Policy Abuse Fraud Prevention | XTN Cognitive Security


Safeguarding against Policy Abuse with behavioral biometrics

Keep your digital business safe from Policy Abuse with XTN Cognitive Security®:

  • Prevent Money Loss
  • Minimize Acquisition Costs
  • Safeguard Reputational and Brand Image
  • Retain High-Value Customers
  • Protect Pricing Integrity

Market Overview

Policy Abuse attacks have become increasingly prevalent in recent years, affecting a wide range of industries and sectors. This rise in attacks is due to several factors, including the increasing complexity of policies and regulations, the widespread adoption of digital technologies, and the growing sophistication of attackers. As policies and regulations become more complex and numerous, it can be challenging for organizations to ensure compliance and prevent abuse. This complexity can also create loopholes or vulnerabilities that attackers can exploit to gain unauthorized access or benefits.

What is it?

Policy Abuse is a common and well-established fraud pattern referring to a customer deliberately manipulating sore policies for personal gain. This can include using deceptive practices to manipulate search results, posting fake reviews, or engaging in other fraudulent activities that violate the platform’s policies. Policy abuse can occur in various contexts, including computer security, government policies, and business settings. In each case, policy abuse involves taking advantage of weaknesses or vulnerabilities in a policy or set of policies to achieve the attacker’s goals. Nevertheless, the areas that are most commonly targeted by criminals for policy abuse include promotions, free shipping, returns, and referral marketing campaigns that are associated with e-commerce.

How does it work?

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.

The challenge

Detecting Policy Abuse in digital services can be a challenging task due to several reasons. Firstly, Policy Abuse is often carried out using sophisticated techniques that can bypass traditional fraud detection methods. Secondly, the sheer volume of transactions in e-commerce or similar services makes it difficult to identify fraudulent activities manually. This is particularly true for abuse types such as coupon and refund abuse, where the fraudster can take advantage of small, seemingly harmless transactions. Additionally, fraudsters are constantly evolving their tactics, making it difficult for e-commerce platforms to stay ahead of the curve. Finally, the need to balance fraud prevention with the user experience is another challenge in detecting Policy Abuse. Implementing too many fraud prevention measures can lead to customer dissatisfaction, while too few measures can result in increased losses due to fraud.

Preventing Policy Abuse with XTN Cognitive Security Platform®

To combat Policy Abuse, it’s crucial to implement two key countermeasures. The first is preventing New Account Opening Fraud by blocking fake and synthetic accounts from enrolling, which efficiently prevents Loyalty, Coupon, or Promotion abuses. Additionally, analyzing customers’ behavior to identify returns abuses is vital. By recognizing trusted users and isolating suspect behavior or recurring returns, you can focus on suspect behavior while leaving most user experiences unmodified.

The XTN Cognitive Security Platform® offers a comprehensive solution for detecting Policy Abuse in digital services. By leveraging the power of correlation and behavioral analysis, the platform can spot when multiple users share the same device, making it difficult for fraudsters and users to open multiple fake accounts. The platform also scrutinizes user interactions with application forms to detect excessive savviness or suspect low confidence in personal information. Furthermore, the Cognitive Security Platform® integrates consistency checks and historical analysis of users’ personal information to recognize synthetic accounts that reuse data such as email, phone numbers, and addresses. With our solution, you can efficiently prevent Policy Abuse and protect your digital business.

The XTN Policy Abuse solution covers the following main areas of analysis:

Behavioral Analytics: we analyze the user’s interaction with the login form. For example, we detect excessive savviness, unfamiliarity with the user’s IP address, and heavy use of copy-and-paste.

Consistency Checks: we verify the personal data entered to detect any anomalies. For example, the reuse of information already associated with another user (phone, email, address) or a device that has already been used to register other users.

Watchlists: we check for the presence of Indicators of Compromise (IOCs) related to previous fraudulent activity or external events (data breaches).

Business Risks

Consequences of Policy Abuse can impact a digital business by:

• Money loss
• Acquisition cost increased
• Reputational and brand damage
• Low-value customers
• Pricing integrity damage


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