In a digital first world, online fraud has become a common threat to individuals and businesses alike. One of the types of fraud that has been on the rise in recent years is account takeover (ATO) fraud. In this comprehensive guide, we will discuss what ATO fraud is, how it works, and ways you can protect your business and customers from falling victim to it.
Account takeover fraud occurs when an unauthorized individual gains access to someone else’s account and begins to make unauthorized transactions. The fraudster may do this by obtaining the account holder’s login credentials, such as usernames and passwords, through various methods, including phishing scams, malware, and SIM card swapping.
ATO fraud can cause significant financial damage, not just to the account holder but also the businesses that are victimized by these criminals. Therefore, it is essential to understand the various tactics that fraudsters use in ATO fraud to protect yourself and your business from this threat.
One of the significant challenges of ATO fraud is that fraudsters use sophisticated tactics to remain undetected. These tactics may include accessing the account from different locations, using virtual private networks (VPNs), and manipulating browser fingerprints.
Despite the techniques of these fraudsters, there are ways you can still detect and prevent malicious activity. One of the most effective and basic strategies is to use behavior-based authentication, which examines user behavior to identify any abnormalities. Actively monitoring login attempts gives businesses the ability to catch any unauthorized access before any damage is done. Both of these strategies may require purchasing tools or services, but for a relatively small investment, you can rest easy knowing that you’re actively preventing account related fraud attempts 24/7.
The best way to protect your customers and business from the damaging effects of account fraud starts with understanding the most common types of ATO attacks and how they are carried out in the first place.
Phishing scams are a common method used by fraudsters to obtain login credentials from unsuspecting individuals. They do this by creating fake websites or sending emails that appear legitimate, but they contain links that take users to imposter websites.
You can protect yourself and customers from phishing scams by using email authentication protocols and implementing effective training programs to educate employees and customers about phishing. It is vital always to double-check URLs before entering login credentials and encouraging customers to report any suspicious activity immediately.
Actively communicating to your customers about how to avoid phishing scams can not only help build a relationship between a business and a customer, but encouraging and educating on thinking critically is the #1 way for consumers to stay protected and avoid becoming a victim.
Also known as credential stuffing, brute force attacks are when fraudsters use stolen login credentials from one site to access accounts on another site. They do this by using bots that automate the login process. Essentially, this method involves using software to systematically try different combinations of usernames and passwords until the correct one is found.
This is often effective because people tend to use weak passwords, like “password” or “123456.” It’s essential to use a strong, unique password to avoid falling victim to brute force attacks. Implementing password policies such as stronger passwords and multi-factor authentication can go a long way in protecting against credential stuffing.
There is a growing market of AI and machine learning tools available to businesses to identify patterns and combat credential stuffing attempts.
SIM card swapping is a new method used by fraudsters to get access to the phone numbers linked to an individual’s account. They do this by posing as an account holder and request their telecom provider to switch the account’s SIM card to a new one. Once they receive the new SIM card, they can gain access to all account information saved on a device, gain the ability to reset passwords, and lock the actual account holder out of their accounts.
This additionally gives the attacker access to any accounts that are protected by SMS-based two-factor authentication which sends a verification code to your phone number. With full access to your phone and texts, attackers can easily steal login credentials.
Malware, especially keyloggers, are also commonly used in account takeover fraud when the attacker wants to collect credentials directly from a computer. Once these programs are installed on your device, they can track everything you type, including passwords. Malware can be found in downloads or attachments, and it can be difficult to detect.
Using robust anti-virus software and updating it regularly is a critical step in keeping devices systems safe from malware. Additionally, training employees on the dangers of malware and implementing security measures such as avoiding downloading unknown files can help protect against this type of fraud.
This vulnerability is obviously difficult to solve for businesses since these fraud attacks typically funnel straight through a customer’s private device, but it is important for businesses to train their own staff on the effects of Malware so that ATO attacks don’t come from being exposed internally.
Mobile banking trojans are a type of malware designed to steal banking information directly from mobile devices through an app or website.
Using a mobile malware detection app, keeping apps updated, and only downloading apps from legitimate app stores are effective ways to prevent mobile banking trojans from causing damage.
As a business, make sure that bad actors are not positioning as your brand on app stores and alert these marketplaces in case they are. Once mobile malware is installed on a customer’s device, the issue is no longer within your control which means it is crucial to do due diligence in any marketplace where account login information might potentially be stored.
Once an attacker has successfully taken over someone’s account, they usually try to do as much damage as possible before being detected. By taking preventive measures, you can detect account takeover fraud early and prevent significant financial losses. Some signs to look out for include:
Banks have a significant role to play in preventing ATO fraud on their platforms. They can the strategies mentioned above and more such as real-time fraud detection and prevention, providing regular updates on common fraud tactics, and educating their customers on how to protect themselves against this threat.
Clearly, account takeover fraud can cause significant financial losses for businesses and individuals. That is why it is crucial to use a fraud prevention system to protect yourself and your customers.
Preventing ATO fraud requires constant vigilance, continuous education, and the use of advanced technology. By staying ahead of the curve and taking proactive measures, you can stop fraudsters in their tracks and safeguard your financial stability.
Real-time fraud detection and prevention is recommended since the use of software, AI and machine learning algorithms can monitor transactions on an account and catch fraudulent activity immediately when it starts.
When ATO fraud isn’t actively prevented, a flood of chargebacks can be expected.
I am an all-around payments expert and a veteran commissioned officer. I previously led the Chargeback and Merchant Risk teams at the payments service provider Simplex, which now successfully recovers millions of dollars a year using the best practices I developed.
