One of the most valuable tools in preventing fraud, is the use of your customer's IP address
to find out where they are located. If your customer (the IP address)
is in Nigeria and using a credit card
from Texas, US, then the transaction is most likely fraudulent.
There are a couple of things you must keep in mind about IP addresses. First, some
large ISP's, such as AOL, will show customers from all around the US as coming from
a single location. This means regardless of their physical location, they appear
to be at the AOL hub. Secondly, with the use of anonymous proxies, a person can
disguise their true location. They may appear to be close to the location where
they claim to be, but in reality they can be on the other side of the globe, going
through a proxy and you are only seeing the IP address of the proxy server.
The use of an anonymous proxy is a very good indicator that your customer has something
they are trying to hide.