Understanding the ‘Casual’ Fraudster

Fraud isn’t always the work of hardened criminals. Online sellers must learn how to spot—and thwart—clever amateur thieves, as well.

Did you take up a new hobby during the pandemic? I finally picked up the guitar that had been lying there since high school. Many new hobbies have become cherished parts of people’s routines, adding extra richness and variety to life.

Unfortunately, there was a group that chose to take up fraud as a diversion during the pandemic — and for many of them, it’s become part of their post-pandemic lives, as well.

In the United States, government programs designed to provide stability and support for businesses during the pandemic were set up with speed rather than security, making them extremely attractive for fraud.

One estimate suggests that PPP fraud (money stolen by leveraging the Paycheck Protection Program) came to about $80 billion. Added to that, there was about $90 billion believed to have been stolen from the Covid unemployment relief program, and perhaps an additional $80 billion from a separate Covid disaster-relief program. It’s easy to see why NBC News refers to this as the “biggest fraud in a generation.”

The biggest fraud in a generation was perpetrated, in part, by professional fraudsters, as you would expect. These are the same bad actors I’ve seen for years through my work as a fraud analyst. The structure of the relief programs was an invitation fraudsters couldn’t turn down.

With pre-pandemic habits returning and some semblance of normalcy reestablishing itself, fraudsters are now back to their regular fraudulent work—in some cases, having invested in and expanded their operations using stolen funds.

However, a lot of the money was taken by ordinary people, the type of people I would have labeled “good customers.” During the pandemic, these amateur fraudsters were introduced to just how easy and tempting it could be to steal money online.

Many people were experiencing economic uncertainty and stress, and defrauding the relief schemes was often as easy as filling in a form online, perhaps with a few faked documents to add perceived credibility.

The post-pandemic world also includes financial uncertainty for many people, and the ubiquity of online interactions hasn’t lessened. In addition, many who entered fraud through the Covid relief door experienced no adverse consequences. It was almost inevitable that many of them would continue. And, especially in the U.S. market, many of them have.

That said, while we did see that trend coming, we didn’t foresee the magnitude of it—a 35% increase in fraud committed by “non-professional” fraudsters from 2021 to 2022. And with that large an increase in amateur fraud, it’s worth understanding more about the trend and what it might mean for digital commerce.

The Dark Path

Amateur fraudsters made the news due to their pandemic-relief pilfering items like Teslas, Lamborghinis, diamonds, gold coins, luxury watches, expensive furniture, and designer clothing. That makes for a good story, but it doesn’t make for good theft. Those sorts of purchases make you very visible as a potential thief.

The amateurs you want to worry about are the ones who didn’t get caught and didn’t make an “amateur mistake.” They’re the ones who are targeting online stores now.

These amateur fraudsters’ conservative behavior has continued. They often aim for valuable items. That makes them potentially painful because if they get through your protections, the cost of those items increases quickly.

We’re seeing two main types of amateur fraudster: the “upgrade my lifestyle” kind, who steals things he or she obviously want for himself or herself, and the “making money on the side” kind, who are in it for profit. There’s some overlap between these two types, but most fall more obviously into one of these two categories.

Who are the “upgrade my lifestyle” fraudsters? This kind of fraudster goes after things that you might want yourself or that you can easily imagine friends or family members wanting, such as:

• New electronic gadgets;
• Food delivery, especially for pricier takeout or groceries;
• Expensive jewelry, like watches;
• Name brand apparel and toys

The “money on the side” fraudster is a little more professional. Like professional fraudsters, this sort targets goods they know they can sell. Where professional fraudsters know resale markets well and often specialize in relatively niche but lucrative goods, amateurs go for things that it’s clear a lot of people want and that can be resold in many places, items such as cell phones, hot fashion items, earbud headphones, and trendy sneakers.

It’s important to emphasize that this isn’t friendly fraud. These amateur fraudsters aren’t buying and issuing a chargeback. They use stolen credit card numbers or other payment methods. This indicates that they’ve gone a little further down the dark path than was the case during the Covid relief days. They’ve also done some research and found places to purchase stolen payment data.

Rely on the Data

Having said that, they’re still amateurs. They may try simple tricks like creating new email addresses, perhaps even trying to match the name on the stolen card, but they’re still using their own address. They also may use a proxy or a virtual private network. But more often than not, they simply visit a site using the same device they’ve
been using for years and attempt fraud immediately, using a different card.

Interestingly, this amateurish behavior can sometimes make them difficult to spot. The fact that they’re not attempting to hide makes it more challenging to determine whether or not they’re attempting fraud
or acting in an unusual but legitimate way.

Complicating things further, amateur fraudsters don’t usually drop their “good customer” persona when they start engaging in fraud. They continue buying things online, using their legitimate information and payment data, and, sometimes, they dip into fraud on the side.

In these cases, the ratio of good shopping to fraudulent attempts varies tremendously from person to person. Some amateur fraudsters are almost always good customers but turn to fraud on rare occasions when they want something that’s priced more than they can afford or during expensive times like the holiday season. Their fraud attempts might be less than 5% of all their online-shopping sessions.

Others have embraced fraud as a part of their approach to online shopping. In these cases, as many as 60% of their online shopping sessions might be fraudulent.

This presents online merchants with a dilemma: How do you decide whether to let this particular person, known as an occasional fraudster, make this purchase?

In short? Rely on the data. Having solutions that give you insights into shopper patterns will help distinguish whether or not it is worth it to move forward with the purchase.

—Doriel Abrahams is the head of U.S. analytics at Forter