Description of Fraud
A fraud requires two basic steps:
1) An action where the fraudster steals a card or illegally copies card information
2) An action where the fraudster uses the stolen card data to place an order online
At this point a fraudster has a set of payment card details that are ready to use for online shopping. The main challenge for the fraudster is that he/she doesn't know the credit limits of the card or if there are sufficient funds on it. Furthermore, the fraudster is under time pressure; the legitimate cardholder might have discovered what is going on and block the card through the issuing bank. Therefore the fraudster must act quickly to exploit the card numbers at hand.
The fraudster needs a delivery address, a.k.a. a "drop". The fraudster picks a web shop and enters bogus customer data, but with a genuine address and the correct card data. If the payment card account is active and funds are sufficient, the transactions will be authorised. The product is dispatched and the fraudster signs the delivery slip upon arrival, using a fake ID (if it is requested at all). The legitimate cardholder, who could be living in a different country, discovers the purchase and initiates a charge back. The web shop that sold the product will normally be held liable for the financial loss.
