Secure Your Digital Presence | Combat Transaction Fraud and Cyberthreats with IDV

Financial crimes, especially payment and transaction fraud, have seen a massive surge in recent years, primarily fueled by cybercriminals targeting ecommerce platforms to extract direct financial funds from them. The e-commerce industry experienced a loss of $41 million in 2022, and according to Juniper Research, the total cost of online transaction fraud to merchants exceeded $48 billion globally in 2023. More terrifying for merchants, it is predicted that the cumulative losses to online payment fraud globally between now and 2027 will exceed $343 billion, thus highlighting the critical importance of enhanced security measures to protect those operating within finance – often targeted by cybercriminals due to their highly lucrative nature. In 2022 alone, 65% of organizations were victims of payment fraud attacks/attempts, with checks being the payment method most vulnerable to fraud. 

The impact of a fraudulent transaction can be devastating, causing severe financial losses, reputational damage, and disruptions to business operations. High-ticket businesses are frequently targeted by financial fraud but require a reliable verification solution to defend themselves against this growing threat. Failure to conduct thorough verification checks before adding an entity to the system can expose the business to potential financial losses and reputational damage. 

Transaction fraud detection solutions help companies create a more streamlined verification gateway, which ultimately helps them create a more secure financial environment.  

A Brief Overview of Transaction Fraud: How Does It Work?

Fraudulent transactions are mainly initiated when an entity gets hands-on access to a user’s personal data, which can then be used to make unauthorized transactions, usually resulting in financial loss for the user. It is imperative to note that transaction fraud is a severe threat, and the utmost caution should be exercised to mitigate its associated risks. Therefore, to effectively prevent this type of fraud, businesses should have security measures, such as two-factor authentication, to protect user data.

• Acquiring Stolen Information 

Gathering data on users that can be exploited to carry out illegal activities is the first step in the transaction fraud process, which is either done by creating backdoors in a company’s processes or by creating breaches and malware attack attempts. Users’ personally identifiable information, which includes data ranging from simple financial documents to real credit card information, can also be purchased from third-party vendors in illegal marketplaces. Data scraping involved in this process allows criminals to access the personal data of various individuals, leading to financial crime.

• Initiating Mass Transactions

A significant plus point these cybercriminals leverage in transactional fraud is that they can easily access accounts without a security protocol and initiate transactions. However, exposed account information can lead to mass drainage of funds that are carried out in small packets, generally below the reporting cap. Criminals may use stolen information to create fake identities and commit financial fraud. Organizations need to protect sensitive data and maintain strong security measures to prevent such activity.. 

• Undetected Transactional Fraud 

A significant chunk of these transactions goes unnoticed because cybercriminals use VPNs and proxies, making identifying their location challenging. It can be difficult to detect online transaction scams unless an entity has a strong detection system. Criminals often convert the stolen funds into cryptocurrency or other untraceable assets, making it challenging to track them once they are taken from the entity.

Understanding the Rise in Transaction Fraud

Transaction fraud is rising due to several factors. Companies are also seeing an increase in the number of chargebacks and phishing attacks due to an expanded consumer base. Online fraud has become more prevalent due to its accessibility to a wide range of people. As a result, cybercriminals have gained access to a broader range of consumers who can be targeted for fraudulent activities. Friendly fraud has also increased, where companies get chargebacks from illegal sources that pose financial losses. 

Phishing attacks are not limited to emails and text messages anymore; cybercriminals can now create fabricated data to carry out phishing attacks. Biometric facial spoofing is now a significant threat to businesses as it can be used to create phishing attacks, which are hard to differentiate.

Any activity that involves financial assets can be subject to these attacks, as they allow criminals to infiltrate business processes with just a minor breach. Low code and no code software solutions have allowed laymen to create scamming tools that create customized, small-scale tools that can be used to target specific financial institutions or individuals, exploiting vulnerabilities in outdated systems. As a result, financial institutions need to stay up-to-date with the latest security protocols to protect themselves from these attacks.

Transaction Monitoring for Businesses 

The demand for transaction monitoring software is increasing rapidly, with the market value expected to reach $25,419 million by 2026. Institutions must monitor all activities on their radar for effective transaction fraud prevention. A robust verification solution helps companies detect and eliminate suspicious activity. Ongoing monitoring allows companies to keep a close eye on all the entities in contract with them, ultimately improving the security of a business. If an entity is suspected of engaging in illegal activities, it will be eliminated immediately. 

• Early Detection and Prevention 

A significant application of transaction monitoring lies in its ability to identify and eliminate high-risk entities beforehand. Early detection detects scammers, fraudsters, and cybercriminals by using behavioral tracking and pattern recognition. Artificial intelligence (AI) and deep learning have significantly improved the ability of modern solutions to identify patterns effectively. 

• Enhanced Compliance 

To effectively regulate finances and business activities, global regulatory bodies have strict rules in place. Companies must comply with these regulations; otherwise, they are subjected to hefty fines and charges, ultimately affecting their finances. Having a robust false transaction tracking system allows companies to comply with AML and KYC regulations. Following regulatory compliance measures ultimately mitigates the risk of engaging with fraudsters. 

• Reduced Operational Costs 

Automating the suspicious activity monitoring process saves businesses significant time and resources This allows them to focus on other vital areas of their operations. Additionally, automating the process eliminates manual review, making the entire process more efficient and accurate. Tasks like data analysis and entry can be subject to errors if done manually, whereas AI algorithms make these processes free of mistakes and allow companies to leverage unparalleled accuracy. 

Transaction Monitoring and IDV: Robust Fraud Prevention 

Identity verification is the holistic process of identifying the identity of an entity and ensuring that it is not related to any illegal activities. Modern identity verification systems allow companies to detect and prevent fraud by verifying the identity of customers in real time. AI-driven identity verification systems are highly accurate and efficient, making them an ideal fraud prevention and risk management solution. An effective transaction monitoring system should promptly identify and report any unusual activities for review and take appropriate action based on the findings.

Identity verification solutions enable businesses to scan documents ranging from government IDs to invoices and transaction records, enabling informed decision-making. By effectively identifying and eliminating suspicious entities, identity verification solutions can aid seamless transactional fraud detections, reduce unauthorized access, prevent account takeovers, and build a trustworthy consumer-business relationship. 

Shufti’s Transaction Monitoring Solution 

Shufti offers a robust AML transaction monitoring solution that aids businesses in detecting suspicious transactions and ensures that normal business processes comply with global rules and regulations. Our solution is now available in 240+ countries and territories and screens data against 1700+ global databases, safeguarding a business from threats.

Still in doubt about how transaction mentoring improves business processes?