Fraud Scrubbing for High-Risk Businesses

April 18, 2018

Fraud Scrubbing for High-Risk Businesses

Fraud scrubbing is a technological solution intended to greatly reduce merchants’ risks of payment card fraud. Having a fraud scrubbing solution in place is especially important for high-risk businesses, as these companies have a higher-than-average chance of experiencing payment fraud and so-called “friendly” fraud (also known as chargeback fraud). By using a fraud scrubbing solution, suspicious activity and dubious transactions can be detected and blocked before they are processed.

How Does Fraud Scrubbing Work?
Fraud scrubbing technology uses rule-based filtering to quickly spot and stop potentially problematic transactions. The configuration of the rules is simple, “If A occurs, do Z.” As an example:
“If shipping address does not match billing address, flag transaction.”
“If transaction originates from (specified) IP address range, block transaction.”
Fraud scrubbing programs make these rules easier to configure by providing dropdown menus with options to select from for each rule.
The pre-set rules are based on patterns typically seen in fraudulent payments. These patterns include:

Anomalies: Exceptionally large orders, rapid-repeat transactions, users who consistently enter the wrong PIN numbers or Credit Card Identification Number (CCN) codes – anything that deviates from expected activity and might result in substantial losses may be flagged for review.
Activity: If a payment card being used for multiple online transactions within a very short period of time, it will probably be flagged as a security risk. It’s typical for criminals using stolen or otherwise compromised payment cards to try and use the card quickly before it’s reported as lost or stolen. Of course, the consumer may legitimately be doing a lot of shopping at once for holiday presents, and transaction velocity checking filters can be adjusted to reflect expected increased activity at certain times of the year.
Blacklists: Some patterns point to extremely obvious problems, but it takes fraud scrubbing filtering to spot them. If the payment card number, consumer’s name or other details associated with a transaction have already been flagged as high-risk, a fraud scrubbing check of blacklist databases will halt the transaction. This could include card data that is believed to have been compromised in a security breach, or transactions coming from countries with a significant history of international transaction fraud.
IP: does the consumer’s current IP address indicate that they are located in a different country than the one associated with their payment card? The consumer may be shopping online while travelling, but it’s also quite possible that their payment card has been stolen or cloned.
Trends: These rules address activities that fraudsters typically enagage in. As an example, criminals often test stolen payment cards by charging small amounts, both to see if the card is valid and if it is being monitored by the issuing bank or cardholder.

Verification: does the shipment address match the billing address associated with the payment card? While people may want shipments sent to their office or another convenient location, mismatches between payment address and shipping address can indicate the use of a compromised payment card.

Configuring Fraud Scrubbers
Fraud scrubbing technology features a set of rules that define what should happen if something occurs. As shown in the examples above, some actions that may appear fraudulent can actually be totally innocent. You don’t want to block customers from purchasing items, nor do you want to make it easy for criminals to defraud you. So, the default rules can be configured to fit an individual business’ needs.
For example:

  • You have three or four customers who place extremely large orders regularly. You can place their names – or even specific credit card numbers – on an exceptions list.
  • You can raise or lower transaction limits based on the level of risk you’re willing to accept.
  • You can opt to be conservative and “block” suspicious activities entirely, or you can adjust the filters to “flag for review.”

You can also screen for innocent mistakes that can result in chargebacks. For example, you can alert users who have placed multiple, identical articles in their carts, or who have attempted to purchase multiple subscriptions. In these cases, the fraud scrubber may be set to flag for review, or may trigger an error warning and ask the consumer to manually confirm the purchase. Different options are available depending on the fraud scrubbing solution and the ecommerce platform that’s being used.
Fraud scrubbers can also be configured to decline problematic transactions before authorization (prior sending the transaction to the acquiring bank for processing) and after authorization (prior to shipping product).

Choosing a Fraud Scrubbing Solution
High-risk businesses, and new e-commerce merchants, may initially need help to configure a fraud scrubber properly. It’s best to utilize a fraud scrubbing solution that is offered by your Payment Processor, who should be experienced in both mitigating potential problems for high-risk businesses and willing to work with you to figure out your needs.
You should be able to view fraud scrubbing activity, and act on items flagged for review, though an easily accessible but secure dashboard accessible through your browser.  You should also be able to update and reconfigure your filtering through the dashboard, including the filters that determine actions based on customer history interactions, IP addresses, email addresses, transaction count and transaction amount, and velocity checks.
Any fraud-scrubbing solution should be updated regularly for it to be effective, and to keep you one step ahead of intentional fraud. Talk to your Payment Provider to determine whether a fully-automated solution is the best choice for your business, or what level of customization will best fit your needs.
The right fraud scrubbing solution, properly configured, will block the majority of fraudulent transactions in real time, and enable you to scrutinize potentially problematic activity to determine whether it is genuine or fraudulent.
T1 Payments specializes in meeting the needs of high-risk merchants, providing a full suite of Payment Processing, including advanced fraud scrubbing and other risk management tools, and Payment Gateway services that integrate with over 175 different shopping carts. T1 also provides flat fee merchant accounts, complies fully with PCI, and offers comprehensive account monitoring, reporting and support to help high-risk merchants avoid chargebacks, fraud and other business risks. To find out more about our customizable global payment solutions for high-risk merchants please visit or call 866-518-2216.