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.
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, using 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:
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.
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.
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 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 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.
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 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:
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.
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.