The (Unfriendly) Fraudster Lurking Next Door

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When it comes to real estate and cybercrime, it seems, it’s all about location, location, location.

With data breaches on the rise and online merchants constantly under threat, retailers may assume the most dangerous fraud attacks are coming at them from the faceless, nameless bad guys all over the world.

True. But cybercriminals are far from only the faceless, nameless group performing their illicit activities from the dark corners of the Earth. In fact, in certain cases, those who are geographically closest to a merchant can be the toughest to combat and among the most dangerous.

The latest installment of the Fraudster Profile Podcast Series, which takes listeners inside the various fraudster personas across a diverse and ever-growing group of cybercriminals, is focused on a very underestimated, but no less dangerous, segment: The Unfriendly Local Fraudster.

Why Proximity Matters

Fraudsters are as unique as fingerprints, it seems. Each have their own personalities and characteristics and apply their craft very differently to the online merchant world.

Local fraudsters — the ones that happen to be in the same country or even the same state of the merchants they are looking to scheme — can be a huge challenge to fraud systems.

As explained by Gilit Saporta, fraud analyst at Forter, there is a specific pattern of behavior among domestic fraud criminals.

“These are often the fraudsters who gain from experience after spending some time being a teenage or nonprofessional fraudster. Now, they are trying to make a living of it,” Saporta said.

That’s right: On-the-job training and climbing the corporate ladder are concepts that are alive and well in the cybercriminal world.

One method of attack by these unfriendly local fraudsters is trying to buy as many products as possible in order to quickly resell them, even if that means doing so from the back of a van somewhere, she added.

And though local fraudsters may not always be the most sophisticated, they still have a huge advantage in the form of resources and tools available to them.

“It’s like the fraudster next door who is knocking — that guy can get access to a variety of dropoff points and reshipping options that third-world countries aren’t going to be familiar with. Often, those are the guys who are easier to spot and catch,” Saporta explained.

For example, these local fraudsters know the geography so well — down to getting information about who might have stopped their mail or from Facebook pages about who might be on a family holiday and therefore away — that they can then intercept and change shipping addresses based on that knowledge to legitimate addresses. A package gets delivered on the front porch since no one is home — bad guy makes off with the loot.

In some cases, Saporta pointed out, these fraudsters are able to manage one bad transaction and then get another 10 through the door long before the merchant even realizes the products have been shipped to a legitimate address that may have been “compromised’ or an illegitimate one.

When Going Local Goes Bad

Every merchant has unique vulnerabilities.

For some, the unfriendly local fraudster can be the most dangerous type of cyberthreat, while others face a bigger risk from more sophisticated fraudsters.

But Saporta noted that both fashion, as well as electronic and gadget retailers, are repeatedly attacked by domestic fraudsters who are “very serious in their intention to succeed.”

Though there may always be specific red flags associated with unauthorized transactions, in order to detect unfriendly local fraudster attacks, merchants need to keep an eye out for unusual bulk purchases.

To do this, it helps if merchants have a very clear picture of the legitimate behavior characterizing good customers on their website so that a reseller or an affiliate program isn’t mistaken for a local fraudster.

The biggest risk when it comes to this fraudster persona, Saporta explained, is if merchants miss out on an opportunity when they see a rise in sales and site traffic because of the possibility that the increase in orders could possibly be fraudulent.

One of the other unique challenges is that, as local fraudsters mature, they have the potential to progress into being more multichannel fraudsters. Saporta said these unfriendly local types may even begin working in gift card fraud because of how easily they can translate those cards into cash. Some of these more mature fraudsters may also end up being early adopters of technology and go into mobile.

Saporta said that not only do these unfriendly local fraudsters have a more business-like mindset but they are true professionals who know how to cover their tracks and are not afraid to invest in their craft.

“They are really financially — and very likely emotionally — invested in the fraud factories that they are running,” Saporta emphasized. “Just because it’s fraud doesn’t mean it’s not their day job.”