Return to sender: The hidden economy of online refund fraud

When the public thinks of retail crime, more often than not they think of shoplifting. A new report, however, by Professor Mark Button, Professor Cassandra Cross, Dr Matthew Edwards, and Dr Jack Whittaker highlights a growing threat that operates almost entirely online: refund fraud.

In their report published by CIFAS, Return to Sender: Mapping the Online Economy of Refund Fraud, they have found a sophisticated underground ecosystem where fraudsters share techniques, sell services, and help one another exploit retailers' refund policies.

Refund fraud occurs when consumers obtain refunds without legitimately returning goods or falsely claim products never arrived. Notably, they estimate that the scale of this type of offending is significant. Drawing on industry estimates, the researchers suggest online refund fraud could be costing UK retailers anywhere between £317 million and £5.76 billion annually, with a likely midpoint of around £2.3 billion.

To understand how this fraud operates, the researchers scraped nearly 500,000 posts from cybercrime forums and Telegram channels, identifying more than 23,000 user accounts involved in refund-related discussions.

The Techniques

The researchers find that there are multiple modalities through which the refund process can be abused:

1. Claiming an order never arrived.

2. Reporting partially empty or missing deliveries.

3. Falsely claiming products were damaged or defective.

4. Manipulating return processes and tracking systems.

5. Returning counterfeit or substitute items.

6. Abusing takeaway food refund policies.

7. "Wardrobing" — wearing clothing before returning it.

Who are the offenders?

The report suggests that those perpetrating refund fraud are predominantly young males, with ages from 14 to 30 documented by the fraudsters who self-reported their ages. Additionally, it was found that many users are also involved in other types of offending such as carding, identity theft, gift card scams, and money laundering. Conversations also revealed a culture characterised by risk-taking, immaturity, and a perception that enforcement is unlikely.

Two types of offender emerged during the research. The first type are "DIY" refunders who attempt to commit refund fraud themselves whilst a second type are "vendors" who advertise their services on underground forums, are experts in the refund limits of each retailers, and charge a "cut" of the amount refunded on behalf of their clients.

Which Retailers are targeted?

Amazon emerged as the most frequently targeted retailer, followed by brands such as Apple, Nike, and Uber Eats. High-value products including electronics, fashion, jewellery, and furniture were common targets.

Most concerning is the speed at which the refund fraudsters techniques are evolving. Large online communities both on underground forums and within the vendors Telegram and Discord groups act as knowledge-sharing networks where users exchange advice, troubleshoot failed attempts, and identify weaknesses in retailer systems.

What can be done?

The report argues that tackling refund fraud requires a coordinated response involving retailers, law enforcement, and industry bodies.

Key recommendations include:

• Greater enforcement and publicised prosecutions to increase deterrence.

• Industry-wide intelligence sharing and fraud databases.

• Better training for customer service teams handling refund requests.

• Public awareness campaigns highlighting the legal and financial consequences of refund fraud.

A link to the full report can be found here