Over the years, proxies have gained popularity due to their various utilities. From the innocent masking of identity, while browsing to buying sneakers and scraping data, these tools are pretty helpful. However, there are two sides to the coin. Some people use the same technology maliciously for personal gain.
Proxies and Fraud
If a customer walked into your store wearing a dark trench coat, big hat, fake mustache, and sunglasses, you would think they were up to no good. On the internet, an equally obvious disguise is more challenging to detect. Fraudsters use proxy servers to obscure their IP addresses and location, making it much harder for law enforcement agencies and merchants to detect fraud before or as it happens.
Common Fraud
A common way criminals defraud merchants is via chargebacks. Even though credit card fraud is not the only thing that results in chargebacks, they are an outcome of most, if not all, instances of this type of scam. In this case, merchants incur losses as they must accept the chargebacks because they have no way of telling the genuine transactions from fraudulent ones. Unfortunately, business owners are responsible for card-not-present fraud and cannot favorably challenge and reverse the chargebacks.
Fraud does not only apply to credit cards. Some criminals use proxies to steal data from competitors or just regular people. While legal methods of data scraping exist, people who scrape private and copyrighted data may face persecution. Legal data scraping has a lot of applications and can even be a profitable venture. To learn more about the subject, use this tutorial.
Signs and a Possible Solution
The best thing merchants can do is try and spot the tell-tale signs of fraud before it’s too late. Having an efficient anti-fraud plan is an essential part of managing chargebacks. Upon close examination of transactions, there are clear signs that point to fraud. For example, some locations worldwide are famous for various types of fraud.
One such place is Nigeria. A while back, the African country was famous for the Nigerian Prince scam. Here, people pretended they were about to come into a lot of money and needed help with the transaction fees. If you fall for the swindle and transfer funds over, you won’t be hearing from the so-called prince again. The same might apply to your money.
If a merchant is seeing trades from a country they’re unfamiliar with, they should scrutinize their transactions. There are anti-fraud tools that automate the process and score transactions according to their risk factor. Unfortunately, many criminals use proxies to hide their locations to make it seem like they are purchasing from a place with a low-risk score.
Why Do Swindlers Use Proxy Servers?
By now, you already know proxies make criminals anonymous and untraceable on the web. They also help them circumvent merchants’ anti-fraud measures. These measures often include flagging specific locations famous for cybercrime. Proxies easily bypass this by masking IPs.
Another way merchants can identify fraudulent transactions is if they come from the same IP address in a small window of time. Fraudsters bypass this by using rotating proxies to make transactions appear as if they came from numerous unique customers.
What Is Proxy Piercing?
Proxy piercing applications provide merchants with the ability to see through the masking attempts and protect themselves. Proxy piercing is a method used to detect if a web user is utilizing a proxy server to hide their IP, location, and other identifiers. Basic ones tell you if a user is hiding behind a proxy, and advanced versions inform you of the person’s actual location and IP.
Conclusion
Online-based crime is a consistent and ever-changing challenge for merchants. Especially where chargebacks are involved, both your revenue and reputation could take a huge hit.
Teaching yourself to detect fraud early enough is the first step toward securing your business. Collecting chargeback data and studying it is an essential step toward learning about swindlers who have targeted you.
When you learn about the fraudsters’ location data, methods used, and such, you can fine-tune your anti-fraud tools. Better configuration leads to improved detection, fewer chargebacks, and reduced false positives. Remember, proxy servers are just one indication; you need to dig a little deeper to make informed decisions.
