IP Fraud Prevention
LexInter | March 25, 2022 | 0 Comments

Importance of IP Fraud Prevention

Just like customers have the right to choose the company they’ll use or buy from, businesses also have the right to refuse service. We often see a sign saying that a business can refuse service if they deem it necessary, even if it never happens.

There are many situations in which this can be applied. If the customer is unreasonable or causes problems, the business can refuse to serve them. If the business suspects fraudulent behavior on behalf of the customer, they can refuse to serve them.

Has any store rejected your payment because the bills you were using were too torn or looked suspicious? Nowadays, if you go to a store and use a credit card to pay, you might be asked to provide an ID card. Provided that you aren’t using your own card, the store can refuse to charge it. Maybe you appear very nervous or they simply have the policy to refuse anyone who can potentially be using a stolen card.

Either way, it is their right to do so. If you are an owner of a business, it is your right to do it, too. Some caution in terms of fraud is always wise for a business.

Understanding IP addresses

Most businesses these days operate at least partly online. Knowing this, one highly effective way to prevent and avoid fraud is IP validation.

In other words, you can use your right to refuse service to a customer that potentially wants to commit fraud and prevent it thanks to IP validation.

Understanding IP addresses

Signs of fraud can differ a lot when you’re doing business online. Even so, many of these issues can easily be avoided just by tracking and checking IP addresses.

Businesses and professionals these days consider IP addresses to be the most useful data point for avoiding fraudulent activities on the website. This might not be the only way – or the most accurate way in every case, but IP addresses carry significant weight in determining the risk profile of a transaction or a user.

How does this work, then?

Every online user has a unique IP address for the device they are using. This IP address can be used to track activities such as moving through a site, scouring different pages online, etc. The IP address monitors this behavior over time.

When criminals want to commit fraud, they avoid using real IP addresses for precisely this reason. This is why they use VPNs and proxies to mask the true IP addresses, which will complicate the validation process and prevent businesses from detecting the location of the user.

IP validation and how it helps prevent fraud

IP validation is an amazing way to detect and prevent fraud before it occurs or minimize the damage before it gets too big. The IP data can reveal many things to the business, including the user’s location, their ISP, and much more.

Nowadays, businesses all around the world use tools like SEON to detect and prevent fraud before it causes tons of damage. Such tools look at various settings, assign them points depending on the risk factor, and help businesses make informed decisions based on an IP fraud score system.

IP validation and how it helps prevent fraud

IP fraud prevention is based on the fraud score. The fraud score is affected by many things in addition to what is used to hide the IP address. Such tools are amazing at finding IP addresses that are historically connected to fraudsters, as well as using things like geolocation to find the red flags in a site’s visits or activities.

IP validation looks at where the addresses are located, which can be a red flag if you’re catering to a selected audience based in a specific area. For example, if your business sells in the US, IP addresses miles away from this range attempting to make a purchase are a great potential fraud risk.

We can all agree that preventing something is better than treating it afterward, especially if it costs your business a lot of money and possibly its reputation.

Most people don’t have any reason to hide their IP addresses. Risk management is done right if we identify, analyze, evaluate and treat the risks before they turn into real problems.

What can an IP address tell us?

IP validation goes on many levels. Its simplest function is to extract geolocation data such as the country, timezone, city, region, or state where the user was based when performing the task. It can tell us from which location a purchase was made on a site, an attempt at purchase, a visit, etc.

If we dig further into this, we can identify the ISP. The ISP is the Internet Service Provider, which can also tell us about the company or organization that owns the IP’s internet connection.

Let’s say that you get an email from an X company discussing an opportunity that can potentially be very beneficial for your business. If the ISP of this company doesn’t really fit i.e. it’s from some entirely different organization, there’s a high chance that you’re facing a fraudster.

IP validation can tell us if an address belongs to a hosting company, a data center, an institution, a residential internet provider, or an entirely different organization.

This doesn’t just help businesses determine who they’re getting the activity from. It also makes it easier to identify the VPNs from Tor connections, hosting providers, etc. When we detect a proxy connection, this shows us that we need to perform further analysis.

Naturally, not all VPNs and proxies are used for fraudulent purposes. This is why brands opt for professional assistance and a very thorough evaluation of the IP addresses and other factors.

How IP addresses help businesses prevent fraud

Having some data can only be useful if you know how to use it to prevent fraud. To help you better understand the importance of fraud prevention with the help of IP addresses, let’s take a look at how businesses use it.

Criminals use proxies and VPNs to create anonymity for themselves when they intend to use stolen credit cards, create fake accounts, send and install spam and viruses, steal personal information, etc.

How IP addresses help businesses prevent fraud

The Internet is a risky place these days. Someone based thousands of miles away can hide their IP and infect your connection and data with malware or viruses, or steal information that can break or kill your business altogether.

All the information collected through IP validation along with blacklists, abusive IP reports, and forensic analysis makes it possible to narrow down the IP addresses that are highly likely to be used for malicious behavior and engage in fraud.

In other words, IP validation is used to check the customer’s IP address for mismatches in location, ownership, etc. Since this takes place in real-time, businesses can act on the information immediately and use their right to refuse service before fraud takes place.

Since criminals are well aware that businesses are checking IP addresses, they opt for using VPNs and proxies to hide this data and make it less likely to get caught. Nowadays, many businesses don’t bother to invest in real-time IP validation or look for such data to keep their websites safe.

As a result, they get bots on the site that only ruin the accuracy of their analytics, face serious frauds that cause them customers and reputation, and are often victims to scams that could have easily been prevented just by using IP validation.

Quality IP validation services can look at many things in addition to geolocation. They have access to blacklists and can instantly detect when a known fraudster is attempting to commit a crime that affects you. They can detect when an address is a part of a proxy network. They can use geolocation to see if these people are in your actual target audience.

In other words, you’ll get alerts when something is going awry and be told to be more cautious before you do business. In the end, it is up to you whether or not you’ll refuse service or reject the person using a proxy.

Final thoughts

We always hear of scams and frauds happening online, but how much do we do to prevent these things from happening to us? We obviously do too little considering that, in 2019 alone, phishing attempts grew by 65%!

If you want to be smart and keep your online business safe, it’s not enough to work fairly and well, and hope that no one will try to scam you.

The warning signs that can help us avoid fraud are out there in the open, but we can only see them if we decide to do so. If you want to prevent fraud before it causes you damage, you need the intent and means to discover them.

Everyone who owns and operates an online business has the responsibility to protect it from harm. That being said, using IP validation is one of the best methods for fraud prevention.

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Lexinter Law, with a team of dedicated authors who strive to provide you with all the relevant and actionable tips on the legal aspect of your life. Our goal is to educate you so that you can make legal action with ease, or find the right person who can help you with your unique personal legal dilemma. Take care!

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