E-commerce Fraud: The Latest Criminal Schemes

Sebbe Jones, manager of fraud and disputes at 2Checkout, details the latest criminal techniques using online payment transactions

E-commerce fraud costs retailers approximately $4 billion each year, according to the most recent results of an annual survey conducted by Cybersource, a provider of electronic payment and risk management services. Sebbe Jones, manager of fraud and disputes at 2Checkout, is in the business of keeping e-commerce fraud at bay.

2Checkout, an international online payment service, is a reseller for small-and-medium-sized businesses. The company has more than 20,000 active suppliers and handles more than 200,000 transactions a month. Merchants come to 2Checkout to handle the financial life of their transaction. Naturally, criminals hoping to defraud people out of their money and credit card information also attempt to use the system for financial gain. Jones outlines how 2Checkout monitors fraudulent activity, and details some of the latest scams he sees on the job.

CSO: You provide online payment services for vendors. Where does the interest in preventing fraud come in to play?

Sebbe Jones: Once we start accepting transactions, we are legally the reseller of that product. Because we are legally the reseller, we are the merchant of record. It's our merchant account and if the charge backs are over one percent, it is our merchant account on record for that and we could receive fines from Visa or MasterCard. So we have to make sure our fraud rate is down. We have a fraud department and we also have a risk department. We have two or three departments that make sure our vendors are doing what they are supposed to doing; providing service. We keep an eye out on terrorist activities, such as money laundering, or putting fraudulent credit cards through an account. So we really have multiple departments to watch every door that there is.

Tell me about the system you use at 2Checkout for identifying possible fraud.

We use 41st Parameters' Fraud Net. We put 100 percent all of our orders through Fraud Net. There are about 300 or so rules turned on that all orders go through Fraud Net. It will take all of that data, and score each order with a points system and we at 2Checkout use that points system.

Based on those points, there are orders that go into 'reject' bucket and a 'suspect' bucket and then even a 'approve and note' bucket. If an order is rejected, it means the system is flagging it, saying 'This looks bad. Take a look at this.' Anything in the reject bucket we manually review 100 percent of that.

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