Marketplace Risk

Common Scams & How to Prevent Marketplace Fraud

Click on the bookmark to view chapters of this webpage

Subscribe to our newsletter!

Please fill out the form below:

Click on the bookmark to view chapters of this webpage

Online marketplaces like Amazon, eBay, and Etsy are here to stay; with more users flocking to these services for convenience and ease-of-use. And a key priority for those businesses is to minimize marketplace risk.

This involves protecting the business and its marketplace users from not only financial crimes such as fraud, but also other abuses that can make users feel unsafe or unwelcome.

Here, we’ll discuss what platforms can be classified as marketplaces, as well as some of the common forms of fraud and other abuses they need to guard against. We’ll also discuss the role of Trust and Safety teams in keeping marketplaces secure, and offer some strategies for them to do so effectively.

Access the State of Fraud and AML 2022 Report Now

What is an Online Marketplace?

An online marketplace is a digital platform that facilitates the exchange of money, goods, or services. Sometimes the platform itself will provide goods or services for sale to its users. Other times, it will serve as an intermediary, assisting with transactions between customers and merchants.

What is Marketplace Fraud?

Marketplace fraud is when a person or group intentionally acts dishonestly to take advantage of – or disadvantage – a marketplace or its users. This could include stealing sensitive information, making purchases with other people’s money, or posting fake feedback to manipulate users’ reputations.

What Does Marketplace Trust and Safety Mean?

Marketplace Trust and Safety refers to tools and processes aimed at protecting the functional integrity of a marketplace. That includes keeping user accounts, information, and interactions safe. This generally consists of setting rules on what kinds of activities are or aren’t allowed on a marketplace, and then monitoring for, investigating, and taking action on violations of these rules.

Online marketplace Trust and Safety includes protecting against illegal financial activities carried out through marketplaces. These include various forms of fraud, as well as money laundering and terrorist financing. But it also involves shielding users from improprieties not necessarily related to finance. These include:

  • Spam or misinformation spreading
  • Harassment, bullying, or threats
  • Posting explicit content (improperly)
  • Unauthorized sharing of personal information
  • Encouraging or soliciting illegal activities
  • Glorifying dangerous or self-destructive behavior
  • Disrupting the normal activities of the marketplace or its users

Common Marketplace Scams to Watch For

Bad actors use many different types of marketplace scams to trick users into giving up sensitive information or to buy things at other people’s expense. Here are seven common marketplace scams that marketplace fraud prevention teams should be aware of.

Triangulation Fraud

Triangulation fraud involves a fraudster setting up a fake store on a marketplace, then listing goods for sale that other legitimate merchants are selling. When a customer orders a product from the fraudster’s store, the fraudster uses stolen payment information to place an order for that product from a legitimate seller and have it shipped to the customer.

The person whose payment information was used for the transaction will likely file a chargeback request for the fraudulent purchase. So a merchant targeted by this scam can lose the money paid for an item – which goes to refund the fraud victim – as well as the item itself.

Overpayment Scams

This type of marketplace scam involves a criminal paying a seller more than an item is worth using either fake or stolen payment details. The criminal will then ask the seller to refund them the difference through a different payment method – usually, one that’s difficult to trace or reverse, such as a wire transfer or cryptocurrency transaction.

But the sale never goes through, because either the merchant’s financial institution or the legitimate payment information owner cancels, blocks, or files a chargeback over the purchase. So the targeted merchant ends up giving away money to a criminal without making a sale.


This type of scam happens when a fraudster lists an item for sale, usually at a lower-than-average price to attract buyers. Once a customer purchases, the fraudster makes up complications about the order to get the customer to pay more money needlessly. Usually, they will ask to be paid the extra in forms that are difficult to trace, like gift cards.

Phishing Scams

There are many marketplace scams and schemes that fraudsters will use to steal users’ sensitive information. Sometimes they will pose as a marketplace employee or other authority figure and claim that they need this information to process a transaction or verify an account. Other times, they may ask another user for their home contact information to arrange a pickup, or to fill out a fake shipping form to arrange a delivery.

These methods of identity theft are jumping-off points for criminals to commit many other types of online marketplace fraud.

Giveaway, Referral, and Promotion Abuse

Many marketplaces offer promotional incentives for doing business with them. Unfortunately, fraudsters can unfairly take advantage of these programs in many ways. They can use fake, stolen, or modified coupons; create duplicate accounts or broadcast promotional codes to redeem promotions an unintended number of times; or take over accounts to steal promotion rewards from legitimate users.

These types of online marketplace scams can cost marketplaces in many ways: loss of pricing integrity; low-ROI marketing campaigns; revenue and inventory loss; and reduced trust from legitimate customers.

Google Voice Scams

These scams involve a fraudster attempting to gain control of a marketplace user’s phone number. They may do so by asking a user for their phone number as contact information, then registering that phone number with a VoIP service provider. When the user receives a verification code for the registration, the fraudster claims that they sent it for another reason, and asks the user to confirm the code for them.

A fraudster can also use the number to call a user’s telecom provider and claim that their phone was lost or stolen. Then, using stolen identity information, they can claim to be the owner of that number and ask for it to be moved to another device.

The end result is a fraudster now controls a phone number that doesn’t belong to them. They can use this to impersonate the victim to commit fraud or bypass some forms of multi-factor authentication to break into the victim’s account.

Fake Property Rentals

This scam targets property rental marketplaces. Fraudsters create fake listings, hoping to lure in customers who can’t immediately visit a property to inspect it.

When such a customer expresses interest in a fake listing, the fraudster tells them that many other people are also interested in renting it. Therefore, they recommend sending a partial deposit as soon as possible to reserve the property. If the customer does so, the fraudster deletes the fake listing and disappears with the stolen money.

Marketplace Fraud Prevention : Safety Tips to Follow

Here are seven marketplace safety tips that Trust and Safety teams can use to detect, investigate, take action on, and ultimately prevent abusive marketplace activity.

Verify Identities Using Customer Onboarding

One of the biggest contributors to fraud on a marketplace platform is the ease with which bad actors can create duplicate or impersonation accounts. So an effective way to keep fraudsters out of a marketplace is to require stricter identity verification procedures for customer onboarding. These may include ID documents, liveness detection, or multi-factor authentication.

Marketplaces should also employ further KYC measures, such as due diligence and transaction monitoring. This will help to determine if a user’s history or behavioral patterns make them a greater risk for committing fraud or other marketplace-disrupting activities.

Use Transaction and Event Monitoring

It’s important for marketplaces to monitor transactions, as some can have certain inherent qualities that raise suspicions. But there are usually series of other policy violations that lead up to larger abuses – financial (such as fraud) or otherwise.

That’s why Unit21’s suspicious activity monitoring rules engine can be configured to detect not only signs of illicit transactions, but also other shady activities that often precede fraud. These include high-velocity consecutive account registrations, suspicious login attempts, and sudden rapid changes to account passwords or other credentials.

Helping Trust and Safety teams spot potentially abusive activity patterns enhances marketplace fraud detection. It allows for proactively shutting down fraudsters before they can access legitimate users’ money or sensitive information.

Leverage Automated Case Management

Many cases of suspicious or abusive activity in a marketplace could occur simultaneously. This is why Trust and Safety teams need to utilize case management frameworks to segregate and track investigations of separate incidents.

Even better is to use a case management solution like Unit21’s. Using a centralized platform to manage cases allows involved marketplace risk departments and employees to collaborate more effectively. Automating standard investigation procedures cuts down on case resolution times. And automatically logging developments in cases shows where the system is working as intended, in addition to areas where it could be improved.

Prioritize Cases with Alert Scoring

Not all suspicious activity on a marketplace is malicious. That’s why tools such as Unit21’s Alert Scores help Trust and Safety teams more effectively prioritize which incidents to investigate.

Alert Scores allow Trust and Safety teams to use a marketplace’s data on how suspicious activity alerts are handled – both historically and in real-time – to rank how likely an alert corresponds to actual abusive behavior. This lets teams allocate resources to cases that most likely threaten their respective marketplaces, while not wasting time with alerts that are probably false positives.

Use Link Analysis to Identify Fraud

Especially when working at scale as part of fraud rings, fraudsters often have to reuse credentials for setting up duplicate or impersonation accounts. Marketplace safety teams can take advantage of this by using link analysis techniques to spot suspicious connections between users’ credentials and activities.

Things to look for include accounts made – or transactions initiated – by users with similar or identical payment information, identifying details, shipping destinations, IP addresses, device signatures, etc. By deducing these unusual patterns, Trust and Safety teams can further investigate users potentially engaged in fraudulent activity.

Educate Users to Protect Themselves

One way to get users to trust a marketplace is for a Trust and Safety team to be transparent about what kinds of abuses users are likely to encounter. To take this further, Trust and Safety teams should advise users on what they can do if they encounter such behavior. 

This can include using common sense to spot deals that are too good to be true, and checking users’ profiles for suspicious activity or contradictory information. Other helpful advice includes immediately leaving a transaction that asks for unnecessary information and contacting the police or other authorities if a user suspects criminal activity.

Allow Customers to Report Scams

Trust and Safety teams should include a marketplace fraud reporting mechanism as part of the platform’s interface. This allows users themselves to play a part in building a trusted marketplace by alerting Trust and Safety personnel to seemingly suspicious behavior.

This has two main benefits. First, it can allow Trust and Safety operatives to identify, investigate, and take action against potentially abusive behavior sooner after it happens. Second, it can teach automated Trust and Safety solutions activity patterns to look for in order to flag suspicious behavior before it turns into more severe abuse.

Build trust in your marketplace with Unit21’s help

Marketplace protection is imperative for businesses that want to retain and grow their customer bases, as well as hold on to their hard-earned revenues. That’s why Unit21’s Marketplace Risk solution gives businesses the tools they need to identify, manage, and take action on marketplace rules violations.

And that extends beyond just fraudulent transactions; it also includes abuses in registration, login, promotion redemption, and more that are often the precursors of more serious fraud acts.

To find out how Unit21 can improve your marketplace’s user experience by stamping out suspicious activities before they become full-blown fraud, book a demo with us today.