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How to Recognize Fraud in Your Marketplace: What You Need to Know for 2022

As digital platforms and transactions become more sophisticated, so do the fraudsters who prey on unsuspecting users. What's different now to what we've seen in previous years is extreme growth and unique circumstances, alongside rapid digital onboarding, with more marketplaces making it easier than ever for both parties to transact online.

The already heavy digital onboarding trend has gotten even stronger, and, unfortunately, this has introduced additional risks as you open your platform up to more users.

So, how do you identify these new risks?

Candace Sjogren, VP of Emerging Markets at Socure, and Jonas Bordo, Co-Founder and CEO at Dwellsy, rounded up a few of the most common during their virtual event “How to Recognize Fraud in Your Marketplace: What You Need to Know For 2022”.

This blog is an abridged version of the full session, which you can watch here:

Account Takeover Fraud

Primarily, account takeover fraud is a buyer issue, but it can also affect sellers at times. Once an account is taken over, a fraudster can change the account details such as address, e-mail etc. and identity checks could be performed as the profile is being changed. This shows up in a lot of ways, the most commonly discussed being ‘mules’ and ‘bots.’

For those that don’t know, a mule is someone whose bank account is used - knowingly or unknowingly - to receive illegal or laundered funds in order to withdraw or transfer that money to other accounts.

For example, where someone is selling a credit card and is saying, ‘OK, you live close enough to the billing address of this credit card, so I'll pay you to accept the goods on my behalf.’By the time the cardholder finds out, the goods are already gone.

Mules are a big issue, and the reason that we bring this up, as well as bots, is that if you're working with a transaction fraud platform, or transaction provider, they often can't help you here.

These two things are really hard to solve for at the time of transaction, which is why catching these types of fraudsters early is so important.

Delivery Fraud

A couple of other things that marketplaces are seeing a spike in right now are buyer and seller collusion and delivery fraud. This is where the buyer and seller are in cahoots - often they are the same person, where goods are never shipped or shipped to a wrong address.

The delivery fraud is where there's an empty box, or the box is delivered one house over so that the shipping confirmation can be completed. Both of these result in chargebacks, which is a growing issue for marketplaces.

Gig Worker Fraud

The gig economy space continues to grow on a global scale. Consequently, marketplaces are seeing a lot of gig worker fraud and there's a very elaborate scheme that you can Google. It's called the Brazilian scheme, and you can read all about it here:

This happened at the end of last year where a number of drivers who were delivering groceries and alcohol to individual homes were scanning the document for the age verification, lifting that document, and then creating fake IDs that were used by illegal drivers to be driving for rideshare companies.

It was a very elaborate scheme including about 17 different platforms, and was recently just prosecuted, and convicted. We're seeing that these fraud schemes are getting increasingly more elaborate and more creative.

Established Fraud Types

Following these, you have some of the tried and true fraud methods that we've been seeing forever. These include counterfeit, missing or stolen items, or a seller that is misrepresenting what it is they're selling, particularly if it's a hard-to-find item. Twenty percent of those buyers never find out, and this often leads to an increase in risk operations and dispute workload investigations,

Find out more in our virtual event - “How to Recognize Fraud in Your Marketplace: What You Need to Know for 2022”

Watch it here.

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