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Manage your business

Help Prevent Fraud Losses

Key Facts

  • Review orders for unusual activities.
  • Verify the customer’s order information before you ship.
  • Use tools to help detect fraud.

Unauthorized Claim

It's critical to protect yourself against fraud.

Although PayPal works hard to prevent fraud, every online transaction still carries an element of risk. PayPal recommends that all merchants take a proactive approach to risk management for these reasons:

  • You are responsible for fraud losses that aren't covered by Seller Protection. Opportunistic fraudsters will take advantage of businesses that are not aware of fraud risks.
  • Nobody knows your business as well as you. You know your biggest customers and are familiar with their buying patterns. Because no payment processor will ever surpass your knowledge in these areas, your involvement in risk management is essential.

Watch our 2 minute video to learn some tips to help protect your business.

Watch our 2 minute video to learn some tips to help protect your business.

Review orders for anything unusual.

While none of these warning signs automatically mean that an order is fraudulent, if something looks too good to be true, it probably is. Here are some examples:

  • Shipping address is in a high-risk country or location that’s known for fraud. You can search online to find a list of high-risk countries.
  • Order is larger than normal. Use caution if you receive an order from a new customer that is larger than your normal order size and if it’s a product that’s in high demand, such as electronics.
  • Customer asks you to change the shipping address after the order has been paid for. Make sure their address change makes sense. Fraudsters originally enter valid addresses so your fraud systems don’t catch them. Then they contact you to change the address.
  • Abnormally large number of international orders within short period of time. For example: you receive over 50 orders from customers outside the US within a few days but you normally only receive 2 international orders within a month.
  • Abnormally large number of orders during an unusual time of day. For example: you receive 10 orders from US based customer(s), all around 3:00 a.m. on the same day.
  • Several orders from different customers are all shipped to the same address. Fraudsters often steal credit cards from several different people and have the orders shipped to one address.
  • Overpayments. If someone overpays you, do not send the extra money back through a wire transfer. Instead, return the money through PayPal. A fraudster may also ask you to send the overpayment to their preferred shipping company. Do not fall victim to this common scam.
  • Order consists of multiple requests for the same item. For example: a customer orders 50 pairs of the same shoe in various sizes. Ask yourself if it makes sense that a customer would order several of the same products. For example, why would a customer need 50 pairs of the same shoe?
  • Rush or overnight shipping. Fraudsters like to receive merchandise quickly, regardless of the cost.
  • Suspicious email address. Look for email addresses that seem unusual like knh$$ or undeliverable emails. Legitimate customers are more likely to use email address that contain their name.
  • Suspicious shipping address. Before shipping an expensive order, make sure you know where the order is being shipped to. Criminals may ship orders to freight forwarders, shipping companies, P.O. boxes, or vacant properties so they can remain anonymous.
  • You received multiple separate orders from the same PayPal account within a short time period. Fraudsters may place smaller separate orders to avoid detection since you may be less likely to review a low priced order than a larger order.
Verify the customer’s order information before you ship.

The amount of time you spend on fraud prevention will depend on what you are selling, who your customers are, and the amount of risk you're willing to take. If you sell expensive products that are in high demand, your fraud prevention and detection processes are even more critical.

Verify the customer’s order information before you ship.

Go online and verify the shipping address. Look for red flags such as shipping to a freight forwarder, shipping company, P.O. box, hotel, or a vacant property. Fraudsters often ship orders to addresses that can't be traced back to them.

  • Freight forwarder: Third party shipping service that reships merchandise to another location (typically abroad) for a fee. To see where your package is being sent to, simply enter the shipping address into a search engine. If the search results show the name of shipping company, be more cautious.
  • Shipping companies or P.O. boxes: Fraudsters like the anonymity that shipping companies and P.O. boxes provide. However, there are also a lot of legitimate reasons for using a shipping company or a P.O. box. You just need to be more cautious, since shipping to P.O. boxes and shipping companies are typically more risky than shipping to residential addresses.
  • Money mule: Fraudsters pay people (known as money mules) to have orders shipped to their address. The money mule receives the package, then reships it to the fraudster’s address. Be careful if you have a lot of orders from different customers that are shipped to the same address.
  • Vacant property: To identify vacant properties, enter the shipping address into a search engine. If the property is currently listed as for rent or for sale, it could be vacant.

Shipping address example: A new customer orders a $10,000 chandelier. Here is what you can do:

  • Search an online map to see who and where the order is being shipped. Is the order being shipped to an expensive home, motel, or to a freight forwarder?
  • Use a search engine or social networking site to verify the name and shipping address. Does the name, shipping address and billing address match?
Verify the phone number

Use a reverse phone look-up or third party data supplier to verify the customer’s name and address. You can also call the customer’s phone number. Don’t rely on caller ID since customers can use spoofing services to disguise their real phone number. These services even let them change their voice.

Contact the customer to confirm the order information

If an order appears suspicious, contact the customer by phone or email to verify information. Ask questions to see if everything checks out. Be cautious if the phone number is disconnected or if the email bounces back.

Delay shipping high-risk orders

If a transaction is fraudulent, account holders often notice and report the problem pretty quickly.

  • If possible, delay shipment for 24-48 hours for customers who place unusually large orders or buy items that are expensive and in demand, especially international orders.
  • Don’t ship overnight unless you're confident that the order is legitimate or you feel comfortable taking the risk.
Use tools to help detect fraud

These fraud tools are used throughout the industry to help fight fraud. They’re available through PayPal and other fraud management vendors.

Use IP geolocation tools

IP geolocation is a great way to pinpoint the geographic location of your customers. These tools tell you where your customer was located when they placed their online order including the customer's city, state, and country. To be proactive about a potential fraudulent transaction, you can check the geolocation details against the billing and shipping address country your customer provided. If the geolocation information doesn’t match, it could be fraud.

You can also use IP geolocation to look for anonymous proxies (a tool that attempts to make online activity untraceable). Orders that originate from anonymous proxies are more suspicious because fraudsters use them to hide their location. However, legitimate customers who value privacy could also use anonymous proxies to protect their information, so this might not be an example of fraud in all instances.

What can I do if the IP geolocation information does not match the billing or shipping address?

Resolve the contacting the customer or by following other steps listed under step 2 above.

Device Identification

Device Identification tools can be used to help identify the computer or phone that placed the order. Each computer or phone has unique characteristics and this tool can determine if a buyer is repeatedly visiting your site using different information (names, addresses, IPs, credit cards, computer browsers, etc.) to mask their identity. You can search online for a list of third party vendors providing this service.

Try add-on fraud filters

PayPal can provide filters to help you take control of your business. Find out more about PayPal Fraud Management Filters.

Keep your Credit Card Statement Name updated

Make sure customers can recognize your business name on their debit or credit card statement. If a customer doesn't recognize your charge on their statement, they may think that the charge was fraudulent and open an unauthorized claim or chargeback. Click here to learn how to verify or update your Credit Card Statement Name.