If you have ever been victim of fraud before, then you know all too well how ugly it can be. The key to preventing fraud is to use common sense and investigate with all the information you have.
They key to preventing fraud is to collect as much information as possible. While more information is generally better, there is such thing as too much information too. You don't want to go around collecting your clients' SSNs, as that probably would scare them away. A shopping cart, or some sort of ordering system is usually a good idea in keeping your customer data secure and easily findable.
Below we're going to break up the different techniques you can do with certain types of information.
The best thing you can do with an IP address is figuring out the location of it. You can do this with http://www.domaintools.com or http://www.dnsstuff.com. Sometimes an IP can be off by a few states or a few hundred miles at the most. But if the IP location is in a different country than your customer, then you may have a problem. From my experience, the IP is usually from an odd country. Generally IP is one of the most clear indicators, but it can be wrong.
With a phone number, you can do several things. The most obvious is figure out where the area code is. If this is a US phone number, you should be able just Google the area code and it will tell you the location of it. Be forewarned, that a lot of times people have an area code near them, but not necessarily in the same location. Then there are the oddballs who have a VoIP number or something similar on the other side of the country. You got to be very careful with phone numbers.
The next thing you can do is a reverse phone lookup. I find http://wwww.whitePages.com to be the most effective and easiest to use. A lot of numbers that you will lookup will be unlisted or cell phone numbers. A reverse phone lookup is also an effective method for finding out if your customer is a minor or just slightly older than a minor (as always, there are exceptions to this).
Every domain must have contact information. There are services out there that offer privacy protection for their contact information, but a lot of the domains are unprotected. You can lookup your client's domain using DomainTools to see if it's registered to them, and if it is, compare the information there with the information that they gave you.
Username / email
Almost all of the fraudsters that you will encounter will use a form of a free email address. The tricky part is, so will your legitimate customers. Googling their email address or a username will sometimes return some results that you can checkout, and learn more about your customer to see if he will be the ideal customer.
How to Deal with an Existing Fraud Case
Didn't see this tutorial in time to learn how to prevent fraud? Well, let's go over the basics on fighting those pesky chargebacks.
No matter what type of merchant account you own, if it is a legitimate fraud, then you will lose. It's pretty simple. However you do stand a chance against those who cry fraud, when in reality, they just wanted it free.
If you use Paypal, then you do stand a chance. If you sell a non-tangible service, such as software, or programming/designing etc. then tell Paypal this. Provide proof that you did fraud screening, and that you know this person received what you guaranteed to them. If they've paid through a credit card to Paypal, then your chances become increasingly smaller. Almost every dispute a consumer files with their credit card company, they will reward the consumer. Fighting a credit card chargeback is not an easy task at all.
The bottom line is use common sense. Try to call your customers directly if possible, to speak with them over the phone. This is by far the best method of preventing fraud. But just remember, there is not a single method that will reduce fraud by 100%. You should always be aware of that, each and every day.