Triangulation fraud definition
Triangulation fraud is an online scam involving three parties: an unsuspecting buyer, a genuine seller, and a fraudulent seller as a middleman.
Here's an example of a triangulation scam: A fraudster sells an item online, uses stolen card details to buy it from a retailer, and ships it to the buyer. The buyer receives the product, but the fraudster keeps the money, leaving the retailer to handle the chargeback.
See also: scam, auction fraud, third-party fraud
How triangulation fraud works
- 1.The scammer sets up a fake online store offering products at significantly reduced prices to lure buyers.
- 2.When a victim buys something from them, the fraudster takes the order and uses stolen credit card details to get the same product from a genuine online store.
- 3.The real seller then ships the product directly to the victim, believing they made a legitimate sale.
- 4.The scammer keeps the money from the original sale. Plus, they never had to handle the actual product.
Damage of third-party fraud
- Stolen money. The scam relies on using stolen credit card data, which means someone is paying for the product without knowing about it.
- Loss for the seller. The genuine seller faces chargebacks when the true owner of the stolen card disputes the transaction.
- Loss for the buyer. While receiving the product, the victim may end up with substandard goods or face issues if they attempt to return or service the product.
- Reputation damage. Genuine sellers can have their reputation tarnished if victims believe they were part of the scam.
- Legal issues. All parties can get entangled in legal troubles, especially if they try to trace back the fraudulent transactions.
How to prevent triangulation fraud
To prevent triangulation fraud, companies should use multiple verification layers, such as email or phone number validation, and incorporate two-factor authentication. Additionally, they can also use strong encryption protocols and regularly monitor their networks for suspicious activity.
