Identifying Fraudulent Orders on Your E-Commerce Website

It’s an unfortunate part of doing business online; every now and again a fraudulent order comes through your website.

What do we mean by a fraudulent order? A thief has obtained a card holder’s credit card information and has placed an order with you that will be shipped to the thief and billed to the unsuspecting card holder’s credit card. If you ship this to the address listed, you will not only lose the merchandise, but you will also eventually receive a credit card charge back when the card holder realizes that their card has been compromised and disputes the charge with their credit card bank.

Placing fraudulent orders

Tools for Detecting Fraud

The credit card companies give you two tools to use to help identify if the order you receive is legitimate or not.

The first tool is called the Address Verification System or AVS for short. It is a system of codes that let you know through your credit card processor if the billing address listed with the order is the same as the address the bank has on file as the billing address for their card holder. If the address is not a match, which should definitely alert you to the possibility of a problem with the order and more investigation is warranted.

The second tool is the security code system that is on all credit cards. Visa, Master Card, and Discover Cards have 3 digits printed on the back of the card and American Express Cards have 4 digits printed on the front of the card. Your credit card processing company also has codes for the security codes to alert you if they do not match. Once again, a mismatch should let you know that there is a potential problem with the order and you need to look at it more closely.

The reason we say that AVS and security code mismatches only indicate a potential problem is because a mismatch on either factor does not always necessarily mean the order is definitely fraudulent; and to make things even more confusing, a match on either or both of the tools does not mean it is definitely legitimate either. If an order is going to be shipped to an alternate address other than the exact match shipping address, then it could be fraud. Along the same lines, if a credit card is stolen, the thief has the security codes needed to make them pass that level of security.

More info on fraud prevention tools:

What’s The Next Step?

Clearly this means that each order you receive must be evaluated on a case by case basis. If your order is shipping to an alternate address other than the exact match billing address in the AVS system, there are a few things you can do.

You can search the address online and see what it is and where it is. Searching the address online can give you a lot of information that can help you identify if an order is valid or not. The address could be the workplace of the card holder or it could be a gift for someone other than the card holder; it does not always necessarily mean that it is fraud, but it could be. The internet search can actually show you the Google Maps Street View of the address, is it a big, expensive home or an abandoned street lot?

Freight Forwarding Companies

If the address you are being asked to ship to is a shipping company, commonly known as freight forwarders, they ship packages overseas for their international clients. In many cases this can be fraud, however you can easily determine this with a quick call to the freight forwarding company.

Sometimes the phone number listed with the shipping address is the number to the freight forwarding company, your internet search can help you determine the correct number to call. Let them know that you are a merchant with an order that has their company as the shipping address and that you are calling to verify the validity of the order. They will ask you for the account number, which is usually a string of numbers listed with the shipping address. They can tell you if they are a long time client or a brand new customer with a lot of new orders coming in, in that case it is more likely to be fraudulent.

What Type of Email Address is Given?

Most often with fraudulent orders an untraceable free email address is used. If the address belongs to a website, then it is more likely to be legitimate. Of course, many internet users have free email addresses, so that in itself is not a reason to declare an order as fraudulent. Emails from Yahoo and Hotmail could more likely be fraud. On the other hand, free email from Gmail is less likely to be fraud.

More tips on fraud prevention:

Putting Together the Puzzle Pieces

Analyzing orders for potential fraud is a lot like fitting puzzle pieces together. One of the ways to investigate an order that has raised some red flags is to actually contact the customer. In many cases this is the last resort because a thief is not going to help you out in any way. However, in most cases if the order is fraudulent, the person who placed the order is not likely to answer your calls or emails. If you do get a cooperative person, then it is likely a legitimate order, but you have to put all of the pieces together to make that decision. In many cases it is experience that helps you the most.

If you are unsure, you can always ask the customer to send a money order, certified check, or pay through Paypal which offers merchants some more levels of security.

About the Author: Richard Larson is blogger and Brand Manager for He enjoys sharing online business and marketing tips.