Category: Online Fraud

In 2022, PwC surveyed nearly 1,300 company executives in 53 countries. Within the past two years, 52% reported experiencing some kind of digital fraud, and 18%  reported losses of more than $50 million USD from a single incident.

A comprehensive digital fraud prevention strategy — one that includes robust cybersecurity measures, advanced fraud detection technologies, and employee training programs — is key to preventing digital fraud and having a plan of action for worst-case scenarios.

Ready to improve your cybersecurity systems and prevent your business from becoming a victim of digital fraud? In this article, we’ll discuss the three most common types of digital fraud prevalent today so that we can get a better understanding of the tools and strategies used to prevent cybercrime.

Understanding digital fraud

Digital fraud, also known as cyber fraud, refers to any fraudulent activity that takes place online or through digital channels. It involves the use of technology and digital platforms to deceive people or businesses into revealing private company data, transferring funds, or making unauthorized transactions. Online fraud can take many shapes, from account takeovers on banking or social media sites to card-not-present fraud on retail sites.

All businesses that operate online or use digital technologies are at risk of digital fraud. This includes e-commerce businesses, financial institutions, healthcare providers, technology companies, and even brick-and-mortar small businesses that use digital tools for operations or transactions. 

The risk is not limited to any specific industry or business size. Any organization that handles data or conducts transactions online can be a target.

Having a digital fraud prevention strategy in place helps with the following:

• Carding prevention: A digital fraud prevention strategy can implement multi-layered authentication, monitor transaction patterns, and use machine learning to detect and block suspicious activities, thereby preventing unauthorized use of stolen credit card details, or “carding.”
• DDoS protection: DDoS attacks are an attempt to make an online service, such as a website or application, unavailable by overwhelming it with a flood of internet traffic. Deploying traffic filtering solutions, using content delivery networks (CDNs) to distribute traffic, and implementing rate limiting can help protect against these.
• Account takeover prevention: Account takeover refers to the unauthorized access and control of a user’s online account, typically to steal funds or personal information. Emphasizing strong password policies or two-factor authentication informed by aberrations in IP geolocation of users, and monitoring for suspicious account activities can help prevent this type of fraud.
• Financial protection: Digital fraud can lead to significant financial losses. A robust prevention strategy can help detect fraudulent activities early and prevent financial damage.
• Data security: Digital fraud often involves data theft. Protecting this data is not only crucial for business operations but is also a legal requirement in many jurisdictions.
• Customer trust: Customers trust businesses with their personal and financial information. Any breach of this trust, such as through a fraud incident, can lead to loss of customers and damage to the business’s reputation.
• Regulatory compliance: Many industries have regulations requiring businesses to take measures to prevent fraud. Having a strategy in place helps ensure compliance and avoid potential fines or legal action.
• Business continuity: By preventing digital fraud, businesses can ensure smooth operations without disruptions caused by fraud investigations or recovery efforts.

Common types of digital fraud (+ prevention techniques)

So, how does digital fraud actually occur? Here are the three most common types of cyber fraud prevalent today, along with a few strategies to prevent them. 

Remember that a comprehensive fraud prevention strategy should take all these different types of threats into account to create a combination of technologies, processes, and people to stop them from happening.

1. Account takeover

Account takeover involves unauthorized access to a user’s digital account, often through credential stuffing or brute force attacks. Once the attacker gains access, they can misuse the account for fraudulent transactions, data theft, or even launch further attacks. This type of fraud poses a significant risk to both financial assets and personal data.

Prevention techniques to prevent account takeover

• Create user profiles using historical IP addresses associated with an account.
• Leverage IP geolocation data to verify whether a login attempt is coming from a legitimate location associated with the user.
• Monitor accounts for unusual activity and have a response plan in place.
• Encourage the use of strong, unique passwords for each account.
• Implement multi-factor authentication (MFA) for added security.
• Regularly update and patch systems to fix potential vulnerabilities.
• Educate users about the importance of not sharing their credentials.

2. Fraudulent payments

Fraudulent payments occur when an attacker uses stolen credit card information or manipulates online payment systems to make unauthorized transactions. Malicious actors often target businesses that handle numerous transactions, making it easier for fraudulent payments to go unnoticed. These attacks can lead to significant financial losses and damage to customer trust.

Prevention techniques to avoid fraudulent payments

• Study geological data to isolate IP addresses commonly associated with fraud.
• Implement secure payment processing systems with built-in fraud detection.
• Regularly monitor transactions for suspicious activity.
• Use address verification systems (AVS) and card verification value (CVV) checks.
• Encrypt data to protect it during transmission.
• Educate customers about secure online shopping practices.

3. Ransomware attacks

Ransomware attacks involve malware that encrypts a victim’s files, with the attacker demanding a ransom to restore access. Attackers often target businesses due to their reliance on data and the potential for larger ransom payments. These attacks can cause significant operational disruptions and financial loss. 

Prevention techniques to stop ransomware attacks

• Monitor geolocational data to block IP addresses of known hackers, specific regions, or countries associated with high ransomware activity.
• Integrate IP data with threat intelligence feeds to receive real-time updates on emerging ransomware threats and their associated IPs.
• Use IP data to identify blacklisted and whitelisted IPs to block or allow traffic accordingly.
• Regularly back up data and ensure it can be restored easily.
• Keep all systems and software updated to fix potential vulnerabilities.
• Use reliable security software to detect and block threats.
• Educate employees about the risks of clicking on unknown links or attachments.
• Implement a robust incident response plan to handle any attacks promptly.

The importance of digital fraud prevention software

Digital fraud prevention apps serve as a critical line of defense against cyberattacks. This software employs advanced technologies to safeguard businesses from a wide variety of threats, including the ones mentioned above. 

Here are a few ways digital fraud prevention tools help protect against common types of cyberattacks:

• Real-time monitoring: Cybersecurity software continuously monitors network traffic, user behavior, and system activities to detect any unusual patterns or activities that could indicate a potential threat.
• Advanced threat intelligence: Using AI and machine learning algorithms, the software can identify and flag suspicious activities, such as multiple failed login attempts, rapid-fire transactions, or unusual data transfers.
• Multi-factor authentication: By requiring additional forms of identification beyond just a password, multi-factor authentication makes it harder for unauthorized users to gain access to accounts and prevents 99.9% of all modern automated cyberattacks. 
• Encryption: Cybersecurity software encrypts data both at rest and in transit, making it unreadable to anyone without the correct decryption key.
• Firewalls and intrusion prevention systems: These tools block unauthorized access to networks and systems and can detect and prevent attacks in real-time.
• IP geolocation: Some cybersecurity software can track the geographic location of IP addresses. This software can help identify suspicious activities, such as login attempts from unfamiliar locations. Companies can also use this software to enforce location-based access controls.
• Anti-phishing tools: These tools can identify and block phishing emails and websites, protecting users from scams designed to steal their personal information.
• Risk scoring: Cybersecurity software can assign risk scores to activities or transactions based on various factors, triggering additional security measures for high-risk scenarios.
• Regular updates and patches: Cybersecurity software is regularly updated to address new threats and vulnerabilities, ensuring the highest level of protection.
• Incident response: In the event of a security breach, cybersecurity software can help identify the source of the attack, contain the damage, and aid in recovery efforts.
• User education and training: Many cybersecurity solutions include features designed to educate users about safe online practices and how to recognize potential threats.

Protect your company from digital fraud with Digital Element

Digital Element is a global leader in IP geolocation technology, providing businesses with data and intelligence to make informed decisions, enhance user experience, and protect assets. Digital Element provides IP intelligence designed to help businesses effectively identify external threats in order to better protect themselves and their customers.

Want to learn more about how you can IP data intelligence to prevent fraud with Digital Element? Find out about our online fraud prevention suite and request more information today!

In the past two years, 51% of organizations say they have experienced instances of fraudulent activity. This is higher than it’s ever been before, and it highlights the immense importance of fraud detection and prevention.

Thankfully, a variety of high-quality tools are available today that are designed to detect and prevent numerous types of fraud.

In this article, we’ll discuss essential fraud prevention tools that can help bolster your company’s risk management and fraud prevention capabilities. By the end of the article, you’ll know some of the tools fraudsters use to compromise businesses and understand better how to detect and prevent these problems.   

What is fraud prevention software?

Fraud prevention software is a category of tools designed to help organizations implement effective fraud solutions. 

Today, many of these tools leverage artificial intelligence and machine learning algorithms to perform data analysis and spotlight suspicious activity and fraudulent patterns.

Fraud detection and prevention software offers a variety of solutions, from tools to prevent credit card fraud in payment processing to tools for reducing ad fraud risk. By leveraging a combination of fraud prevention tools, organizations can improve their security from multiple angles and take a comprehensive approach to fraud protection.

Benefits of fraud prevention software

The wide-ranging functionality provided by different types of fraud prevention software can offer many key advantages, including:

Balances risk management

Risk management is always a delicate balancing act. Companies need to decrease losses from fraud as much as possible, but at the same time, they need to avoid blocking legitimate customers.

Threat intelligence tools such as Digital Element’s Nodify and NetAcuity’s VPN & Proxy detection allow organizations to automate determining which connections to review and which ones to allow. While these tools alone won’t stop fraud completely, they provide critical context to help identify it.

Strengthens fraud controls

Fraud controls such as identity verification can be a big help in preventing payment fraud. However, integrating these fraud controls with fraud prevention tools can make them even more effective.

For example, companies can leverage real-time customer data to flag account access from unusual or high-risk locations. This strengthens identity verification procedures and empowers companies to automatically detect potential instances of fraud as they happen.

Detects proxies

Proxies are a common tool in a fraudster’s toolbox and are notorious for allowing users to avoid detection and remain anonymous by spoofing their IP address. For this reason, the usage of proxies is a major red flag in fraud detection and prevention.

With fraud prevention tools, organizations can automatically detect the use of proxies during checkout, online payment, and other sensitive activities. By making it easy to detect this common indicator of payment fraud, tools for detecting proxies are highly useful for preventing fraud.

Bolsters digital profiles

Creating thorough digital profiles of customers and users allows organizations to detect unusual access and transactions by comparing those actions to normal user patterns. 

By analyzing a range of data points and IP information, organizations can highlight logins and transactions that seem out of the ordinary and flag them for further investigation.

You can bolster these digital profiles with fraud prevention tools and automatically fill them with reliable, current data. This will give your company a standard to compare unusual patterns against so that suspicious activity won’t go unnoticed.

What tools do fraudsters use?

Modern organizations leverage a variety of tools for preventing fraud. Unfortunately, bad actors have plenty of tools at their disposal as well. 

Some of the most common tools that fraudsters use to execute their scams include:

Proxies 

Like VPNs, proxies are designed to hide a fraudster’s actual IP address and location. Proxies act as an intermediary between a fraudster’s device and the internet. Normally when you go online, your device communicates directly with the internet. With a proxy server, though, fraudsters are able to communicate with the proxy server instead so that their IP address is hidden. 

Ad fraudsters use the anonymity provided by proxies to avoid detection from ad networks, spoof legitimate websites, and overcome IP-based blocks.  

Learn more about how Digital Element helps businesses use IP intelligence to prevent online fraud.

Residential IP proxies 

One of the ways that ad fraudsters make it look like their fake traffic is coming from legitimate sources is by using residential IP proxies. Residential IP proxies allow fraudsters to use a network of compromised residential devices such as computers and smartphones to generate fake traffic and ad engagement. 

Since the traffic/engagement is coming from numerous trusted devices spread across numerous locations, it appears more legitimate to ad networks. This allows fraudsters to overcome IP blocks and avoid detection. 

VPNs

Virtual private networks (VPNs) allow fraudsters to mask their IP address so that it appears they are accessing the internet from a location that is different from their actual location. This reduces the ability of ad networks to detect their fraudulent activities. 

Using a VPN creates a private, encrypted tunnel for accessing the internet and provides fraudsters with relative anonymity. They are therefore a go-to tool for just about every type of ad fraud. 

Darknets 

Darknets are encrypted and hidden networks that are not indexed by traditional search engines. These secretive corners of the internet allow ad fraudsters to operate in the shadows when performing activities such as selling stolen credit card information or selling fake traffic/impressions. 

Activity on the darknet is incredibly difficult for law enforcement to track, and websites on the darknet where criminal activity is conducted are rarely discovered and shut down. This provides fraudsters with a hidden and anonymous marketplace for conducting their illegal transactions. 

Malware and hacking tools

The purpose of malware is to gain unauthorized access to systems — usually to steal sensitive data or intentionally disrupt a company’s operations. Malware can include keyloggers, remote access trojans (RATs), and ransomware.

Hacking tools are used by fraudsters to exploit an organization’s security vulnerabilities and breach its defenses. Password crackers and network scanning utilities are two hacking tools commonly used to breach an organization’s cybersecurity defenses and gain unauthorized access to its systems.

SOCKS5 proxies

SOCKS5 proxies mask IP addresses so the user can remain anonymous while committing fraudulent activities. With SOCKS5 proxies, fraudsters can route their network traffic through multiple locations, making it difficult to track their origins.

The prevalence of proxies and their ability to hide the criminal’s identity make detecting the use of proxies a vital element of ecommerce fraud prevention. This is why many organizations implement fraud detection tools designed for automatically detecting when someone is using a SOCKS5 proxy.

Phishing kits

In 2022, 92% of organizations fell victim to phishing attacks, making this one of the most common forms of online fraud. To execute phishing attacks, criminals use phishing kits to build websites or emails that mimic those from legitimate organizations. They then use these fake websites/emails to steal the customer’s information, such as passwords and payment information.

Fraudsters who steal from your customers by mimicking your company may not directly harm your company’s bottom line. However, they can cause a lot of indirect financial loss by harming your brand’s customer experience and eroding customer trust.

Spoofing tools

Spoofing tools have a purpose similar to phishing kits, allowing fraudsters to spoof their phone number, email header, or website address. 

Using these tools to spoof their identity, bad actors can trick customers into providing personal information or engaging in fraudulent transactions.

As with phishing attacks, allowing your customers to fall victim to criminals spoofing your organization can leave a permanent stain on your brand reputation.

Identity theft tools

An estimated 15 million Americans had their identities stolen in 2021. Identity thieves use tools such as data skimmers, card readers, or fake ID generators, which enable them to steal personal information, clone credit cards, or create counterfeit identification documents.

Distributed Denial of Service (DDoS) tools

DDoS attacks overwhelm an organization’s network or website with an immense volume of fake traffic. 

Sometimes carried out for no purpose other than to harm the organization they target, these attacks hold companies ransom, demanding payment in return for ceasing.

By using DDoS tools to send massive amounts of fake traffic to a network or website, they can overload the network or website’s capabilities and prevent legitimate users from being able to access it.

Additional tools and techniques for fraud prevention

If you would like to optimize your company’s approach to fraud prevention and detection, there are several powerful tools and techniques you can leverage, including:

Data analytics

One of the best ways to highlight activities and transactions that are likely fraudulent is to compare them against past user patterns and activities. But sifting through all this data manually isn’t feasible for most organizations.

With data analytics tools, organizations can analyze transactions and activities automatically. This makes it easy to spot anonymous activities that don’t fit a user’s typical patterns and flag them for further investigation.

Employee training and awareness

An organization’s vulnerabilities sometimes stem from its employees and a lack of training or awareness surrounding their online actions.

Some inappropriate employee actions that could leave a company vulnerable to fraud include allowing unauthorized device usage, using weak passwords, falling prey to phishing schemes, and mishandling restricted information. 

By making your employees aware of how fraud happens and what to do to protect against it, you can help eliminate a major source of many of these vulnerabilities and prevent fraudsters from exploiting your systems.

Regular audits

Cybersecurity is a rapidly evolving landscape, and rampant fraud forces organizations to keep up with these bad actors who constantly improve their tools and techniques.

Just because your company’s security controls and fraud prevention measures are effective today doesn’t mean they’ll be effective tomorrow. 

By regularly auditing your company’s security and fraud prevention controls, you can keep them updated and effective against the ever-evolving slew of cybersecurity threats.

Strong internal controls

Strong internal controls, such as tools for detecting proxies, geolocation tools, and data analytics tools, will provide your company with an immense amount of fraud protection. 

Procedures for flagging, investigating, and responding to potential instances of fraud are just as important when creating strong fraud prevention controls for your company.

Secure network systems

Once a hacker has access to your company’s network systems, there’s no limit to the damage they could cause.

Thankfully, there are plenty of ways that organizations can secure their network systems and prevent this online fraud before it happens. 

Network segmentation, strong access controls, firewalls for filtering incoming and outgoing traffic, and regular patching and updates are just a few of the measures you can take to bolster your company’s network security.

Protect your valuable assets with Digital Element

Digital Element is committed to helping organizations prevent fraud and all its costly consequences via cutting-edge threat intelligence solutions. Learn more about Digital Element’s industry-leading online fraud prevention tools and strengthen your company’s security today.

In 2022, ad fraud cost businesses worldwide $120 billion,  and as cybercriminals continue to fine-tune their scams, the cost is likely to only increase.

When you pay for ad spend, you expect your ads to be seen and clicked on by real users. But how do you know these clicks are real and aren’t just a product of fraud?

Well, the good news is you can easily detect and prevent online fraud with the right tools and strategy.

This article explores everything you need to know about the common types of ad fraud in order to help you prevent it and avoid paying for non-human traffic.

What is ad fraud?

Ad fraud aims to make money by sending traffic to a website or ad and getting paid by the publisher for fake ad impressions, clicks, and installs. Digital ad fraud occurs when someone attempts to trick advertising platforms into thinking that fake activity on an ad or platform is coming from real users.

Digital advertising has become so widespread that the average person is now exposed to 6,000 to 10,000 ads every single day. With ad budgets so high and so many ad networks to choose from, there are plenty of vulnerabilities for fraudsters to expose.

Types of ad fraud

There are a lot of different types of ad fraud digital advertisers need to be aware of. Some of the most common types of ad fraud costing businesses the most money in 2023 include:

1. Click fraud

Click fraud is a type of ad fraud targeting pay-per-click (PPC) ads. Click fraud drives fake clicks to the ad, which forces advertisers to pay for clicks that didn’t come from real users.

Fraudsters commonly execute this type of ad fraud using bots programmed to spoof human users and generate fake clicks automatically.

Along with botnets and bot traffic, some fraudsters will engage in click fraud using click farms — large groups of low-paid workers hired to click on ads.

2. Domain spoofing

With domain spoofing, ad fraud perpetrators spoof or impersonate a high-value website and then sell display ads on the website they’ve spoofed.

Advertisers think they’re purchasing ad placements on a well-known and high-traffic website when they’re actually paying for ads on a low-authority site merely spoofing the website they thought they were working with.

3. Cookie stuffing

Websites use cookies to track user behavior on the site, providing valuable insights into the actions users are taking.

Websites can also use cookies to determine the source of website traffic for attribution purposes, allowing companies to pay the publishers they partner with based on how much traffic those publishers send to their websites.

With cookie stuffing, fraudsters insert cookies from other websites in order to disguise traffic sources and make it look like the traffic came from a different website than its actual source. They do this in order to manipulate the traffic’s attribution so that the website owner pays the fraudster instead of the publisher who actually sent the traffic to their website.

4. Click injection

Click injection is a type of mobile ad fraud targeting Android devices. When the device’s user downloads a new app, the fraudsters trigger a click that allows them to take credit for the install. This means that the fraudsters take credit for the click and install rather than the publisher who actually directed the user to the new app.

5. Pixel stuffing

Pixel stuffing involves cramming advertisements into tiny spaces on a screen — often spaces as small as 1×1 pixels. The ads are technically present on the website and generate impressions, meaning that you’ll end up paying for them just like they are real ads.

But with pixel stuffing, the ads are made so small that they are virtually invisible and won’t actually deliver any value for your company.

6. Ad stacking

Like pixel stuffing, ad stacking is another method that fraudsters use to “hide” advertisements on a website. Ad stacking entails layering multiple ads on top of one another so that the top ad is the only one actually visible to website visitors. Once again, these ads generate real impressions you’re required to pay for, but no one is actually seeing them.

7. Ad injection

Ad injection occurs when fraudsters insert ads on apps and web pages without the knowledge or consent of whoever owns the platform where they’re published. Typically, they design these fraudulent ads to deliver malware to users when clicked on.

8. Geo masking

The ability to target ads to specific demographics based on their location is a powerful feature of online ad campaigns.

With geo masking, fraudsters send false location data and cause the ad to display outside its target demographic. This means that advertisers end up paying to display their ads to large numbers of users they never intended to target.

The consequences of ad fraud

If it’s not prevented, ad fraud has several costly consequences for advertisers launching ad campaigns and the publishers who are displaying those ads.

Some of the most impactful consequences of ad fraud include:

1. Inaccurate performance metrics

Digital advertisers use performance metrics from their campaigns to test and optimize different ads and advertising strategies. When these metrics are thrown off and made invalid due to ad fraud, they no longer offer any value, and the inaccurate performance metrics that ad fraud creates can cause advertisers to make faulty decisions based on this bad data.

2. Financial loss

The most obvious consequence of ad fraud is direct financial loss. When you’re paying for fake clicks or fraudulent traffic, you’re draining your company’s advertising budget and not receiving any value in return. An ad fraudster’s financial gain is always some other company’s financial loss.

3. Damage to brand reputation

There are several ways that ad fraud can damage a company’s brand reputation. For one, it commonly causes the company’s advertising efforts to underperform, making it look like the company is wasting resources without generating results. It can also harm the user experience on your website and erode consumer trust.

4. Loss of consumer trust

Whether it’s clicking on a fraudulent ad that infects their computer with malware, discovering that most of the engagement of a brand’s social posts is fake, or discovering a brand’s ads on irrelevant/low-quality websites, there are several ways that ad fraud can cause a consumer to lose faith in a brand.

Tips for ad fraud prevention

Ad fraud is a costly problem for advertisers and publishers alike, but there are ways to mitigate it.

Below are our top tips for preventing ad fraud and all the unwanted consequences it creates.

1. Verify traffic sources

Before you partner with a publisher or ad network, it’s important to verify their reputation and ensure they follow industry best practices. Do your due diligence to confirm the quality and legitimacy of a publisher’s traffic sources, and make sure they are following practices designed to mitigate the potential for ad fraud.

2. Implement ad fraud detection tools

One of the easiest and most effective ways to fight ad fraud is to use ad fraud detection tools. These tools use machine learning algorithms and data analysis to pinpoint and filter out fraudulent activities in your digital marketing campaigns. They can automatically detect anomalies, suspicious patterns, and non-human traffic.

Implementing ad fraud detection tools won’t directly stop ad fraud from happening, but they can provide you with valuable insights you can use to optimize your other ad fraud prevention efforts.

3. Set clear campaign objectives

Defining clear and measurable campaign objectives allows you to detect inconsistencies and anomalies in campaign performance. When you know exactly how you expect an ad or a campaign to perform, it’ll be a lot easier to pinpoint anomalies that could be signs of ad fraud and take appropriate action.

Use whitelists and blacklists

Whitelists and blacklists help prevent ad fraud by controlling where your online ads appear. Whitelists include trusted publishers and websites that have been thoroughly vetted and are confirmed to follow practices that mitigate ad fraud.

Blacklists, meanwhile, contain publishers and websites that are known for fraudulent activity and improper practices. Restricting where you place your ads so you prioritize whitelisted websites and block blacklisted websites can go a long way toward reducing the likelihood of ad fraud.

4. Monitor campaign performance

Once you set objectives and expectations for your ad campaign, it’s important to continually monitor the campaign’s performance to make sure it is performing as expected. Tracking metrics such as click-through rate (CTR), conversion rates, and engagement metrics will enable you to identify unusual spikes and patterns that could indicate fraudulent activities.

5. Implement ad verification tools

One of the most effective ways to prevent ad fraud is to leverage ad verification tools such as those offered by Digital Element.

With Digital Element’s innovative IP targeting solution NetAcuity, advertisers can laser target their ad campaigns while automatically verifying ad viewability, brand safety, and placement accuracy. By providing unprecedented campaign transparency and automated verifications, Digital Element empowers brands to eliminate the potential for ad fraud.

Unmatched targeting and campaign transparency is one reason why AppsFlyer — the global leader in mobile attribution and marketing analytics — chose Digital Element to improve the accuracy and reliability of their geographic data.

By using IP intelligence data from NetAcuity, AppsFlyer has improved the quality of the data they provide to their clients while also actively preventing ad fraud.

Safeguard your advertising efforts with Digital Element

Ad fraud is a costly problem for many companies. But the right ad verification tools can keep it from being prevalent.

To verify that real users genuinely interested in your brand are seeing and clicking on your ads, check out Digital Element.

Our tools can help safeguard your advertising efforts against all forms of ad fraud and give you peace of mind when you’re paying for online advertising.