Package Rerouting Fraud: How To Stop This Ecommerce Fraud

June 15, 2022

The Bolt Team

Retail fraud in 2022 can look like an alphabet soup of names and acronyms. There is friendly fraud, reshipping fraud, and credit card fraud, and let’s not forget about BOPIS or ORC. 

In that mixed bag of names and acronyms, we also have rerouting fraud, which in recent years has run rampant in ecommerce. Below are some tips for identifying and preventing rerouting fraud. 

What is package rerouting fraud? 

The story of a rerouting fraud begins like most frauds; a bad actor acquires a credit card or other payment information by illicit means. With the stolen card numbers in hand, the fraudster goes on a shopping spree. But instead of swiping their way down fifth avenue, they use the stolen funds in various corners of the internet. 

Ordering online lets bad actors complete purchases with stolen card information in a way that doesn’t raise many red flags. That’s because the billing details and shipping addresses will match the credit card owners’. After the order is processed, fraudsters pull a bait-and-switch, or what we know as rerouting fraud. They forward the package from its initial destination to their own. 

Although this sounds like a roundabout way to scam retailers, it, in fact, is an effective way to bypass fraud detection services—many of which flag mismatching addresses for fraud. 

Types of rerouting fraud

Rerouting fraud may sound straightforward in theory, but in practice, the scheme can take on many different forms.  

Classic rerouting fraud

The classic approach is to complete an order with a verifiable address, and only after the order is completed will a fraudster call the retailer to request a change of address. As mentioned above, this method evades modern fraud detection systems, which look for mismatched addresses at completion. 

Contact the courier

Some fraudsters may think the classic method sounds too risky. So instead of duping the retailer, they request a change of address from the shipping company. As a result, the bad actor bypasses the retailer altogether, who, on occasion, will question the intention of an address change. What’s more, this method banks on the fact that retailers and shipping companies keep somewhat messy lines of communication. 

Misdirection at the onset

In other rerouting frauds, the customer uses an incorrect shipping address from the get-go. When the courier eventually flags the package as undeliverable, and don’t worry, they will, the fraudster gives the shipping company a new address. 

Why is package rerouting fraud a big deal for ecommerce? 

Fraud, in general, has become a persistent problem impacting retailers. For one, shoppers who are scammed often question how brands could allow such nefarious activity. In fact, a recent study we conducted with YouGov found that 71% of customers would view a brand unfavorably if their information were compromised. 

If that weren’t enough, there are also the monetary damages. For every dollar lost in a fraudulent transaction, retailers lose $3.60. That adds up to almost $20 billion in losses each year, according to a Juniper Research study. 

For rerouting fraud, specifically, retailers stand to lose more than $10,000 in time, resources, and shipping costs. 

How to prevent package rerouting fraud

There is, of course, a simple solution to all this; block customers from rerouting packages after completing a purchase. But this approach comes at the cost of a frictionless customer experience. There are legitimate reasons why customers reroute packages—including sending a gift or shipping to an office— and taking away that option may leave some unsatisfied. 

For retailers who don’t wish to make this tradeoff, there are a few things they can do.

1. Look for shipping address changes

Rerouting fraud starts and ends with an address. Knowing when a customer forwards a package is a natural starting point for stamping out this type of fraud. That can mean implementing policies for handling address changes or receiving notifications when they happen at the shipping company. 

2. Know why customers ask for rerouting 

Address changes happen for many reasons, some legitimate, some not. Knowing the why behind each case can help retailers stamp out real threats without hindering legitimate reroutes. Doing so effectively requires clear lines of communication not just internally but with the shipping company. 

3. Analyze the contact details

The truth about retail fraud is that most follow a similar pattern, and the fraudsters committing the crimes exhibit similar behaviors. In cases of rerouting fraud, retailers will want to look for repeated uses of VPNs or VOIP phones. Bad actors use either mechanism to mask their true identity. Retailers will also want to make sure the email address used to complete an order is active. Check out our recent blog for other tell-tale signs of fraud. 

4. Implement a third-party solution

Monitoring cases of rerouting fraud can become a significant undertaking, but with advanced fraud solutions like Bolt, retailers can rest assured that they are protected. Bolt takes a systematic approach in identifying, monitoring, and eliminating fraud. Our machine learning models analyze over 200 behavioral signals that we’ve found foreshadow instances of fraud. And when our models miss something, we have a team of expert reviewers on standby, ready to look over any individual transaction. 

ThinkShop by Bolt does not constitute professional tax or financial advice. Contact your own tax or financial professional to discuss your situation.