6 Common Frauds Facing Merchants When Transacting Internationally

Posted on 20th November 2023

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As ecommerce expands its reach globally, so too do the risks of encountering different forms of fraud. Because of this, understanding their nature and developing preventive measures are integral pillars for ensuring both your business’s growth and reputation remain intact. To that end, here’s a look at a few common examples as a starting point for your own anti-fraud efforts.

Card-Not-Present Fraud

On the international stage, Card-Not-Present (CNP) fraud is a daunting challenge for merchants. Essentially, this type of scam involves fraudulent transactions where the cardholder doesn’t physically present the card to the merchant during purchase.

It’s prevalent in situations like online shopping, email orders or telephone sales, and perpetrators are getting craftier by day making it harder to detect their deceitful tactics. As such, implementing merchant fraud protection measures is a must to safeguard your business against these bad actors on global scale.

Friendly Fraud

Friendly fraud might sound harmless, but it’s anything but that for international merchants. Essentially a misnomer, this form of deception happens when a consumer makes an online purchase with their own credit card and then disputes the charges with their credit provider after receiving the goods or services.

The irony is that these are ‘friendly’ customers committing the act, often without realizing its potential implications. It’s like shoplifting while wearing a smile!

Understanding how to detect and combat friendly fraud will greatly bolster your global business’s resilience against significant revenue loss. There are full-blown platforms designed to detect, prevent and counter-dispute this type of fraud, so don’t be shy about adopting them.

Identity Theft

When crossing international borders, businesses also risk falling victim to identity theft fraud. This fraudulent act involves a scammer utilizing stolen personal information for illicit gain at your expense.

For instance, they may use compromised data to open nefarious accounts or make unauthorized transactions in the victim’s name.

At a time when sensitive details are commonly stored online, this type of deceit is increasingly common and far-reaching, so it pays to be extra vigilant about how you share client-centric information internationally.

Interception Fraud

Dealing with international transactions opens the door for the intrusion of interception fraud. This happens when a criminal intercepts, and possibly alters, communications between you and your customer to defraud either or even both parties.

For instance, they might change bank details on invoices so that payments are redirected into their accounts instead of yours.

With international business bringing an added layer of complexity to communication and technologies used across countries, falling victim can be surprisingly easy. Having robust cybersecurity measures in place to protect data as it passes between your business and legitimate end users can minimize this threat.

Phishing Scams

Modern merchants are frequently hooked by phishing scams. This form of fraud sees unscrupulous actors trick individuals into revealing sensitive data like passwords and card details by pretending to be reputable entities, from banks to known ecommerce platforms.

Cybercriminals might send out mass emails or create fake websites that seem authentic at first glance but their true intent lies in wrongfully acquiring personal information.

Given the global online presence of brands nowadays, phishing can impact both customers and businesses. Raising awareness about the tactics used through in-house training of team members, as well as alerting customers when scams involving your branding are implemented, will give you a means to defend yourself from phishing.

Triangulation Schemes

One intricate fraud scheme that global merchants grapple with is triangulation. This involves three parties, made up of a fictitious online store, the unsuspecting buyer, and you, the genuine retailer.

The scammer lures buyers to their fake shop offering highly attractive deals, and you as the innocent supplier fulfill these through drop shipping. Meanwhile the crook walks away having paid for these goods with stolen cards or hacked PayPal accounts.

Once again, tools to detect and deflect triangulation tactics such as these are available, and it’s only really relevant for dropshipping operators, but it’s worth knowing about whatever type of ecommerce business you oversee.

The Last Word

International trade offers vast opportunities, yet it’s not without challenges, including the potential for fraud in many forms. Luckily, familiarizing yourself with these common types of ecommerce-related scams leaves you better equipped to protect your business.