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However, at this point the damage is already done. Once chargebacks start to pile up, these merchants are usually rapidly shut down by the acquirer. Onboarding process and regularly monitor transaction activity.īust out merchant accounts are associated with high chargeback rates. To detect fraudulent merchants, acquirers must conduct enhanced due diligence during the merchant A strong KYC program is essential in order to block these bad actors out of the ecosystem. Online storefronts for the purpose of fraud and transaction laundering. The above demonstrates just how easy it is to falsify an identity or set up bogus To convince the banks that they were real individuals that lived at a particular address, the criminals made up social security numbers and even created fake utility bills. Start processing fraudulent transactions and will continue doing so for as long as possible. Once the merchant is approved by an acquirer, fraudsters will immediately In total, the perpetrators managed to steal $200 million from banks between 20.įraudsters will be very careful to not trigger any alerts during the onboarding process, and most traditional KYC programs fail to continuously monitor the status of existing accounts. With other stores to run their credit card transactions. They also created fake companies that did little or no legitimate business or worked together The biggest synthetic identity fraud scheme to date, criminals managed to create 7,000 fake identities and apply for and receive 25,000 separate credit cards. In the online world, it is extremely easy to falsify identities and set up fakeīusinesses. The aim of this type of fraud is simple: process as many fraudulent transactions as possible within a short amount of time, and before being caught, simply abandon the account. These merchant accounts are then used to process fraudulent transactions or to acquire lines of credit before abandoning the
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In this fraud scheme, a merchant applies for a merchant account without any intention of actually operating a legitimate business. Specifically, acquirers should be on the lookout for these three types of merchant fraud: When tackling the challenges of merchant fraud, acquirers need to be aware of the many forms this fraud can take. Merchant fraud exposes acquirers to the liability of facilitating criminal activity – placing them at risk of chargebacks, fines, brand or reputational damage, regulatory sanctions, and even legal action. Yet, the work put into detecting and preventing merchant based fraud is nothing compared to the costs involved in dealing with chargebacks, feesĪnd fines. Merchant fraud can be very hard to detect – especially given the complexity of the digital payments ecosystem. With all the hype about identity theft and other consumer-side digital crimes, it’s easy to overlook the fact that merchant fraud is still one of the most common and costly causes of financial loss