FSituation:  The entire supply chain has to worry about fraud, theft and deception. There are many thousands of people who stay awake nights trying to figure out how to cheat and steal from others and the more remote the relationship the easier it is to put these scams together. The on-line environment has always been dangerous as it is anonymous at its heart. We are all familiar with the darker side of the Internet as it relates to children and to the unaware. This insecurity applies to the merchant as well. They must spend a great deal of money to be somewhat protected against those that seek to defraud and cheat them and they will still not be able to prevent all (or even most) of it.

The balance is a delicate one. There are many ways to make these transactions safer and more generally secure but this comes at a cost as far as customer convenience is concerned. At a point the consumer is unwilling to jump through any more hoops – even if these actions make their transactions safer. The merchants have to manage between these two desires.

The fraud challenge has become more acute as more people trust the on-line transaction.  Once, not so many years ago, that trust was not common and people were more than willing to take the time required to secure these interactions but as trust has been built there is a less serious regard. This is interesting as the risk of fraud is greater now than it has been in the past – as anyone would know by looking at the number of hacks and attacks that are reported every day.

Analysis:  The most telling aspect of the new fraud challenge is the diversity of those who are committing it. Once upon a time the majority of the fraud cases were carried out by either those possessed of inside knowledge of an operation or by semi-sophisticated criminal organizations that could identify and exploit weaknesses in a system. There were also those who carried out very low level fraud aimed mostly at individuals. The Internet related attacks are often carried out by people with only basic knowledge of hacking as they can borrow from one another and swiftly create a system to attack. The investigation of many fraud cases reveals the existence of the “dark web” and the information trading that goes on in this realm. The credit card that is stolen is offered on line within seconds of the theft and has been used to commit fraud within five minutes (or less) from the time it was stolen.  The business-related fraud is on a grander scale but the same principle applies.

Courtesy of Dr. Chris Kuehl, Armada Corporate Intelligence