Executive brief (for directors)

Residential proxies let attackers route activity through real
household / small‑business ISP IPs, making abuse look like customer
traffic. That breaks the two cheapest controls most companies still lean
on: IP reputation and geo / velocity rules. The result is a
compounding effect: higher ATO/fraud/scraping success and more
customer friction if you respond with blunt blocking.

In January 2026, Google Threat Intelligence Group observed 550+
tracked threat groups using exit nodes tied to a single residential
proxy network in a seven‑day window. Enforcement actions also reduced the available device pool by millions, demonstrating that
proxy capacity is both large and materially disruptable.

Board-level takeaway: this is a loss + growth + customer trust
problem, not just a security tooling problem.

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TL;DR (what you should remember)

• Why it matters: residential proxies turn "trusted" consumer ISP
  space into an attacker asset, degrading IP-based defenses and geo
  signals.
• What's new: proxy capacity is built via embedded SDKs,
  "bandwidth sharing" clients, and compromised devices---creating a
  large, global, constantly rotating pool.
• Business impact: higher success rates for ATO, fraud,
  scraping, and SaaS intrusion, plus increased support load and
  customer friction if controls are too blunt.
• What works: don't "block proxies." Use tiered risk decisions
  driven by identity + behavior, with proxy intelligence
  (provider + confidence + recency) as a strong signal.
• How to govern it: require KPIs tied to loss, conversion, and
  operational load (not just "blocks" and "alerts").

Why residential proxies are a board problem

Think of IP-based controls as "caller ID." Residential proxies don't
spoof caller ID---they use real numbers.

That creates a structural bind:

• If you trust consumer ISP traffic, you miss more abuse.
• If you block broadly, you punish real customers (conversion drop, churn, brand damage).

Scale makes this worse: modern residential proxy networks control
millions of devices/IPs, and hundreds of tracked threat groups were
observed leveraging just one network in days.

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How attackers use residential proxies

Residential proxies act as an economic amplifier for abuse..