Buguroo has provided a comprehensive breakdown of the different forms of fraud in a new blog post that classifies fraud into three separate categories. Third party fraud refers to fraud in which a cybercriminal targets a victim with no knowledge of the fraud taking place. That fraud can take many different forms, from phishing attacks to account takeovers, and is most representative of the general public’s understanding of financial crime.
First party and second party fraud are not as deeply engrained in the public consciousness, but they can be just as devastating for retailers and financial institutions. First party fraud describes fraud in which someone falsifies or distorts their own personal information for their own gain. For example, someone could purchase a new TV, and then report that the large, anomalous transaction is fraudulent in an effort to get that charge revoked. The practice is far more common than many realize, with one in seven UK residents engaging in such behavior.
Second party fraud is carried out in a similar manner for similar ends, but goes through a second party to help mask the fraud itself. Essentially, someone shares their personal information with a friend or family member, who makes purchases that seem fraudulent because they are being made by someone other than the account or credit card holder.
All three forms of fraud are extremely difficult to prove. Third party fraudsters are becoming more sophisticated, while first and second party fraudsters will seldom confess to their transgressions.
However, Buguroo argues that behavioral analytics offers a potential solution to all three. The tech develops a behavioral profile for every single user based on factors like typing speed and accuracy. The software will spot any deviations from the norm, which could point to the presence of a first, second, or third party engaging in atypical behavior. Either way, a good behavioral analytics solution will be able to stop any transaction that raises too many red flags, at least until someone can make a manual review.