How to detect proxies used by fraudsters is an important component of fraud prevention for online merchants. Proxies are used to mask the IP address of a computer, making it more difficult for fraudsters to identify where the user is located. They also make it easier for malicious users to spread malware by infecting computers on their networks and stealing sensitive information.

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In order to detect proxy activity, fraud detection solutions should include a proxy piercing feature. This feature identifies whether a user is using a proxy and how much of their traffic is coming through the proxy. It can also reveal other information, such as whether a customer is using Linux, outdated browsers or other telltale characteristics that can help confirm a proxy user is not legitimate.

Fraudsters use proxies for a variety of reasons, from masking their identity and location to circumventing fraud detection rules that rely on geolocation. For example, they may use a residential or mobile proxy to hide their true location so that a credit card payment doesn’t trigger a chargeback. Detecting these fraudulent activities requires a combination of multiple indicators, including proxy detection, in order to determine whether a transaction is suspicious.

However, many legitimate users also use proxies, and blocking them could negatively impact sales conversion rates. Instead, it’s better to monitor and potentially block this type of traffic, and rely on other fraud indicators to prevent costly chargebacks and other types of damage.