Common Fraud and Scams Found in Marketplaces

By Steve Craig on March, 7 2024
Common Fraud and Scams Found in Marketplaces
Steve Craig
Steve Craig

In my last guest blog post, I highlighted the business risk of ineffective business verification. I briefly touched upon the rise of fraud and financial crime. In this post, I cover common fraud and scams found in online marketplaces.

Fraud & Scams

The terms “fraud” and “scam” are often used interchangeably.  To level set, I use the following definition for fraud: Wrongful or criminal deception intended to result in financial or personal gain. 


A scam is a type of fraud where the scammer tricks a victim into giving up their money, personal information, or convincing them to do something that isn’t in their best interest.


Fraud and scams in marketplaces aren’t just prevalent; they’re sophisticated and constantly evolving. Scams in particular have become such a problem for small businesses that the Federal Trade Commission published a guide for small business.


In this post, I’ll refer to fraudsters and scammers collectively as bad actors: individuals or groups who purposely and willfully deceive others for financial or personal gain.


Exploitation in Marketplaces

Marketplaces and digital platforms have become foundational infrastructure for our  modern economy. Bad actors exploit weaknesses in both business-to-business (B2B) and business-to-consumer (B2C) ecosystems. They use marketplaces as a meeting ground to find victims and quickly take communications into other channels.


In B2B, fraud often revolves around exploitation of business information. In B2C, fraud typically targets the consumers directly, exploiting their trust in the marketplace itself and circumventing the systems in place for their protection.


When it comes to scams, they can be difficult to detect because the bad actors trick their victims into using their account to complete a transaction or task that appears legit to the marketplace. Often, it is only after the money is lost that the scheme comes to light.


Common Fraud Challenges in B2B Marketplaces

While not an exhaustive list, the following are common attack vectors in B2B marketplaces:       



Fake Business Listings: Bad actors create fake listings on business directories or B2B marketplaces to appear as a legitimate entity, providing information that may look valid but doesn’t exist.



Business Identity Theft: Most business entity filings are public record. According to the IRS, bad actors use this business information to commit tax fraud. They also use valid business information to create fake business accounts or to authorize fraudulent transactions.



Domain Spoofing or Website Cloning: Bad actors can quickly create fake, duplicate websites or email addresses that mimic legitimate businesses to deceive other businesses into thinking they are dealing with a reputable business.



Invoice Fraud: Once a fake business website is set up, a common scam is to send fake invoices to companies, coaxing unsuspecting businesses into paying for non-existent services or products.



Payment Fraud: A payment fraud can occur when stolen payment information, such as a business’s bank account details or credit card, are used to make unauthorized purchases or transactions, often leading to significant financial losses and operational disruptions.


Common Fraud Challenges in B2C Marketplaces

It is common for bad actors to pretend to be good consumers and attack businesses but bad actors also create fake business accounts in B2C marketplaces to scam or defraud consumers.


The following are common attack vectors in B2C marketplaces:     



Fake Product Listings: After creating the fake business profile, bad actors post non-existent products or services to deceive consumers into making payments for items they will never receive.



Counterfeit or Stolen Goods: Using fake business profiles, bad actors sell counterfeit or stolen goods. If a legitimate business is caught selling counterfeit or stolen goods, they are usually banned. In that scenario, they may create new fake business profiles to continue to scheme.



Fake Reviews or Review Manipulation: By creating fake reviews, bad actors can unjustly enhance the reputation of their products or tarnish those of competitors, misleading consumers and skewing the marketplace's integrity.



Triangulation Fraud: The bad actor creates a fake business profile, sells items at low prices, and when a consumer buys a product, the bad actor uses the customer's payment information to buy the item from a legitimate store and ships it to the customer. The customer receives the item, not realizing their personal and payment information has been compromised.


  1. Combating Fraud in Marketplaces

The repercussions of fraud and scams extend beyond immediate financial loss.


They impact the marketplace’s brand reputation and customer loyalty. Marketplaces may also get inundated in fraud investigations and remediation which consume precious time and resources from the organization.


Mitigating fraud requires a multi-layered approach. For B2B and B2C marketplaces, it's crucial to implement robust business verification processes but also leverage advanced fraud detection tools, continuously monitor business profiles, and foster a culture of education, awareness, and vigilance within the community.


Developing a comprehensive trust & safety program is essential. Each marketplace should set clear guidelines and policies for ecosystem participants but also include employee training, customer education, and a strong framework for detecting and responding to fraud. Collaboration across peer marketplaces and across other industries can also amplify these efforts by creating a united front against fraudulent activities.


I personally recommend marketplace leaders participate in conferences and communities like the events presented by Marketplace Risk, an organization dedicated to risk management, trust & safety, legal, and compliance. Both myself and Diego Asenjo, Co-founder & CEO of Mesh serve on its Advisory Board.


Next Up

In the third article in this series, I’ll share a framework for assessing your current fraud prevention measures and how best to evaluate potential solution providers to improve your defenses.


This guest post was written by Steve Craig,  Founder & Chief Enablement Officer at PEAK IDV.  Steve is on a mission to enable 10,000 people to become experts in digital identity.

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