It should go without saying that e-commerce businesses rarely meet their clients in person. That’s okay for the most part. However, some scammers have figured out how to exploit this anonymity.

You can’t defend yourself if you don’t know who your enemy is. Because of this, scammers conceal their identities from you; hence, you cannot accurately determine if they are the real cardholders during a transaction. They use proxy servers, which give the impression that their actions are coming from someone else to accomplish online transaction fraud. Fortunately, this post will fill you in on how to use proxy piercing to prevent online fraud. 

What Is Proxy Piercing in Fraud Detection?

Proxy piercing is a technology that allows hosts to ascertain whether a client is trying to use a proxy server to conceal their IP address. Essentially, it helps determine whether a buyer is hiding their identity by utilizing a third-party server. The check takes place via a brief test that usually runs in the background without the user seeing it. 

There are good reasons to use datacenter proxies, like safeguarding one’s data. However, proxies are also a great tool for abuse because of the same reasons that make them valuable. Criminals can conceal their identities through proxy fraud to get away with schemes. The purpose of proxy piercing tools is to avoid that.

In What Ways Do Criminals Employ Proxy Servers?

Since hiding behind a proxy makes identifying cyber criminals difficult, they tend to like employing these tools for malicious activities. Although knowing about proxy piercing will not deter them, it can make their job more challenging.

Datacenter proxies, which use virtual IP addresses generated in a data center, and residential proxies, which use real residential IP addresses from actual people with contracts with their ISPs, will be our focus. Because home connections are less likely to create suspicion, fraudsters usually prefer residential proxies out of the two.

Use of Proxy Piercing in Online Fraud Detection?

Proxy piercing techniques aim to expose online scammers that conceal their identities through an intermediary. It works by deploying a tiny piece of code on a user’s device to determine if their real IP address matches the one used in a transaction.

This technology compares the customer’s IP address to a myriad of factors, weighing whether a purchase is legit or not. To do this, they evaluate things like geolocation data, billing and shipping addresses on the purchase order, dark web activity and more through AI-powered fraud detection mechanisms. After the verification phase is done, the technology then assesses how problematic the true IP is. The application can reject an order and even block the user’s IP address if it detects a proxy.

Companies can use proxy piercing techniques through the following approaches: 

• #1) Session Monitoring

Device fingerprinting and user interaction tracking, including page views, form the bigger part of session monitoring. The idea of this non-intrusive approach is to closely watch a user’s activity to ascertain whether their activities on a website are legit or not.

• #2) HTTP Headers

In certain situations, it is possible to automatically look up the client’s IP address via HTTP headers. It is unlikely, though, as this method depends on either a malfunctioning VPN or an improperly configured proxy.

• #3) DNS Leaks

Similarly, if the proxy or VPN is set up correctly but the scammer makes a mistake configuring it on their end, DNS leaks could reveal a user’s IP address. At best, this is a hit-or-miss situation. 

• #4) WebRTC

With WebRTC, browsers enable a multitude of multimedia features, such as voice and video calls, file sharing, and real-time chat, to work without needing an extra app or application. In specific configurations where WebRTC may be exploited, proxy piercing could figure out a user’s real IP address if an undesired leak takes place.

How Can Proxy Piercing Help You Prevent Online Fraud?

There is always a fine line between security and friction when combating digital fraud. Many fraud-fighting technologies will flag IPs from datacenter proxies as suspicious on first look. However, not everyone using a proxy is necessarily a fraudster or a criminal. Therefore, businesses still need to accept reputable clients even if they use proxies.

Advanced proxy piercing software needs a lot more than just a person’s IP address to determine whether someone is using these tools. Proxies won’t always be able to fully avert anti-fraud software — after all, a person’s digital footprint is so much more than just their IP’s reputation.

To be confident about customers employing proxies, a business needs sophisticated anti-fraud solutions that go far beyond basic IP reputation rankings. Truly advanced proxy piercing software looks for a myriad of data to evaluate if a user is legitimate or not. These data pieces are frequently unrelated to the IP origins and include device fingerprint, screen resolution, installed browser plugins, languages, and more. The number of scams prevented and potential losses will always outweigh the costs when appropriate fraud prevention tools are implemented and tailored to a specific company.

Wrap-Up

There are numerous uses for proxy piercing. Although any scammer would value confidentiality, proxies are neither intrinsically malicious nor unlawful. Nevertheless, regardless of how much scammers and other undesirables tried to hide their activities, proxy piercing constitutes a helpful alternative to weed out these individuals.

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