The scale of e-commerce fraud is accelerating at an alarming rate, powered by Gen AI, human trafficking and the exploitation of new targets, according to a report from commerce protection provider Signifyd.
Signifyd’s “State of Fraud and Abuse 2024” report highlights the industrialization of online fraud at the hands of global criminal rings. The report details the growing threat of first-party fraud, in which consumers contest legitimate transactions as fraudulent; and the increasing overlap of e-commerce fraud and traditional cybercrime. Highly sophisticated fraud rings have stolen billions of dollars in goods from online brands in the United States while rapidly shifting their tactics and strategies, building an e-commerce component to organized retail crime, according to Signifyd.
In the report, Signyfyd noted attempts at placing fraudulent orders increased 19% in the first half of 2024 versus the previous year. In all, 13% of orders now include signs of address manipulation, a fraud-ring tactic that attempts to outsmart machine learning models’ ability to recognize addresses with a history of fraud. Cases of attempted reshipper fraud jumped by 50% in 2024, a sign that crime rings increasingly rely on middlemen to mask their online orders while moving stolen goods out of the United States, according to Signifyd.
Professional fraud rings have expanded into non-payment or first first-party fraud and abuse as they look for new revenue streams. New approaches include “fraud-as-a-service” operations through which criminals commit returns and refund fraud, claiming reimbursement for a product that was never bought or was not shipped back, on a consumer’s behalf for a piece of the profits.
One Vietnam-based crime ring targeted an estimated $4.7 billion in goods across the country and successfully stole $940 million in merchandise in just months, according to a Signifyd analysis. Indeed, fraud and cybercrime compounds now operate through Southeast Asia, staffed through human trafficking, according to the United Nations. Overall, fraudsters cost U.S. e-commerce retailers $48 billion last year, the company maintained, pointing to Juniper Research data.
As fraud becomes more sophisticated, retailers will need to resist the impulse to overcorrect and reject good orders, Signifyd pointed out. For their part, consumers should consider carefully monitoring their bank, credit and retail accounts for evidence they have been compromised. The report indicates the evolving applications of AI by criminal rings has resulted in the creation of such tools in deep fakes. However, fraud prevention professionals are deploying machine learning models to protect the entire buying process, including account security and post-purchase activities, such as refund and return requests.
“The growing prominence of global fraud rings is not new, but the acceleration of that growth and the adoption of increasingly sophisticated tactics and operations is worrisome for e-commerce merchants,” said Signifyd CEO Raj Ramanand. “The challenge for retailers is to avoid falling prey to these sophisticated attacks while still providing a best-in-class customer experience and preserving their hard-earned customer lifetime value. Fortunately, fraud protection leaders continue to innovate and add the machine learning and data science resources needed to stay a step ahead.”
Xavi Sheikrojan, Signifyd’s senior manager, risk intelligence, added, “Fraudsters today are managing large, criminal enterprises. They plot out annual roadmaps. They look for new revenue streams and assess ROI before deciding where and how to strike next. We are certainly up to the task of undermining them, but it requires determined vigilance.”
