Fraud Dictionary
/
Clean Fraud

Clean Fraud

What is Clean Fraud?

Clean fraud involves fraudulent transactions that don’t get easily detected because they appear extremely legitimate. These methods often use real data which has been stolen or otherwise acquired by a third party. However, clean fraud is an umbrella term and can take many forms. 

For instance, a criminal steals someone’s credit card and personal details. Then, they use these to defraud online retailers out of cash or valuable goods. 

For all intents and purposes, the cybercriminal looks like a legitimate customer, so the merchant is likely to believe the claim and demonstrate goodwill. 

Since clean fraud uses unique data that appears genuine, it is much more difficult for both algorithms and humans to flag.

How Does Clean Fraud Work?

In order to commit clean fraud, a cybercriminal needs to acquire data that might appear genuine. They might do this by hacking into a database, hacking into a computer, or by stealing data from an internet connection. 

They then use this to create false transactions that go unnoticed. These fraudulent transactions can be used in various ways and can be difficult to detect. They can be used to buy goods or services, sell goods, or make transfers. 

A common example of clean fraud is the so-called ‘friendly fraud.’ Friendly fraud occurs when a user makes an online purchase and then claims that they never received the item. This is a common scam that costs retailers millions every year. Users often claim they didn’t receive the item after a long period of time, in order to avoid being caught. 

Another common example is card skimming. Card skimming is when a criminal uses a device to swipe someone’s card details. This happens in a variety of ways – for example, by hacking into an ATM, using a skimmer attached to a card reader in a bar, or using an electronic device to read the information from a card left on a restaurant table. The criminal can then use this information to create a new card, which they can use to make a purchase online.

4 Real Examples of Clean Fraud

Friendly fraud: Friendly fraud describes a situation where an online shopper falsifies a claim and then asks the seller to reimburse them for the false claim. 

For example, a shopper might claim that they didn’t receive an item, when in fact they intended to keep it but didn’t want to pay for it. 

Friendly fraud is often committed by people who believe they are entitled to a refund or compensation without having to pay for it. 

The scenario can be especially problematic when a seller uses a payment service that doesn’t automatically flag fraudulent transactions. 

After all, if the seller doesn’t review the details of each transaction, they might miss the fact that the person who made the false claim is unresponsive when asked to return the item in question.

Account takeover (ATO) fraud: Account takeover is a form of identity theft that often targets online stores or ecommerce platforms. A criminal will obtain access to a victim’s account, usually by obtaining their details through phishing or some other method. 

After that, they log into the account and complete transactions as if they were the legitimate account holder. 

ATO fraud can take many forms and can happen to anyone. For instance, a criminal might use someone’s account to transfer money to another account, or they might use the account details to buy goods that they then sell online. 

ATO fraud is a very real threat to online sellers, especially those who accept credit card payments. It is important to take steps to protect your account, including using strong, unique login details and regularly reviewing any recent logins.

Fraud by false claim: A fraud by false claim is a type of clean fraud where the criminal submits a claim that is false but extremely convincing. The claim might be genuine in parts, but the person submitting it is aware of the false information that is included. 

For example, a criminal might acquire someone’s identity and use this to submit a claim for work on a house that was never done. They might use a combination of genuine information, such as the homeowner’s street address, and false information, such as the name of the contractor who supposedly did the work. 

The fraud by false claim is likely to go undetected because of the genuine elements that are woven into it. A person reviewing the claim is likely to assume that it is valid.

 

First-party fraud: First-party fraud refers to the fraudulent activities of employees, contractors, and other people who have legitimate access to the systems or accounts of a company or individual. 

First-party fraud often takes the form of an employee stealing from their employer, or contractors using fraudulent credit cards to siphon money from a company. 

First-party fraud is a serious problem for businesses, especially those that rely on subcontractors or a large number of employees.

 

How to Avoid Clean Fraud

There are a few ways to avoid clean fraud. First, you need to make sure that your data is secure. You can do this by implementing robust data management processes and data security systems. However, even if you do everything correctly, you can’t always prevent clean fraud.

If you believe you are the victim of clean fraud, you should report the crime to the appropriate authorities. While you can’t undo the damage, you can prevent it from occurring again. You can also implement payment security systems that prevent clean fraud. 

These include risk algorithms and dynamic data authentication systems. You can also use chargebacks, which allow you to reverse a transaction. This shows the card provider that an unauthorized transaction has taken place, and they will then reverse the charge.

How to Detect Clean Fraud

To detect clean fraud, you need to be aware of the common signs. If you are suspicious about a transaction, you can use a risk algorithm, or buyer verification tool (like Spotrisk) to investigate it. This will investigate a transaction based on the past data, and will flag up any potential fraudulent activity. 

You can also use dynamic data authentication systems, which monitor data and flag up whenever it appears to be fraudulent. If you suspect clean fraud, you can also use chargebacks to reverse a transaction and protect your business. However, if you detect clean fraud, you need to detect it as early as possible. 

This will allow you to investigate it fully and prevent it from continuing. You can identify clean fraud by checking if a customer’s name, card details, and address don’t match. If they don’t, you should investigate further to determine if the transaction is legitimate or not. You can also check if a customer uses a different device than they usually use to make a purchase.

Last word

Clean fraud is a type of fraud that occurs when someone uses real information that has been stolen or otherwise acquired by a third party. This type of fraud is difficult to detect because it looks extremely legitimate. In order to commit clean fraud, a cybercriminal needs to acquire data that might appear genuine. 

They might do this by hacking into a database, hacking into a computer, or by stealing data from an internet connection. A common example of clean fraud is the so-called friendly fraud. This occurs when a user makes an online purchase and then claims that they never received the item. To avoid clean fraud, you need to make sure that your data is secure.

Ready to protect your store?

Connect your ecommerce store free, in just a few clicks.
© Copyright Spotrisk 2022