A Triangle of Trouble: Understanding and Preventing Triangulation Fraud

Explore how triangulation fraud poses a major threat to eCommerce businesses and online consumers. Read on to learn how to protect yourself.
by Roenen Ben-Ami
Share this post
Published: January 25, 2023
Table of Contents
hello world!
fraud hacker security justt

Triangulation fraud is an example of a devious class of scheme that prey on consumers and businesses while also serving as a reminder of the well-known phrase, “if it sounds too good to be true, it probably is.” 

Unfortunately, many businesses and credit cardholders are likely to fall victim to these scams while fraudsters thrive from their ill-gotten gains. In fact, triangulation fraud and the larger category of card-not-present fraud are likely to cause a loss of up to $200 billion by 2025. 

In this article, we’ll be looking at how triangulation fraud schemes work, their effects on merchants and customers, and how to avoid falling victim to these scams. 

How do triangulation fraud schemes work?

Triangulation fraud schemes involve the following:

  1. Customers and their actual credit card (whether knowingly or unwittingly participating)
  2. The fraudster and their eCommerce website
  3. Fraudulent card details possessed by the fraudster
  4. Legitimate merchants and their products 

The process for how the triangulation fraud scheme works is as follows:

Step 1 - An unsuspecting cardholder will find a product they wish to buy online. It will be an appealing offer, usually at a much lower price than elsewhere on the web. They will input their personal information along with their card details. These details are then sent to the fraudster. 

Step 2: The fraudster will use another fraudulent card to purchase the same item from a legitimate online shop. Fraudulent card details are often purchased on the dark web or stolen from other scam victims.

Step 3: The legitimate eCommerce store will then send the order to the address of the initial customer. Days or months later, the merchant will receive a chargeback from the cardholder of the stolen card details in Step 2. 

Step 4: The customer will have received their desired product; however, their personal information may now be used by fraudsters elsewhere as a Step 2 for another scam. Meanwhile, the fraudster pockets the sum charged to the legitimate customer’s card.

What happens to merchants in triangulation fraud?

Merchants who dispatch orders that were made with fraudulent cards will suffer the most. They will lose their stock and pay the costs of fulfilling the order while footing the bill for the chargeback and associated chargeback fees. Additionally, they will face a tarnished reputation from cardholders whose stolen card details are used in the scam and may view the merchant as the fraudulent party. 

What happens to consumers involved in triangulation fraud schemes?

Whether they participate knowingly or unknowingly, the consumer who initially places an order with the fraudster is also likely to suffer. As their personal details are now in the hands of a fraudster, their details will likely be used elsewhere for other scams. Additionally, there’s bad news for consumers who were aware that it was a fraudulent offer. Unlike friendly fraud, as triangulation fraud involves a third-party’s stolen card details, criminal charges may be filed should the issue be escalated.

Triangulation fraud prevention

For consumers, there are some ways to prevent triangulation fraud:

Ensure sellers are legitimate

Whether shopping on a new website or ordering from a new seller, always be wary of the details supplied. Other reviews can be a good indicator of a business being legitimate. Checking for the HTTPS or lock icon on sites is another method, although it doesn’t completely guarantee the legitimacy of the seller. However, exercising caution is the best form of fraud prevention.

Protecting card information

While there are issues with card skimmers and other ways in which fraudsters can steal card details. There are other ways to ensure only the true cardholder can make purchases. For example, certain banks will allow cards to be locked or unlocked. This is a great way to ensure it is only accessible when required. However, it can get tedious to remember to unlock the card each time an order needs to be placed.

For merchants, here are some ways to protect against triangulation fraud. 

Stay aware of trends.

As a merchant, it pays to be wary. Look out for early warning signs, such as the delivery address being different from the registered cardholder’s address. Additionally, ensure you’re up-to-date with news and trends of issues with card-not-present chargebacks and similar causes of revenue loss. 

Invest in fraud prevention tools

Fraud prevention tools can ensure that all orders are monitored to help prevent fraud. So before any orders are released, all the order details, including geographic location, account details, and even order value, can be assessed for fraud risk. High risk orders should be automatically blocked or passed along for manual review. 

Bottom Line

Triangulation fraud and similar card-not-present scams present a serious problem to online eCommerce, especially for business owners. In addition, keeping up with emerging trends that risk revenue loss is a demanding task—having industry knowledge and ready-to-use technology that actually makes an impact can be incredibly beneficial. This is where Justt comes into play. With strong industry knowledge and combined with proprietary AI technology, Justt will minimize your chargeback problems. Remove the stress of dealing with individual chargeback claims and revel in the fact they can be automatically resolved, with great success rates to boot.

To learn more about effectively dealing with chargebacks, read more on the Justt blog. 

Written by
Roenen Ben-Ami
Co-founder & Chief Risk Officer at Justt. 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.
Sign up for our newsletter
2024 Justt Ltd. All rights reserved.