We use a software fraud detection service (MaxMind) but we review all orders for fraud manually as well, and we have not lost a chargeback in over 5 years. (we've had a few, but they were customers who didn't feel like following our policies, we disputed and won).
Here are some of the criteria we look for in our store, if you see any of these you should look for more information to further validate the order because there's a high probability of fraud:
- Small order with extremely high shipping cost
- Order with different sized items (i.e. size Small shirt and size Large shirt in the same order)
- Different billing / shipping address
- Different billing / shipping country
- IP address does not match billing or shipping city (you can use GeoBytes to locate IP addresses)
- Extremely large order
- Phone number that does not match billing or shipping city (reverse phone to look up)
If you notice any of these things, look at some of the others like IP address and phone number to try to verify further. When we have an order that has a high fraud score through MaxMind and also fails a few of the criteria above, we send the customer an email asking for them to call us. When they call we ask them for clarification.
If, for instance, their IP address doesn't match the billing or shipping city we'll simply say something like "our fraud detection software marked this order - is there any reason it might have done that?" or "is there any reason our fraud detection would say you're not where you live?" something like that.
After 13 years I've found that most "scammers" won't call you and explain - they're just looking for a quick and easy transaction. But if we're still uneasy we simply ask them to fax or email us a copy of their photo ID and credit card showing the same name - the one used on the order. They can snap it from their camera phone and blur or hide most of the number, as long as we can make out the last 3 or 4 digits and the name that's all we need.
It's a hassle but most customers understand... and it happens very rarely. And again, in all these years we've never had one slip through the process so it works! Hope that helps a bit...