I don't know about the specifics of PayPal but.... Automatic fraud detection is common and it is based on data analysis. See http://en.wikipedia.org/wiki/Data_

I don't know about the specifics of PayPal but.... Automatic fraud detection is common and it is based on data analysis. See http://en.wikipedia.org/wiki/Data_analysis_techniques_for_fraud_detection http://en.wikipedia.org/wiki/Data_analysis_techniques_for_fr... for more info. >Fraud management is a knowledge-intensive activity. The main AI techniques used for fraud management include: >Data mining to classify, cluster, and segment the data and automatically find associations and rules in the data that may signify interesting patterns, including those related to fraud. >Expert systems to encode expertise for detecting fraud in the form of rules. >Pattern recognition to detect approximate classes, clusters, or patterns of suspicious behavior either automatically (unsupervised) or to match given inputs. >Machine learning techniques to automatically identify characteristics of fraud. >Neural networks that can learn suspicious patterns from samples and used later to detect them. >Other techniques such as link analysis, Bayesian networks, decision theory, land sequence matching are also used for fraud detection.[3] It is also used by insurance companies to detect fraudulent claims. From what I understand, the software is very very good at flagging possible fraud and there is probably a human reviewer of the flagged claims. Paypal wants to keep it a secret because if the fraudsters known what Paypal is looking for, they can change their behavior to bypass the fraud detection. Also, it is a threat to their business if competitors use it as well.