammer’s listing. They believe they are making a legitimate purchase.
3. The Unsuspecting Online Marketplace/eCommerce Shop: The scammer takes advantage of an existing, trusted online marketplace or eCommerce shop that handles a high volume of online transactions. The merchant is unaware of the scammer’s fraudulent activities.

How Triangulation Fraud Happens

Step 1: The scammer sets up a fake online store or uses a legitimate online marketplace to list popular or high-demand products for sale. They often offer these products at unusually low prices to attract potential buyers. 

Step 2: The innocent shopper, looking for the item, comes across the scammer’s listing and initiates the purchase process believing they’ve scored a bargain deal. They think they are dealing with a genuine merchant. 

Step 3: The scammer, acting as the merchant, accepts the consumer’s payment and collects the funds. 

Step 4: Once the payment is received, the fraudster then uses the victim’s credit card information or stolen credit card information to purchase the same item from a legitimate merchant, but inputs the unsuspecting customer’s shipping address. In some cases, the fraudster may provide a different shipping address to avoid suspicion or confusion and attempt to intercept the delivery.

Step 5: The innocent shopper who made the purchase or the consumer whose card was used (without their knowledge or consent), unaware of the scam, may try to contact the merchant or online marketplace for resolution. However, they may encounter difficulties in getting a refund or receiving the correct item.

Triangulation fraud essentially exploits the trust between the innocent consumer and the online merchant. The scammer leverages the merchant’s reputation and infrastructure to deceive buyers into making payments for items that they will never receive or that do not match the description.

For online merchants, implementing fraud prevention measures, such as verification processes, customer reviews, and proactive monitoring of suspicious activities, can help detect and prevent triangulation fraud. Educating users about potential scams and providing effective customer support for dispute resolution are also crucial in maintaining trust and protecting consumers from such fraudulent schemes.

For eCommerce shops, detecting triangulation fraud requires careful monitoring and analysis of various indicators. Here are some signs that may indicate the occurrence of triangulation fraud.

An Unusual Spike in Sales

A sudden and significant increase in sales volume, particularly for specific products, can raise suspicions. Fraudsters often target popular items as they have a higher demand and are more likely to attract customers. They also offer products at prices significantly lower than the market value to entice potential customers. These unusually low prices serve as bait to lure customers into purchasing from their fraudulent operation.

Multiple Orders From the Same IP Address & Other Uncommon Purchase Patterns

Pay attention to a high volume of orders from the same IP address. If you notice an unusual amount of orders coming from the same IP address, it could be indicative of fraud. Fraudsters will place multiple orders from a single device with shipment to different addresses. However, more advanced fraudsters have evolved their techniques and will often hide their IP address to avoid tipping merchants off to their fraud attempts.

Additionally, keep an eye out for transactions that deviate from typical purchasing patterns. This includes multiple purchases from the same IP address, unusual payment methods, or repetitive purchases of high-value items.

Complaints or Reports From Customers

Take customer complaints seriously, especially those related to receiving counterfeit products or suspicious transactions. Triangulation fraud often involves substandard or counterfeit products being sourced from third-party sellers, leading to customer dissatisfaction and subsequent complaints. Additionally, customers who encounter difficulties in contacting the seller or receive unsatisfactory customer service are also more likely to file complaints. Fraudsters involved in triangulation fraud typically provide limited or unresponsive customer support, as they aim to avoid detection or direct engagement with customers.

The presence of multiple similar complaints from different customers about a particular product can be a clear indication of triangulation fraud. If multiple customers share common experiences of non-delivery, poor customer service, or mismatched product descriptions, it may suggest the presence of triangulation fraud.

Unexplained Chargebacks or Disputes

If you experience an increase in chargebacks or disputes related to certain transactions or products, it could indicate that triangulation fraud is taking place. Customers may initiate chargebacks not realizing they were part of a fraudulent scheme.

It’s important to note that these signals are not definitive proof of triangulation fraud but rather indicators that warrant further investigation. If you suspect triangulation fraud in your store, consider taking the following steps.

Analyze Transaction Data

Analyzing transaction data is a powerful method for preventing and detecting different types of fraud, including triangulation fraud. By leveraging advanced analytics and machine learning techniques, businesses can identify patterns, anomalies, and other indicators of fraudulent activity within their transactional datasets. 

Collect and integrate data from multiple sources, such as sales records, customer profiles, financial transactions, and user behavior logs. This comprehensive dataset forms the foundation for fraud detection and prevention efforts. Review your sales data, order details, and customer feedback to identify any patterns or irregularities that may suggest fraudulent activity.

Work With Payment Service Providers

Contacting payment service providers (PSPs) is an important step in fighting triangulation fraud. PSPs are crucial in facilitating financial transactions and can collaborate with businesses to prevent fraud. Reach out to your payment service provider to discuss any suspicious transactions and seek their guidance on addressing potential fraud.

Collaborate with PSPs by sharing indicators of triangulation fraud that you’ve identified through your own analysis. These indicators may include specific patterns, IP addresses, seller account details, or any other relevant information that can help PSPs enhance their fraud detection systems. Sharing such insights helps PSPs proactively identify and prevent similar fraudulent transactions in the future.

Investigate Resellers 

Fraudulent stores often exhibit subpar website design and functionality. Look for signs such as grammatical errors, inconsistent branding, broken links, or an overall unprofessional appearance. Legitimate businesses prioritize user experience, while fraudulent stores often overlook these details. Paying attention to website design and functionality can help distinguish between trustworthy and fraudulent sites.

To avoid potential chargebacks or refunds, fraudsters commonly restrict payment options to less secure methods. These may include wire transfers, prepaid cards, or virtual currencies. Legitimate businesses offer a range of secure payment options, including credit cards, PayPal, or trusted third-party payment processors. Consumers should exercise caution if a store only accepts unconventional payment methods, as it may indicate fraudulent intent.

Legitimate businesses prioritize customer support and provide multiple means of contact. Fraudulent stores often lack accessible customer support channels, making it challenging for customers to seek assistance or resolve issues. Be wary of online stores that do not provide clear contact information or respond inadequately to inquiries, as it may signal fraudulent activity.

Collaborate With Authorities

Collaborating with authorities is an essential step in preventing and combating triangulation fraud effectively. Law enforcement agencies have the expertise and resources to investigate and prosecute fraudsters, and their involvement can significantly contribute to deterring fraudulent activities. 

If you believe fraudulent activity is occurring, report the situation to law enforcement agencies and provide them with any relevant information or evidence you have gathered.By actively monitoring your store for potential signs of triangulation fraud and taking appropriate actions, you can help protect your business and customers from fraud.