Abstract:
Techniques are presented for detecting fraud while facilitating an online transaction. Sale information from a seller and payment information from a buyer are received and analyzed for fraud. If no fraud is detected, the transaction proceeds and payment from the buyer is facilitated. If fraud is detected, the transaction is terminated and a fraud investigator is notified.

Description:
PRIORITY APPLICATIONS 
       [0001]    This application is a continuation of U.S. patent application Ser. No. 12/491,801, filed on Jun. 25, 2009, which is a continuation of U.S. application Ser. No. 09/615,638, filed Jul. 13, 2000, entitled “A METHOD AND SYSTEM FOR DETECTING FRAUD”, the benefit of priority of each of which is claimed hereby, and both of which are incorporated by reference herein in their entirety. 
     
    
     FIELD OF THE INVENTION 
       [0002]    The invention relates to detecting fraud in a networked system that facilitates a payment transaction between two parties. More specifically, the invention relates to a system and method for detecting fraud in which an Internet web site serves as a payment facilitator when a first party wishes to pay a second party for goods, services, etc. 
       BACKGROUND 
       [0003]    Traditionally, classified advertisements and other newspaper, specialty paper, and magazine advertisements and listings provide a way for a seller of goods or services to advertise in an attempt to obtain a buyer for the goods or services. However, when a transaction is agreed upon, the buyer and seller enter an awkward time, particularly when the transaction takes place across a great geographical distance. The persons and smaller businesses taking advantage of classified advertisements and similar listings do not typically accept payment by credit card or bank debit card. Checks and money orders are generally used. The buyer may send a check or money order by letter to the seller, and the seller may either simultaneously with the sending of the funds or upon receipt of the funds, send the goods to the buyer. The buyer and seller must trust one another. Each runs the risk of encountering a swindle and being the victim of fraud. The same applies when services are purchased over a great distance. In addition, there is a delay in the buyer receiving the goods or services when the seller waits for a check to be mailed and then clear before shipping the item or activating the service. 
         [0004]    On-line sale facilitating systems have given new life to person to person long distance sale of goods and services. Rather than selling via local magazines, specialty papers, and newspaper classifieds and listings, persons are using on-line sale facilitating systems to sell locally, nationally and internationally via the Internet. 
         [0005]    The Internet and personal computers have become ubiquitous in modern society. Although the Internet has existed in various forms for many years, the Internet became popular as a mass communication vehicle with the introduction of the world wide web. The world wide web is, from the user&#39;s perspective, a way of easily identifying a remote computer, connecting to the remote computer, and viewing information stored on the remote computer. Remote computers that provide a vehicle for the sale of goods and services have become very popular. These systems are referred to herein as sale facilitating systems. EBAY® is an example of a sale facilitating system. However, even with this new technology, buyers and sellers must still trust one another as each still runs the risk of encountering a swindle and being the victim of fraud while funds and goods are exchanged by mail. 
         [0006]    While using the Internet, hidden from the user are the various communications protocols that make the Internet function. Various committees and ad hoc groups known as working groups coordinate and control the Internet. The Internet Engineering Task Force (IETF) is the protocol engineering and development arm of the Internet. Working groups under the IETF determine the rules and protocols for the underlying functionality of the Internet and publish them as requests for comment, commonly referred to as RFCs. Each working group makes its RFCs available via the Internet at various web sites. Information is communicated over the Internet via the transmission control protocol/Internet protocol (TCP/IP) and hypertext transfer protocol (HTTP). Many personal computers utilize the point to point protocol (PPP) to communicate with an internet service provider to obtain a link to the Internet. More information is available from T. Socolofsky and C. Kale,  A TCP/IP Tutorial , RFC 1180, January 1991, http://www.ietf.org/rfc/rfc1180.txt; R. Fielding et al.,  Hypertext Transfer Protocol—HTTP/ 1.1, RFC 2616, June 1999 (Draft Standard), http://www.ietf.org/rfc/rfc2616.txt; and W. Simpson, Editor,  The Point - to - Point Protocol,  RFC 1661, http://www.ietf.org/rfc/rfc1661.txt. 
         [0007]    To make on-line and off-line purchases easier, payment facilitators that allow buyers to purchase from sellers via credit cards and debit cards eliminate the uneasiness of long distance purchases originating from traditional classified advertisements, on-line classified advertisement, on-line sale facilitating systems such as EBAY®, and others. To make their service safe and secure, payment facilitators should check for potential fraudulent transactions when processing payment transactions. 
       BRIEF SUMMARY OF THE INVENTION 
       [0008]    A system and method for detecting fraud when facilitating a payment transaction over a global wide area network. The method comprises receiving a sale information, receiving a payment information from a buyer, and analyzing a transaction information for fraud. If the analyzing indicates fraud, an enhanced transaction information is communicated to a human for fraud analysis. In one embodiment, the method comprises performing rule-based analyses to determine whether the transaction appears to be fraudulent. Rule-based analyses may include suspect data rules and velocity rules. Velocity rules generally determine whether there has been excessive activity that may lead to a conclusion that the transaction may be fraudulent. Suspect data rules are used to determine whether the billing, shipping, selling addresses, telephone numbers, and account numbers, and other data are in a syntactically correct format and whether they exist. In one embodiment, the method further comprises performing simple screening of the transaction information. In one embodiment, the method further comprises seeking approval from a third party such as a financial institution based on the payment information. The method may be implemented as part of a system that includes personal computers, server computers, and other personal computing devices, some of which may communicate over the Internet, and others which may communicate via dedicated communication lines. 
     
    
     
       BRIEF DESCRIPTION OF THE DRAWINGS 
         [0009]      FIG. 1  depicts a networked environment in which the fraud detection method and system of the present invention may be implemented. 
           [0010]      FIG. 2  depicts a software architecture and software components of one embodiment of the fraud detection method and system of the present invention. 
           [0011]      FIG. 3  depicts a general flow of actions taken according to one embodiment of the fraud detection method and system of the present invention. 
           [0012]      FIG. 4  depicts a more detailed flow of actions taken according to one embodiment of the fraud detection method and system of the present invention. 
       
    
    
     DETAILED DESCRIPTION 
       [0013]      FIG. 1  depicts a networked environment in which the fraud detection method and system of the present invention may be implemented. In this embodiment, the method is implemented as software stored in and executed by a server computer such as payment facilitator computer  10 . Payment facilitator computer  10  may be any server computer that can execute software programs and access a global communications network such as the Internet. In one embodiment, payment facilitator computer  10  comprises processor  12  and memory  14 . Processor  12  may be any computer processor, and memory  14  may be any random access memory (RAM) or other readable and writeable memory device. 
         [0014]    The method and system for detecting fraud in a networked system that facilitates a payment transaction between two parties is referred to, for ease of reference, as fraud detection software and the fraud detection system. Processor  12  executes the fraud detection software utilizing memory  14 . Information, including the fraud detection software, is read from and written to disk drive  16  which is coupled to the payment facilitator computer via disk controller  18 . Disk drive  16  may be a hard disk drive, a readable and writeable compact disk (CDRW) drive, a floppy disk drive, etc. In addition, disk drive  16  may be any device by which a machine may read from a machine readable medium such as the devices already mentioned, as well as, but not limited to, a stick or card memory device, a digital audio tape (DAT) reader, etc. The processor may communicate instructions to display controller  20  to display images on display device  22 . Display controller  20  may be any display controller, and display device  22  may be any display monitor, including, but not limited to, a CRT display monitor, or TFT display screen. A system administrator or other similar person accesses payment facilitator computer  10  via any computer input device, such as, for example, keyboard  24  and mouse  26  which are coupled to the processor by I/O controller  28 . 
         [0015]    Payment facilitator computer  10  also includes network interface  30 . In this embodiment, the payment facilitator computer  10  communicates with a wide area network, or, in one embodiment, the Internet  34 . Network interface  30  may be an analog modem, a digital modem, a cable modem, an Ethernet card, or any other kind of network access device that allows for connection to the Internet  34  via an analog telephone line, digital subscriber line (DSL), cable television line, T1 line, or any other line capable of communicating information over a network. Processor  12 , memory  14 , disk controller  18 , display controller  20 , I/O controller  28 , and network interface  30 , are coupled to one another via and communicate with one another over bus  32 . Bus  32  may be any bus that provides for communication of and between components within a computer. Although only one bus is depicted, multiple buses may be used in personal computer  10 . In addition, other components and controllers (not depicted) or multiple instances of depicted components and controllers may be included in payment facilitator computer  10 . In one embodiment, payment facilitator computer  10  communicates over the Internet via network interface  30  and receives information from and communicates information to devices connected to the Internet such as seller computer  35  and buyer computer  36 . 
         [0016]    Although only one payment facilitator computer  10  is depicted, a payment facilitator system may be comprised of multiple computers in the form of a local area network (LAN), grouping, subnetwork, etc. (not shown). This payment facilitator system grouping, LAN, subnetwork, etc. may be connected to the Internet or other global communications network, in one embodiment, via one or more firewalls or other security devices and systems so that the payment facilitator computer is separated from the Internet for security purposes. The payment facilitator computer or system may be comprised of graphics servers, application servers and other specialized, dedicated servers (not shown). 
         [0017]    In one embodiment, seller computer  35  may be any kind of personal computing device that can execute programs and access a global communications network such as the Internet, including, but not limited to, cellular telephones, personal digital assistants, desktop personal computers, portable computers, computer workstations, etc. In one embodiment, seller computer  35  comprises processor  44 , which may be any computer processor, and memory  46 , which may be any random access memory (RAM) or other readable and writeable memory device. Software programs, including a web browser and Internet communication and connection software, and other information are stored on disk drive  48  which is coupled to seller computer via disk controller  50 . Disk drive  48  may be a hard disk drive, a readable and writeable compact disk (CDRW) drive, a floppy disk drive, etc. and may also be any other kind of storage device, such as, but not limited to, a stick or card memory device, a digital audio tape (DAT) reader, etc. The processor may communicate instructions to display controller  52  to display images on display device  54 . Display controller  52  may be any display controller, and display device  54  may be any display monitor, including, but not limited to, a CRT display monitor, or TFT display screen. A user accesses seller computer  35  via any computer input device, such as, for example, keyboard  56  and mouse  58  which are coupled to the processor by I/O controller  60 . 
         [0018]    Seller computer  35  also includes network interface  62 . In one embodiment, the seller computer communicates over the Internet  34  to access payment facilitator computer  10 . Network interface  64  may be an analog modem, a digital modem, a cable modem, or any other kind of network access device that allows for connection to the Internet, or other global communications network. Processor  44 , memory  46 , disk controller  50 , display controller  52 , I/O controller  60 , and network interface  62 , are coupled to one another via and communicate with one another over bus  64 . In addition, other components and controllers (not depicted) or multiple instances of depicted components and controllers may be included in seller computer  35 . 
         [0019]    Buyer computer  36  may be any personal computing device such as that described with regard to seller computer  35 . Similarly, fraud investigator computer  38  may be any personal computing device such as that described with regard to seller computer  35 . In addition, financial institution computer  40  may be any computer such as that described with regard to payment facilitator computer  10 . Although referred to herein as financial institution computer  40 , the financial institution may be a traditional financial institution such as a bank, savings and loan, or credit union, and may also be a clearinghouse for credit card transactions, electronic check transactions, debit card transactions, etc. 
         [0020]    In one embodiment, payment facilitator computer  10  communicates over the Internet via network interface  30  and receives information from and communicates information to other computers and personal computing devices connected to the Internet such as seller computer  35  and buyer computer  36 . Although only one each of buyer computer  36  and seller computer  35  are depicted, multiple buyers and sellers with personal computing devices may utilize the services provided by the fraud detection software executing on payment facilitator computer  10  by communicating over the Internet. Communications by buyer and seller personal computing devices via the Internet may be accomplished by land line, wireless or other methods of communication. 
         [0021]    In one embodiment, fraud investigator computer  38  and financial institution computer  40  do not connect with payment facilitator computer  10  via the Internet. Rather, in one embodiment, a dedicated line such a DSL line, T1 line, etc. connect financial institution computer  40  with payment facilitator computer  10 . In another embodiment, a secure wireless connection may be used between financial institution computer  40  with payment facilitator computer  10 . In one embodiment, fraud investigator computer  38  is connected to payment facilitator computer outside of the Internet or other global communications network in a private LAN. In another embodiment, there may be multiple instances of fraud investigator computers and financial institution computers, although only one of each is depicted. Fraud investigators may communicate by email with buyers and sellers. In one embodiment, all email communication involving the fraud investigator computers is routed through the payment facilitator computer, payment facilitator system, and/or, in other embodiments, is routed through the payment facilitator grouping, firewalls, LAN, etc. 
         [0022]      FIG. 2  depicts a software architecture and software components of one embodiment of the fraud detection method and system of the present invention. Payment facilitator computer  200  includes payment processing software  202 . In one embodiment, fraud detection software  204  is implemented as a component of payment processing software  202 . Authorization software  206  is also implemented, in one embodiment, as part of payment processing software  202 . In another embodiment, authorization software  206  may be implemented as part of fraud detection software  204 . Payment facilitator computer  200  includes email software  208  that allows payment processing software  202  to send and receive email messages. 
         [0023]    Operating system, communications software and Internet software, collectively  212 , provide file system support, Internet connectivity support, computer communications support, and other typical operating systems features. The operating system, communications software and the Internet software  212  may be combined as one entity as depicted, or may exist separate from one another. In one embodiment, payment processing software  202  accesses the Internet and communicates with buyer computers such as buyer computer  250  and seller computers such as seller computer  260  with the Internet software. In this embodiment, payment processing software  202  accesses the local file system and local system resources via the operating system, and accesses fraud investigator computer  220  and financial institution computer  230  via the communications software. In one embodiment, the communications software provides support for communications over any dedicated computer communication line. 
         [0024]    Fraud investigator computer  220  includes web browser  222 , email software  224 , and operating system and communications software  226 . The operating system and communications software may be combined as one entity as depicted, or may exist separately. Upon determining that a payment transaction may involve fraud, in one embodiment, fraud detection software  204  sends an email message via email software  208  and communications software to a human fraud investigator at fraud investigator computer  224  over a dedicated communications connection such as an Ethernet cable, T1 line, or wirelessly. The fraud investigator retrieves the email message using email software  224 . In another embodiment, the fraud investigator computer is capable of communication over the Internet such that the fraud notification email message may be sent to the fraud investigator via the Internet. In yet another embodiment, payment facilitator computer  200  and fraud investigator computer  220  may include instant messaging software (not shown) so that an instant message is sent by the fraud detection software upon determining that a payment transaction may include fraud. In another embodiment, multiple fraud investigators may communicate with the payment facilitator computer over a LAN or other private network. In this embodiment, email messages or instant messages may be sent via the LAN. In addition, fraud investigators may communicate via email messages with buyers and sellers. In one embodiment, the fraud investigator&#39;s email messages are sent over the Internet through payment facilitator computer  200 . In other embodiments, email from the fraud investigators is routed through the payment facilitator LAN, grouping, etc. 
         [0025]    In one embodiment, financial institution computer  230  includes authorization software  232  and operating system and communication software, combined as  234 . In this embodiment, authorization software  206  of payment processing software  202  may seek authorization of a payment transaction by communicating over a direct connection to financial institution computer  230 . Financial institution computer  230  may be a clearinghouse for credit card and/or debit card transactions or serve only one financial institution. Companies that provides authorization services are, for example, Paymentech of Dallas, Tex. and First Data Merchant Services (FDMS) of Englewood, Colo. Upon receiving a request for authorization of a payment transaction via operating system and communications software  234 , authorization software  232  processes the request and returns a response. Although only one financial institution computer is depicted, in another embodiment, the payment facilitator computer or payment facilitator system may communicate with multiple financial institution computers. In one embodiment, the payment facilitator computer communicates with financial institution computer(s) over a direct line rather than over the Internet for security and surety of connectivity. In another embodiment, the payment facilitator computer may communicate with financial institution computers via the Internet. In yet another embodiment, the payment facilitator computer may communicate with the financial institution computer(s) via a secure wireless connection. 
         [0026]    In one embodiment, fraud detection software  204  accesses information about the transaction history of buyers and sellers, reviews blacklists and stores and obtains other pertinent data by communicating with database software  210  and accessing one or more databases stored on payment facilitator computer  200 . Database software  210  may provide support for any well known database system that implements, in one embodiment, structured query language (SQL), or any other well known database languages. In another embodiment, fraud detection software  204  communicates with database software  210  which accesses database server  240  via Java Database Connectivity (JDBC) and/or the Open Database Connectivity (ODBC) application programming interfaces to access database software  242  to store and obtain pertinent information. Database server  240  includes operating system and communications software  246 . Database software  242  may provide support for any well known database system that implements, in one embodiment, SQL, or any other well known database languages. In another embodiment, fraud detection software  204  may check for fraud by issuing queries regarding information provided by the buyers and sellers, checking blacklists of various information included with the transaction data, checking with external credit bureaus, etc. by communicating with one or more third party database servers, one or more third party blacklist servers, one or more external credit bureaus, etc. In one embodiment, financial institution computer  230  may also serve as a third party database server, third party blacklist server, external credit bureau, etc. 
         [0027]    Buyer computer  250  and seller computer  260  may each communicate with payment facilitator computer  200  over the Internet  216 , or other wide area network. Users of the payment facilitator system represented by payment processing software  202  on payment facilitator computer  200  communicate with payment facilitator computer  200  via web browsers  252  and  262  on buyer computer  250  and seller computer  260 . Web browsers  252  and  262  access the Internet  216  and access local file system and local system resources via operating system and Internet software  256  and  266 . The Internet software provides support for TCP/IP, PPP and other network communications protocols. The web browsers support communication via HTTP and other application level protocols. An example of a web browser is Netscape Navigator available from Netscape Communications of Mountain View, Calif. 
         [0028]      FIG. 3  depicts a general flow of actions taken according to one embodiment of the fraud detection method and system of the present invention. After a buyer and seller agree to participate in a sale of goods or services, as shown in block  300 , the seller provides sale information to the payment facilitator system, as shown in block  302 . In one embodiment, the seller provides at least a sale price for the good(s), a description of the goods, the email address of the buyer, and an identifier of the buyer such as a name, and may also provide a detailed description of the good(s), information about the buyer such as the buyer&#39;s name, email address, billing address, shipping address, etc. In one embodiment, the sale information may also include seller information such as the bank account, credit card account, or other account which will be credited upon completion of the sale. In another embodiment, the seller may provide seller information prior to providing the sale information, such as when creating a seller&#39;s account with the payment facilitator system. In one embodiment, the seller&#39;s internet protocol (IP) address is saved and stored with the seller information and/or with the transaction information. The IP address may be gleaned from examination of incoming packets of data from the seller when the seller is communicating with the payment facilitator system. 
         [0029]    In one embodiment, the sale information and the seller information are provided by the seller by communicating to the payment facilitator system via a web site interface provided to the seller by the payment facilitator system. In one embodiment, the payment facilitator system provides for the communication of programs and data that result in the display of images and information on a seller&#39;s display screen. For example, the payment facilitator system may package JAVA® applets and hyper-text markup language (HTML) code that is communicated via HTTP over TCP/IP with the user. The user interface provided by the payment facilitator system may include well known user interface items such as icons, text data entry fields, menus, buttons, sliders, and the like. In one embodiment, dates, credit card issuers, banks, etc. may be provided as items in menus accessible via any well known method. In this way, the amount of text required to be entered by a user is minimized, and the ease of use of the system is enhanced. In one embodiment, the communications between the seller computer and the payment facilitator computer are made secure by use of encryption and security techniques such as secure HTTP, secured sockets layer (SSL) encryption, and/or the transport layer security (TLS) protocol. More information on SSL is available from Netscape Communications of Mountain View, Calif. and additional information concerning TLS is available in E. Rescorla,  HTTP Over TLS , RFC 2818, http://www.ietf.org/rfc/rfc2818.txt, May 2000. 
         [0030]    In one embodiment, the negotiations and agreement to sell may have occurred on a computer system via a sale facilitating system such as EBAY®. In this embodiment, the sale information may be provided via a direct communications link to the sale facilitating system. In another embodiment, the sale negotiations and agreement between the buyer and seller may have occurred by mailed correspondence or by telephone, and may have been initiated by viewing an offering of goods or services for sale by a classified advertisement on-line, classified advertisement or listing in a newspaper, specialty paper, or magazine, or by any other method that connects buyers with sellers. In this embodiment, the buyer and seller agree to use the payment facilitator system, and the seller then begins the payment transaction process by connecting to the payment facilitator web site. 
         [0031]    After receiving the sale information, the payment facilitator system prepares an invoice and emails the invoice to the buyer, as shown in blocks  304  and  306 . In one embodiment, the invoice includes at least a description of the goods or services the buyer agreed to purchase and the sale price, and may include further information such as the seller&#39;s contact information, namely the seller&#39;s email address, mailing address, telephone number, etc. In another embodiment, the payment facilitator may prepare an invoice, and email a notification to the buyer that an invoice is ready for retrieval at a specified location within the payment facilitator web site such as at a specified uniform resource locator (URL) or uniform resource identifier (URI). In response to receiving or viewing the invoice, the buyer then communicates with the payment facilitator web site, and the buyer provides payment information to the payment facilitator system, as shown in block  308 . In one embodiment, the payment information includes a billing address information, a shipping address information, and a financial account information. The financial account information must include one of a credit card account number, a debit card account number, a bank account number, etc. and may include related information such as an expiration date, an issuing institution name and address, etc. The billing and shipping address information may include the name of a person, street address, city, state, zip code, and day and night telephone numbers. The payment information may also include the buyer&#39;s email address, screen name, account name, or other identifier and identifying information. In one embodiment, the buyer&#39;s IP address is saved and stored with the payment information and/or with the transaction information. The IP address may be gleaned from examination of incoming packets of data from the buyer when the buyer is communicating with the payment facilitator system. 
         [0032]    Upon receipt of the transaction information, the payment facilitator system analyzes the transaction information for fraud, as shown in block  310 . How this is achieved is discussed in more detail below with regard to  FIG. 4 . A check is then made to determine whether the transaction appears to be fraudulent, as shown in block  312 . If the transaction does not appear to be fraudulent, the payment facilitator system debits the buyer&#39;s account and sends an email message instructing the seller to complete the sale, as shown in block  314 . In response to such an email message, the seller then sends the good(s) to the buyer in an agreed-upon manner. In one embodiment, the payment facilitator system then credits the seller&#39;s financial account upon receipt of an email note from the buyer confirming completion of the sale or after a specified period of time, as shown in block  316 . In this embodiment, the seller&#39;s account is credited when the buyer confirms that the good(s) have been received. Alternatively, in this embodiment, if the buyer fails to confirm receipt of the good(s) and does not inform the payment facilitator system that the good(s) were not received, the seller&#39;s account is credited for the sale. In another embodiment, the payment facilitator system may send an email message to the buyer asking the buyer to confirm receipt of the goods. This message could also state that if no response to the email message is received, the buyer&#39;s account will be debited and/or the seller&#39;s account will be credited if no response is receive within a specified period of time. 
         [0033]    If the transaction appears to be fraudulent, as shown in block  312 , the payment facilitator system sends appropriate email messages to the buyer and/or the seller, putting the sale on hold, as shown in block  318 . The payment facilitator system then communicates information about the payment transaction and fraud information to a human investigator, as shown in block  320 . The human investigator then investigates the transaction, starting with the fraud information provided as a result of the earlier fraud analysis, to determine whether the transaction is fraudulent or appears to have a high possibility of being fraudulent. The fraud investigator then takes whatever action the fraud investigator deems appropriate, such as communicating with the buyer and/or the seller by email or telephone, contacting local police authorities, contacting the FBI, etc. The fraud investigator may cancel or allow the sale based on the results of the investigation. If the investigator allows the transaction, actions according to blocks  314  and  316  discussed above are then executed. 
         [0034]    In one embodiment, after the buyer and seller agree on a sale, the sale information may be communicated to the payment facilitator system by the buyer. In this embodiment, the seller may have already registered with the system, and the buyer provides pertinent sale information to the payment facilitator system. This sale information may include the payment information regarding the buyer as discussed above regarding block  308 , as well as specific information identifying the sale transaction such as a description of the goods or services the buyer agreed to purchase and the sale price, and may include further information such as the seller&#39;s contact information, namely the seller&#39;s email address, mailing address, telephone number, etc. The payment facilitator system then sends an email sale confirmation request to the seller. In various embodiments, the seller may respond to the email to accept the sale transaction, or the seller may accept the sale transaction by communicating with the payment facilitator system via an internet web interface either independently or by following a URI or URL contained in the email sale confirmation request. In another embodiment, no email sale confirmation request, and the payment facilitator system provides a screen notification to the seller the next time the seller logs on to the sale facilitator system. The screen notification may be a text display or an iconic display, or any other user interface technique. The flow of actions then continues with block  310  as discussed above. 
         [0035]      FIG. 4  depicts a more detailed flow of actions taken according to one embodiment of the fraud detection method and system of the present invention. Fraud detection software receives transaction information from the payment facilitator system, as shown in block  400 . The transaction information may include information about the seller such as the seller&#39;s contact information, namely email address, user name, mailing address, as well as the seller&#39;s specified financial account. That is, the financial account to which the sale will eventually be credited when the sale is complete. The transaction information also includes information about the buyer such as the buyer&#39;s billing and shipping address information, the buyer&#39;s telephone number(s), the buyer&#39;s email address, the buyer&#39;s user name, the financial account the buyer has selected to use to pay for the transaction. In addition, the transaction information also includes the price of the good(s) and a description of the good(s). After the fraud detection software receives the transaction information, the fraud detection software performs simple screening, as shown in block  402 . Simple screening is the process by which the fraud detection software compares various data contained in the transaction information with lists of financial account numbers, addresses, email addresses, user names, telephone numbers, etc. known to have been used with fraudulent transactions and/or obtained from a third party such as a credit card issuer, bank, or specialized service provider. In another embodiment, the lists or blacklists may be obtained on demand or regularly from a third party such as a bank, credit card issuer, other financial institution or specialized service providers. Such lists include known stolen credit cards and addresses known to have been involved with fraudulent transactions either with any of the payment facilitator system, the sale facilitating system, and any of the many credit card issuers, banks, other financial institutions, specialized service providers, etc. In one embodiment, the simple screening compares the fields for which lists exist with the appropriate list. In this embodiment, if any transaction information is found on any screening list, the transaction is blacklisted. 
         [0036]    The fraud detection software then checks whether the transaction is blacklisted, as shown in block  404 . If the transaction is not blacklisted, the fraud detection software seeks approval from the financial institution implicated by the financial account specified by the buyer, as shown in block  406 . In one embodiment, this involves communicating with a financial institution such as a credit card issuer, bank, etc. computer via a dedicated line to obtain approval for the transaction. The fraud detection software then receives a response from the financial institution and checks to determine whether the transaction is approved, as shown in block  408 . In practice, the financial institution or third party that provides financial account approval returns one of a plurality of codes. In one embodiment, the fraud detection software determines whether the code returned should be classified as an approval or rejection. In another embodiment, the fraud detection software may classify the code as a requiring further information and automatically issue email messages to the buyer or seller requesting information clarifying the response from the financial institution. In this embodiment, one example may be for the fraud detection software to automatically send an email message requesting that the buyer confirm the billing address, the buyer&#39;s name, or other portion of the transaction information to which the fraud detection software is directed by the error code. Such a recovery system eliminates false positives when a simple typo was made by the user. In one embodiment, if the transaction is blacklisted or if the transaction has not been approved, the fraud detection software rejects the transaction, as shown in block  410 . In one embodiment, when a transaction is rejected, appropriate email messages are sent to the buyer and the seller informing them that the payment transaction has been rejected. 
         [0037]    If the financial institution approves the transaction, the fraud detection software performs rule-based analysis, assigning a score for the transaction based on rule violation, as shown in block  420 . The list of possible rules is endless. Generally, certain information gleaned from the transaction information is compared with other information. This other information may be generally available address look-up information to determine whether the seller&#39;s address and the shipping and mailing addresses of the buyer exist, or may be more complex database queries and retrievals of information obtained from the history of transactions that have been processed by the payment facilitator system. In another embodiment, the historical information may also be obtained from a database maintained by a sale facilitating system in addition to or in place of historical information obtained from the payment facilitator system. 
         [0038]    Analyses for whether the addresses and other information contained within the transaction information are syntactically correct or whether the addresses or other identifying information exists may be referred to as suspect data rules. Example suspect data rules include the following
       a. is the shipping address a real address?   b. is the shipping address used with multiple different buyers?   c. is the billing address a real addresses?   d. is the billing address used with multiple different buyers?   e. is the shipping address implicated in prior possible fraudulent transactions?   f. does the buyer and/or seller financial account meet the format requirements of the type of account it represents?   g. are the buyer and seller phone numbers real phone numbers?   h. are the seller and shipping addresses the same?       
 
         [0047]    Analyses which require more complex analysis of databases of the payment facilitator system and/or a sale facilitating system may be referred to as velocity rules. Generally, velocity rules check to see if there has been an inordinate amount of activity involving some piece of the transaction information. That is, the rules cause the fraud detection software to determine whether there has been excessive activity that may lead to a conclusion that the transaction may be fraudulent. In one embodiment, velocity rules may involve analysis of transaction volume over a given period of time for the buyer and/or seller, transaction dollar value totals for the buyer and/or seller for a given period of time, etc. In another embodiment, velocity checks may also include analysis of how frequently the specified financial account number or buyer has been declined authorization. In general, determining that there has been excessive activity with one seller may evidence that an innocent seller may be the target of a fraudulent buyer or group of buyers. On the other hand, excessive seller activity may also evidence that the seller is involved in committing a fraud. Although evidence of fraud may exist, it may be difficult to classify whether the fraud was committed by the buyer or by the seller. Therefore, if evidence of fraud appears to be present in a transaction, the transaction is sent to and examined by a fraud investigator so that false positives are minimized. 
         [0048]    A more specific example of a velocity rule is determining whether the seller&#39;s account has been used beyond some determined threshold during some set period of time. Another example is determining whether the buyer&#39;s credit card has been used for a number of transactions exceeding a predetermined acceptable number of daily (or hourly or weekly, etc.) transactions. Further examples of velocity rules follow:
       a. does the dollar value of transactions from a single seller exceed $1,000 per financial account per $10,000 worth of transactions on the payment facilitator system?   b. has the buyer&#39;s financial account been used with the seller more than 3 times in the past hour?   c. has the buyer&#39;s financial account been used with the seller more than 3 times during the last 1000 transactions on the payment facilitator system?   d. has the buyer spent more then $1,000 in 12 hours?   e. has the buyer&#39;s financial account been involved with transactions exceeding $1,000 in 12 hours?   f. has the buyer&#39;s financial account been involved with more than $10,000 in one month?   g. have the buyer and seller been involved with more than $1,000 of transactions with one another in 12 hours?   h. has the buyer&#39;s financial account been used with the seller more than 3 times in the past 100 transactions with the seller?   i. has the shipping address been specified more than 3 times in 12 hours?   j. has the shipping address been specified more than 3 times in the last 100 transactions involving the seller?   k. has the seller&#39;s or buyer&#39;s IP address been involved with more than 3 transactions in the past 100 transactions on the payment facilitator system?   l. has the buyer&#39;s IP address been involved with more than $1,000 transactions in the past 12 hours of transactions on the payment facilitator system?       
 
         [0061]    This list includes just a few of many possible rules. In one embodiment, the dollar amounts and numbers may remain constant and may only be changed by a system operator. In one embodiment, the amounts and thresholds may be automatically adjusted based on the kind of goods sold, the kind of seller, and other variables. The dollar amounts and thresholds listed above are examples and may be any dollar amounts or thresholds that serve as accurate indicators of a possible fraudulent transaction. 
         [0062]    In another embodiment, the rule-based analysis may check for fraud by issuing queries regarding information provided by the buyers and sellers, checking blacklists of various information included with the transaction data, checking with external credit bureaus, etc. by communicating with one or more third party database servers, one or more third party blacklist servers, one or more external credit bureaus, etc. in addition to checking the database of the payment facilitator system and the sale facilitating system. In one embodiment, the same financial institution that was consulted to approve the transaction may also serve as a third party database server, third party blacklist server, external credit bureau, etc. with which the rule-based analysis interacts to execute and evaluate rules. 
         [0063]    A numerical value is associated with each rule. Each time a rule is found to be violated, the score for the transaction is incremented by the amount associated with the rule. The fraud detection software sets a threshold such that after the rule analyses have been completed, when a score exceeds the threshold, the transaction is considered potentially fraudulent. The numerical values may be weighted according to the particular rule and need not be uniform. In some embodiments, a transaction that violates one velocity rule may cause the threshold to be exceeded, while violating one suspect data rule may not cause the threshold to be exceeded. After the rule analysis is performed, the fraud detection software checks to determine whether the score total exceeds the threshold, as shown in block  422 . If the threshold is exceeded, the fraud detection software routes the transaction information and rule violation information to a human investigator, as shown in block  430 . In one embodiment, the routing is achieved via email. In one embodiment, the rule violation information may be a code designating which rules were violated, a textual description of the rules violated, or both. The code may be any combination of letters, numbers or symbols that uniquely identifies the rule violated. If the score total does not exceed the threshold, as shown in block  422 , the fraud detection software accepts the transaction. With regard to block  312  of  FIG. 3 , a transaction is considered fraudulent when the score total exceeds the defined threshold as in Block  422  of  FIG. 4 . 
         [0064]    In the foregoing specification, the invention has been described with reference to specific embodiments. It will, however, be evident that various modifications and changes can be made thereto without departing from the broader spirit and scope of the invention as set forth in the appended claims. The specification and drawings are, accordingly, to be regarded in an illustrative rather than a restrictive sense.