POLICY ABUSE FRAUD PREVENTION

Policy abuse typically involves exploiting loopholes in the policies and guidelines set by an online platform. Since this can be done in a variety of ways, let’s describe some of the significant categories of policy abuse scams out there:

• Coupon Fraud, Promo Fraud, and Loyalty Abuse are types of fraud that occur when a customer exploits reward programs for personal gain. This often involves creating fake accounts to collect multiple sign-up bonuses quickly, such as gadgets or credit coupons. These fake accounts are typically used only for sign-up and do not generate any revenue for the service owner. They all are a form of New Account Opening fraud and a growing concern for financial services, online gaming, and gambling.
• Referral Abuse occurs when fraudsters create multiple fake or synthetic accounts and refer them to each other to gain referral bonuses. These fake accounts have little or no activity and do not generate any revenue for the service owner from referrals or new users. Referral abuse is a growing concern for service owners and can have a significant impact on the referral program’s effectiveness and legitimacy. While e-commerce is one industry that is particularly susceptible to referral abuse, other industries, such as finance and healthcare, can also be affected.
• Returns Abuse occurs when a customer uses the return and refund option in a fraudulent way, causing significant losses for the store. For example, the customer may forge or copy a receipt and make alterations to receive a higher reimbursement when returning an item. In other cases, the customer may request a refund by shipping an empty box or a different item, hoping it will get lost in the inventory. Sometimes, Returns Abuse involves declaring the item as damaged, requesting a refund, and refusing to return the damaged goods. Returns abuse is a growing concern for e-commerce businesses, as it can lead to reduced profitability, increased costs, and a negative impact on customer experience. A slightly different case of Returns Abuse is the Overpayment Scam, also known as cash forwarding or cash advance scam, a type of returns abuse that involves using a stolen credit card to pay for a purchase and then requesting a refund to a different form of payment. In this scheme, the fraudster can obtain money back from the card by passing it through the merchant. This type of scam is more advanced than traditional returns abuse and can be difficult to detect.