Author: Ady

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DAC7 Compliance

The COVID-19 pandemic boosted the digital commerce space like never before. The gig economy also saw a boost as companies all over the world looked towards remote workers. The gig economy has always been outside the traditional norms of business. Allowing delivery drivers, vacation property owners, and similar businesses to avoid paying taxes on these transactions. 

Due to this, the IRS made new rules for gig economy tax evaders. IRS has made it compulsory to provide reports of income generated from on-demand services and goods and digital platforms. 

The EU has also had the same legislation in the works for a long time. If you’re a digital platform owner in the EU or if you have sellers on your platform from the EU, you should be aware of the DAC7 directive. 

Let’s dive a bit deeper into DAC7 and what it means for EU businesses.

What is DAC7?

In March 2021, the European Council released the DAC7 directive. DAC7 aims to extend the scope of existing tax transparency laws for digital platforms. The directive requires platform owners to collect and report personal and business information on income realized by sellers using their platforms for commercial services.

The goal of the directive is to ensure that all taxes (income tax & value-added tax) are reported and assessed. The gig economy and sharing economy have been evading tax. DAC went into effect on January 1, 2023. It applies to everything from ride-sharing, food delivery apps, online jobs, and other digital marketplaces. 

Even businesses in traditional industries may come under the scope of DAC7. That is, if they connect third-party sellers and users through their website for commercial activities. 

Payment processing platforms such as PayPal, Venmo, and Stripe that allow users to only advertise goods or services and platforms that redirect or transfer users to another platform don’t have to comply with DAC7.

Businesses that Have to Comply with DAC7

DAC7 applies to digital platform operations incorporated or managed in the EU. It also applies to tax residents in the EU who engage in commercial activities that don’t fall under general tax rules. 

Digital platform owners/operators located outside the EU who host sellers who are EU residents or facilitate the rental of property in the EU have to comply with DAC7 as well. 

Here’s a complete list of those who have to comply with DAC7:

Business TypesExamples
Sales of GoodsSecond-hand items
Collectibles
Real estate
Rental of Immovable PropertyCo-working spaces
Parking spaces
Vacation homes
Delivery or Performance of Personal ServicePaid live streaming
Food delivery services
Ride-hailing
Rental or Any Mode of TransportScooters
Cars
Bicycles

Whose Information Has to Be Reported?

Under the DAC7 directive, any platform that hosts EU resident sellers who conduct business on the platform has to report the seller’s information. Businesses must also report information about non-EU residents who rent immovable property.

On the other hand, government and publicly traded entities are exempt from complying with DAC7. Casual sellers that have less than 30 sales whose amount equates to less than 2,000 euros. Smaller hotel chains and tour operators that have conducted less than 2,000 transactions in a reporting period are also exempt.

What Information Has to be Reported?

If you’re a digital platform operator, you’re obligated to start identifying and collecting specific information from sellers on your platform as of January 1, 2023:

  • Seller’s identity – full name/legal name, primary address, DOB
  • EU member state of residence
  • Financial account information
  • Tax identification number
  • VAT/Business registration number (for entities)
  • Consideration is paid or credited per quarter, along with any fees, commissions, or taxes withheld by the reporting platform operator.

If you’re operating a platform that deals with immovable rental property, you’re required to report additional information, including:

  • Address and land registration number of each property listing.
  • Total number of days a property was rented.
  • The total amount paid in the reporting period.
  • Any fees, commissions, or taxes withheld or charged by the platform in the reporting period.

You, as a business, have to inform the seller in advance that their information will be collected and reported. If the seller doesn’t share their data, you, as a business, are obligated to send 2 reminders. If the seller fails to provide the data for 60 days, the business has to remove the seller from the platform and close the account.

How to Comply With DAC7 Reporting Obligations?

Businesses can comply with DAC7 reporting obligations by submitting all their EU seller information in one member state. If you’re a registered business in the EU, you’ll have to submit your information in the state in which you’re registered. 

As a business, you have to submit your reportable information no later than January 31 of the year following the calendar year in which you identify a reportable seller. The final deadline for the reporting period is January 31, 2024. 

Once the information is submitted, the member states’ tax authorities will distribute the information among themselves. EU member states are required to exchange information within 2 months of reporting. 

You can submit the information yourself or find a service provider to do that for you.

How to Prepare Your Business for DAC7?

If you’re a business operating in the EU, there are some steps you need to take to prepare your business for DAC7. It’s all about how you collect data and how you report the entire process. Here are some initial questions to answer as reporting requirement dates come closer:

  • Does your business already collect all the data you need from the sellers for reporting? If not, what should you do to collect data? Process and systems-wise, to collect the data?
  • Do you need to make any changes to the terms and conditions or posted consent policies to facilitate data collection from sellers?
  • Which steps do you need to take to keep the collected data safe from hackers and data breaches?
  • Which systems and processes do you need to upgrade or implement to validate the seller’s information before reporting?
  • Is your business subject to other regulations or laws that require you to collect similar information and have similar reporting requirements?

How DIRO Can Help

DIRO document verification can help businesses comply with the EU’s DAC7 directive.

Our online document verification solution can help you verify businesses and onboard them quickly. You can collect and verify a business’s bank account information, address, incorporation documents, and other valuable data.

DIRO verifies documents directly from the issuing source, eliminating the use of fake and stolen documents.

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Application fraud

Let’s just agree on one thing – digitization has changed the financial sector for the good. No more waiting hours, no more visiting brick-and-mortar locations, and the ability to do things instantly.

But, there’s a downside to doing everything digitally. Without face-to-face interaction, businesses become open to application fraud. As banks can’t see the person that’s behind the screen, fraudsters can easily commit fraud. 

This is a challenge that financial institutions, realtors, creditors, and other businesses face every day. Even a miniscule miscalculation on the business’s end can lead to huge losses. 

Fortunately, there are ways to protect businesses against application fraud. In this article, we’ll go over everything about application fraud.

What is Application Fraud?

Application fraud is when an applicant submits false information to a business for approval. This can include misrepresenting personal or financial information, including:

  • Falsifying employment history
  • Inflating income
  • Providing fake ID documents
  • Misrepresenting credit history

The biggest example of application fraud is when an individual for credit cards, loans, or other products. A fraudster would use fake information about their financial information, employment, or further relevant details. 

If everything goes the fraudster’s way, they will have access to a credit card or a loan that they can use to conduct other financial frauds.

How do fraudsters get access to the fake information? Well, just in 2023, over 4.5 billion personal information records were stolen. 

Technology has made it easier than ever to steal personally identifiable information.

How is Application Fraud Committed?

Consumers want instant financial services. So, banks, credit unions, and other financial institutions offer digital products to keep up with customer demands.

Processing online applications puts businesses at a risk of being defrauded. When a person applies for a credit line or loan, they expect a seamless process. To make this happen, companies offer fast approval times. These fast approval times lead to mistakes and invite fraudsters to commit third-party fraud.

When committing third-party fraud, criminals will fill out applications under someone else’s identity trying to trick the organization. If a fraudster has enough information at hand, they can trick the systems. 

By the time the company or the individual figures out the fraud, it’s too late. Because of digitization, criminals can submit fraudulent information to as many companies as they want. This is only possible because of advanced tools like bots, cloud infrastructure, and virtual machines.

This is likely why loan application fraud is growing.

Common Methods Criminals Use for Application Fraud

There are a number of ways scammers use to commit application fraud. One of the most common ways is using synthetic identities.

It’s challenging to identify the type of fraud when businesses allow online application submission and application of ID documents. But how do scammers collect this personal information and commit application fraud?

1. Breaching Databases

Data breaches happen to businesses of all scales. Some happen intentionally, while others happen by accident. Accidents such as an employee can create an insecure password. Or leave the password at a place where anyone can access it. 

It’s highly common for data breaches to happen when hackers blatantly target an entity to breach their database. Fraudsters use a number of technologies to break into a company’s database. They often use bots that insert millions of variations of a password to brute force a password. 

Once a data breach happens, millions of data records can be stolen. Common data includes:

  • Names
  • Date of birth
  • Addresses
  • Phone numbers
  • Account details

2. Targeting Call Centers

The Internet isn’t the only way criminals are stealing identities. One of the second most used methods is using call centers. Unfortunately, voice isn’t enough to determine someone’s identity, making it another easy target for fraudsters.

As there’s no way to detect synthetic identities or fraud patterns, criminals can easily use it to their advantage. 

3. Intercepted Mails

Intercepting emails are more sophisticated than stealing envelopes from mailboxes and hoping to grab something valuable. Criminals today use USPS informed delivery while applying for credit cards. This is a service that USPS offers to allow users to track mails and packages before they are delivered.

This notifies the scammer when the credit card will be delivered so they can snatch it before the legit customer has a chance to see it. 

4. Using Cloud Infrastructure

Criminals also use virtual spaces to commit identity theft and application fraud. This includes using the same cloud services businesses use daily. Fraudsters use the cloud to run automated scripts and bots to conduct large-scale fraud attacks.

Bots can also be used to brute force attacks by hacking into accounts by entering different variations of PINs and passwords. It’s not uncommon for fraudsters to search for available credentials. This is when fraudsters use a collection of personally identifiable information.

How to Detect and Prevent Application Fraud?

  1. Security Measures for In-House Personnel

Employees are the first line of defense against fraudulent attempts, so they should be educated about fraud applications. To detect and prevent application fraud, businesses should educate employees on:

  1. Machine Learning Solutions

Artificial intelligence and machine learning are revolutionizing the industry. AI and ML technologies can make it possible for companies to detect and prevent various types of fraud. Financial institutions use rules engines and a mix of supervised and unsupervised machine learning.

But these technologies become outdated, so you need solutions that can evolve. If solutions are not updated, engines and rules-based systems can become susceptible to false positives.

  1. AI for Application Fraud Detection

Financial institutions also use AI-based document verification tools for fraud detection. Some AI solutions use existing data sets to verify information provided by customers.

This offers more efficient and ultimately automated document fraud leading to fewer loan write-offs. Using AI for fraud detection is excellent for organizations that process dozens or even thousands of applications every day. This leads to a lower risk of fraud and improves user experience.

Conclusion – Fight Application Fraud

Digital transformation is an ongoing trend for modern businesses. Organizations are becoming quick to adopt new technologies to streamline operations, improve customer experiences, and boost competition.

But as businesses increasingly rely on interconnected devices, the risk of fraud is also increasing. Application fraud poses huge risks to businesses, which can lead to huge financial and reputation losses.

Businesses should rely on all available methods such as DIRO to prevent application fraud. DIRO document verification verifies documents from the issuing source to prevent the use of fake and stolen documents. This helps businesses improve the entire onboarding process and reduce user experience.

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Protecting Yourself from Holiday Shopping Fraud

The holiday season is upon us, with Black Friday and Cyber Monday just around the corner. As the festive shopping rush begins, it’s important to stay vigilant against potential fraudsters who are gearing up to exploit the season’s hustle and bustle with different holiday shopping fraud.

Whether you’re a retailer hiring seasonal workers or a shopper making wish lists, staying informed about common scams can help you safeguard your financial security. 

Here are five prevalent scams that are expected to show up unexpectedly this holiday season.

5 Ways to Protect Against Shopping Scams?

There are some basic steps everyone can follow to prevent holiday shopping fraud. Without proper vigilance, it’s almost impossible to distinguish between legit sellers and scammers.

1. Vigilance Against Phishing Attacks

Phishing attacks are the biggest concern that intensify during the holiday season. At this time of year, fraudsters often deploy emails or text messages designed to lure recipients into sharing personal information or clicking malicious links.

These messages may appear to come from legitimate businesses and offer enticing rewards or promotions for minimal effort.

For instance, fraudsters may exploit the increase in package deliveries by sending fake tracking notifications or emails that claim there’s an issue with a shipped package. The end goal is to prompt recipients to enter sensitive information.

To defend against these scams, it’s crucial to exercise caution and critically evaluate suspicious offers. Ask yourself whether a legitimate organization would request payment details or personal information through such means. 

If in doubt, reach out directly to the business using verified contact information to confirm the legitimacy of the message.

2. P2P/Zelle Scams: Be Wary of Unsolicited Calls

Scams involving peer-to-peer (P2P) payment apps like Zelle are an ongoing concern. Use of these apps tends to spike during the holiday season. Fraudsters love to impersonate banks or credit card companies, making unsolicited phone calls to victims. 

They may claim there’s been fraudulent activity on the victim’s account and instruct them to transfer money to a purportedly secure account—owned by the fraudster.

In addition, fraudsters may manipulate consumers into making payments through P2P apps outside the legitimate shopping websites. 

For example, they might pose as sellers on popular marketplaces and entice buyers to make direct payments through P2P apps to evade fees or secure exclusive deals. 

To avoid falling victim to these schemes, stick to the official payment methods offered by trusted websites and never make direct payments to individuals.

3. Guarding Against Account Takeover

Account takeover scams, a time-honored tactic, continue to pose threats during the holiday season. In these scams, fraudsters gain access to victims’ accounts and exploit their credentials to make unauthorized transactions, often targeting e-commerce and retail accounts.

Be vigilant for notifications about unusual orders, shipping addresses, or other account changes. Amid the holiday rush, it’s easy to overlook such notifications, so be proactive in monitoring your accounts.

If you suspect any unauthorized activity, act promptly to secure your account and prevent further fraudulent actions.

4. Promotion Abuse: Don’t Fall for Too-Good-To-Be-True Offers

Holiday sales often tempt consumers with irresistible promotions. Scam artists capitalize on these offers, exploiting promotions that involve referrals, sign-ups, or Buy Now, Pay Later (BNPL) services.

They may open fraudulent accounts to cash in on these promotions or leverage bots to automate the process. Be cautious if you receive confirmation emails about new accounts you didn’t create.

While you might not directly suffer financial losses, the prospect of fraudsters using your personal information illicitly remains a concern.

5. Vigilance Against Fake Websites and Seller Accounts

Fraudsters deploy fake websites and social media accounts to impersonate legitimate businesses, thereby enticing users into divulging personal information or downloading malware. 

These fake websites are designed to closely mimic authentic ones, even appearing in search engine results and sponsored ads. Similarly, on e-commerce platforms like eBay, fraudsters create counterfeit seller accounts to trick consumers into paying for nonexistent items or services.

Exercise caution while clicking on links in emails or social media posts to mitigate these risks. Verify the legitimacy of websites before entering personal information. If a deal seems too good to be true, it’s wise to approach it skeptically.

Secure Your Shopping Experience

While the holiday season offers joy and celebration, it also presents an opportunity for fraudsters to exploit unsuspecting consumers.

To protect yourself, remain vigilant, and adopt a skeptical approach to unfamiliar offers or communications. Staying informed about prevalent scams and following best practices can ensure that your holiday shopping remains safe and secure.

Remember, your awareness and proactive response against frauds are powerful tools in thwarting fraudsters’ attempts and preserving the joyous spirit of the season.

FAQs

1. What does “Holiday Shopping Fraud” refer to?

Holiday shopping fraud involves various deceptive activities that target shoppers during busy holiday seasons, aiming to steal personal and financial information, money, or merchandise.

2. Why is holiday shopping a prime time for fraud?

During holidays, people are often in a rush and more willing to make purchases online or in-store. This creates opportunities for fraudsters to exploit vulnerabilities in payment systems, websites, and customer behavior.

3. What are the common types of holiday shopping fraud?

Common types include phishing emails, fake websites, identity theft, counterfeit products, gift card scams, and online auction fraud, where buyers pay but don’t receive items.

4. How do gift card scams work?

Scammers might request payment via gift cards for various reasons (e.g., fake tech support, overdue bills). Once the gift card codes are given to scammers, they can’t be traced or refunded.

5. What should I do if I suspect a phishing attempt?

Don’t engage with the message. Report it to your email provider and the relevant authorities. If it’s from a legitimate organization, contact them through official channels to verify the communication.

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Biometric Verification

Proving ourselves online has become a relatively recent problem. As the world becomes interconnected, it becomes harder to distinguish between legit users and people who imitate a legit user. Document verification and identity verification methods are essential when high-risk transactions are involved.

ID verification and other similar methods have become necessary for the identity-proofing process.

Several methods exist to verify our identity, including biometric data, faces, fingerprints, eyes, and voice.

What is Biometric Authentication?

Several biometric verification methods allow us to prove who is online. Biometric authentication is commonly used for device security, authenticating online transactions, immigration controls, and patient identification in healthcare.

All biometric recognition solutions use a comparison of the digital representation of a physical or behavioral feature with a previous template.

Biometric systems must operate on pre-determined recognition accuracy and meet the speed and organizational resource requirements.

Advantages of Biometric Verification

Using Biometric verification is different from relying on third-party verification solutions. That doesn’t make biometric authentication inferior to other solutions.

Here are the advantages of Biometric authentication:

1. Fast and Convenient

Some types of biometric authentication are faster than others. Almost all verification can be done within seconds. Biometric verification is a convenient and secure method for protecting against ID fraud.

Biometric authentication is enough and doesn’t require PINs, passwords, KBAs, or other responses. Eliminating the need for remembering passwords. The best part of biometric authentication is that there’s no need to carry credentials.

2. High-Level of Security

Unlike KBA, biometric authentication has no information that hackers can steal. Cyberattacks and data breaches don’t risk the stealing of biometric data. To have a chance at stealing biometric data, hackers have to target specific individuals.

To imitate an individual’s physical characteristics, fraudsters have to sophisticated circumvention of scanners or camera sensors in a biometric system. Stolen and impersonated biometric data can still be verified with liveness checks to ensure the person is legit.

3. Tough to Fake Genuine Presence

Biometric verification is trusted because it’s directly related to the genuine presence of the owner.

The US National Institute of Standards in Technology evaluates and ranks liveness detection technology to ensure that only the best is used. Combining biometric authentication with liveness checks makes biometric systems hard to imitate.

Disadvantages of Biometrics Authentication

It’s not all good when it comes to Biometrics authentication; the solution also has some drawbacks. Such as:

1. False Biometric Matches Can Happen

While it is rare, a false biometrics match can happen. It happens when the biometrics data of two individuals need clarification. Most of the time, it occurs in the case of two similar-looking siblings. If the biometrics data used is incorrectly recorded, then the chances of these mistakes happening increase dramatically.

To reduce the false approval rates in biometrics authentication systems, the system should be able to capture high-quality biometrics data. It should also be able to update biometrics reference data regularly to match with users.

2. Can Reject Legit Users

Instead of giving out false positives, biometrics authentication can reject a legit user. This can happen when a person’s biometric traits change (with age/due to some accident/weight gain or loss). Poor image capture can also cause result in false rejections.

To prevent this, ensure that systems’ sensors capture high-quality biometric samples and templates.

3. Biometrics Bias

Biometrics verification systems run on machine learning algorithms. In past studies, the US National Institute of Standards and Technology showcased that African-American and Asian people experienced 10-100 times higher FAR.

There should be special care to train these algorithms on all-inclusive data sets that don’t discriminate against races and demographics. The best authentication systems should follow ISO standards to ensure no discrimination or disadvantage for any group.

4. Secure and Smooth Digital Experience

Brands are built on trust and excellent customer relationships. A great digital experience and a safe experience matter to businesses and customers. ID verification systems must balance these out and adjust between security and convenience according to the organization’s needs.

Multi-biometrics systems can combine authentication checks against several biometrics features.

It makes sense to layer identity data verification checks to provide an ideal level of speed and security in biometrics authentication. Verify names, date of birth, and addresses alongside biometric verification to establish trust in a person’s identity.

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Protecting Against Authorized Push Payment (APP) Fraud

As online transactions continue to surge across industries, concerns over authorized push payment (APP) fraud are growing among businesses worldwide. During the first half of 2022, APP fraud constituted a staggering 75% of all digital banking fraud. This type of fraud poses serious risks to both businesses and their customers, leading to financial losses, reputational damage, and erosion of trust.

To counter the evolving tactics of fraudsters, businesses are actively seeking strategies to mitigate APP fraud risks and ensure the security of their customers’ financial information. This not only involves the implementation of robust security measures but also extends to educating customers about how to avoid falling victim to scams.

In this article, we will delve into the concept of APP fraud, explore various forms it can take, and provide insights into effective strategies that businesses and customers can employ to thwart fraudulent activities.

What is APP Fraud?

APP fraud involves scams in which criminals manipulate individuals or businesses into transferring funds to fraudulent accounts. Fraudsters employ diverse techniques to gain victims’ trust, often by masquerading as legitimate entities or individuals. 

Unlike other types of fraud, APP fraud entails victims willingly authorizing fund transfers, frequently through online banking or phone conversations. This makes recovery challenging and can result in substantial financial losses for victims.

As APP fraud continues to rise, financial institutions are implementing countermeasures. However, businesses and individuals must remain vigilant and adopt precautionary measures to safeguard themselves against these scams.

Examples of APP Fraud

APP fraud manifests in various ways, with fraudulent actors utilizing an array of tactics:

  • Impersonation Scams

Fraudsters pose as legitimate entities and request victims to transfer money to fake accounts. For instance, they may impersonate a bank employee and claim there’s an issue with the victim’s account, demanding a payment for resolution.

  • Invoice Fraud

Fraudulent actors send fabricated invoices to companies or individuals, requesting payment for nonexistent goods or services. Companies may receive invoices for services they never ordered, leading to payments to fraudulent accounts.

  • Investment Scams

Fraudsters promise high investment returns, persuading victims to transfer money to fictitious accounts. Examples include Ponzi schemes that promise lucrative returns on cryptocurrency investments.

  • Romance Scams

Fraudsters build relationships on online dating platforms and request funds to be transferred to fraudulent accounts. The notorious Nigerian prince scam is an example, where fraudsters impersonate wealthy individuals and request money for various reasons.

  • CEO Fraud

By posing as CEOs or high-ranking executives, fraudsters coerce victims to transfer funds to fake accounts. For instance, a scammer might impersonate a CEO and request an urgent payment to a supposed supplier.

  • Social Engineering

Social engineering uses psychological manipulation tactics. Fraudsters use impersonation techniques such as impersonation. They assume the identity of big companies to get them to surrender account information, and login details, or authorize payments.

  • Phishing

Phishing scams are prevalent. Fraudsters impersonate the identity of a trusted institution via email or text to get the victim to click on a link or download harmful files. Once the user opens the link/file, the fraudsters can access and collect their personal information.

  • ATO

ATO or Account Takeover Fraud is when a criminal takes control of an account that belongs to an individual or organization to cause harm or steal money. One of the most common methods is when a fraudster uses a hacked social media account to ask the victim’s friend to send money.

  • Confidence Scams

These scams work when a fraudster gains someone’s trust to access their account or manipulate them into handing over money. Usually, it involves a romantic angle or a business opportunity. 

  • Tech Support Scams

Fraudsters masquerade as tech support personnel, demanding payment to resolve fictitious computer issues. Victims receive pop-up messages prompting them to make payments to remove nonexistent viruses.

Protecting Customers Against APP Fraud

Businesses bear the responsibility of implementing effective security measures to safeguard customers against APP fraud. This involves educating customers about fraud risks, verifying payment requests, utilizing secure payment methods, monitoring accounts, implementing fraud prevention measures, and promptly reporting incidents to authorities.

Customers also play a pivotal role in protecting themselves against APP fraud:

  • Verify Requests: Customers should verify payment requests, especially those from unfamiliar sources. Authenticity should be confirmed before authorizing any transfer.
  • Use Secure Payment Methods: Secure payment methods requiring two-factor authentication, such as card payments or bank transfers, should be favored. Avoid cash or insecure money transfer services.
  • Beware of Phishing Scams: Customers should exercise caution regarding phishing scams, refraining from clicking links or downloading attachments in suspicious emails or texts.
  • Protect Personal Information: Strong passwords, two-factor authentication, and prudent sharing of personal and financial data are essential safeguards.
  • Keep Software Updated: Regular updates to software and devices help guard against malware and cyber threats.

Fraud Detection and Prevention Tools

Advanced tools like Stripe Radar and secure payment hardware, such as Stripe Terminal, empower businesses to prevent APP fraud by offering:

  • Real-time Transaction Monitoring: Stripe Radar monitors transactions in real-time to detect anomalies and high-risk activities, enabling swift intervention.
  • Behavioral Analytics: Behavioral patterns are analyzed to identify unusual activities and potential fraudulent actors.
  • Two-factor Authentication: Secure payment hardware ensures dual authentication before transactions are authorized.
  • Data Encryption: Payment hardware and software use encryption to protect sensitive customer information.
  • AI-based Fraud Detection: Machine learning and AI algorithms detect patterns and anomalies to identify potential fraud.

Role of Liability Sharing in APP Push Fraud

The UK Payment Systems Regulator (PSR) made the news when they announced the 50/50 liability proposal and published their APP Fraud Performance Report. While the UK made the news the most, the proposal is not just limited to the UK and we’re seeing several countries across other regions. Several regions taking regulatory steps to fight scams that are enabled by real-time payments.

Several countries are taking steps to implement data sharing among one another to prevent fraud. The UK has taken the highest steps compared to other regions with the 50/50 Liability Announcement. It’s only a matter of time before other countries start implementing similar regulations. This is already apparent with the Monetary Authority of Singapore’s proposed framework for liability sharing.

Pros and Cons of Liability Sharing

ProsCons
Uncover more mule accountsReputational damage & customer switching.
Reduce scam lossesIncrease in opportunistic and first-party fraud.
Better customer protectionMore financial exclusion

With better data sharing among several regions, financial institutions (FIs) can make more accurate decisions to prevent fraudsters from opening a mule account.

Moreover, businesses will be able to judge better if a new customer account is part of a mule network. However, with the reporting comes potential risks. Above all, data sharing will lead to reputational damage to organizations that were hacked or attacked. Customers will better understand how well their financial institution protects them and how likely a particular institution is to be attacked.

Another benefit of sharing information between financial institutions and cross-industry collaboration is that it leads to a significant reduction in scam losses. 

The ability to highlight certain red flags on specific fraudulent transactions in real time can significantly reduce the risk of fraud. The enforced reimbursement of customers opens the door for first-party fraud. Account holders can claim that they were victims of a scam when they’re trying to scam the system. 

The focus of the regulation is to protect the victims of scams and more customers will be safeguarded. FIs will need to prove that the customer purposefully was a part of the scam to be reimbursed. 

Final Take

By fostering collaboration between businesses and customers and promoting awareness of emerging threats, APP fraud can be effectively curbed. As both parties unite to combat fraud, they enhance security measures and reduce vulnerability.

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Five Key Fraud Management and Assessment Strategies

In today’s digital landscape, businesses with an online presence often encounter fraud or potential fraud. As cybercriminals employ advanced techniques like ‘synthetic identities,’ organizations seek comprehensive approaches to fraud and risk management. To effectively combat fraud, businesses are adopting holistic fraud risk management strategies.

Fraud risk management entails evaluating fraud risks within an organization and designing an anti-fraud program to preempt fraudulent activities. This involves identifying inherent and potential fraud risks and implementing measures to detect and prevent both internal and external fraud.

Statistics indicate that companies worldwide lose an average of 5% of their gross revenue to fraudulent activities. Given this substantial impact, businesses must proactively address fraud risk to prevent its escalation within their operations.

Fraud risk management also carries legal implications, as non-compliance can result in severe penalties for both organizations and employees. The “Yates Memo” of 2015 spotlighted corporate wrongdoing and held individuals accountable for knowing of misconduct within their organization.

Key Factors in Fraud Risk Assessment

Here are the five key principles of an effective fraud risk management strategy:

1. Fraud Risk Assessment

Understanding organizational vulnerabilities is the first step in fraud prevention. A comprehensive risk assessment helps analyze the specific risks that a company faces due to its complexity, scale, products, and market exposure. It examines various risk types, their likelihood, and associated costs.

The assessment encompasses internal and external factors. Employees’ interactions with company resources, senior management communication, and external threats should be scrutinized. 

Defining a risk-tolerance limit quantifies risks and guides the development of a strategy that prioritizes risks exceeding the limit.

2. Fraud Risk Governance

Embedding fraud management into the corporate culture is essential. Stakeholders must embrace new procedures and comprehend the severity of fraud risks. Effective Governance includes:

  • Clear strategy communication for upper management and a fraud risk manager
  • Delegated roles and responsibilities
  • Whistleblower procedures
  • Internal audit measures
  • Investigation process description and corrective actions
  • Fraud awareness tools and techniques

Appointing a designated leader responsible for the entire fraud risk management program ensures cohesive communication, training, and adjustments.

3. Fraud Risk Prevention

A proactive approach involves deploying fraud detection tools at the onboarding stage to verify identity. This strategy applies to customers, employees, and vendors, preventing fraudulent individuals from embedding themselves within the organization.

The primary goal is to stop fraud before it occurs. Frequent risk assessments and internal controls are crucial. Over time, the organization may modify its prevention program, potentially avoiding certain activities or transferring risk to other parties.

4. Fraud Risk Detection

Controls and reporting mechanisms employed for prevention can also aid detection. Controls, implemented across various organizational layers, alert employees to potential fraud. Clear understanding and timely assessment of controls are imperative.

Reports play a critical role in detecting fraud by identifying variances and suspicious behavior. These reports should contain essential details, including timestamps. A streamlined process for flagging fraud ensures prompt action while safeguarding sensitive information.

5. Monitoring and Reporting

Fraud risk management is a continuous process that necessitates monitoring and reporting on the first four principles. Regular assessment evaluates successes, identifies blind spots, and highlights areas for improvement.

Transparency is vital in communicating outcomes to stakeholders. Regular reviews of legal requirements ensure compliance.

Summary

In summary, clarity is the common thread running through these five principles. A thorough risk assessment establishes the foundation, and clear governance ensures alignment across the organization.

Collaboration and culture underpin fraud prevention, while effective detection relies on transparent controls and reporting. Consistent monitoring and reporting sustain a robust fraud management system.

A well-integrated fraud risk management strategy shields organizations from financial losses, fraudulent activities, and legal repercussions.

FAQs

What is fraud management, and why is it important?

Fraud management refers to the set of processes, tools, and strategies used by organizations to detect, prevent, and mitigate fraudulent activities. It’s important because fraud can lead to financial losses, damage to reputation, and legal consequences for businesses and individuals.

What are the primary goals of fraud management?

The main goals include identifying fraudulent activities, preventing fraud from occurring, reducing fraud-related losses, and maintaining compliance with legal and regulatory standards.

What are fraud assessment strategies, and how do they differ from fraud management?

Fraud assessment strategies involve evaluating the potential risks and vulnerabilities within an organization’s operations that could lead to fraud. This is a proactive step to identify areas of weakness and implement preventive measures. Fraud management, on the other hand, deals with ongoing activities to detect and respond to actual instances of fraud.

What are some common methods used for fraud assessment?

Common methods include conducting risk assessments, internal audits, and vulnerability assessments to identify weak points in an organization’s processes that could be exploited for fraudulent activities.

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Top 5 Compliance Trends to Watch in 2023

In past years, the rising pressure for financial crime professionals, whether they work in AML, fraud prevention, or cybersecurity. It is getting harder and harder to keep up with growing compliances.

For businesses looking to safeguard themselves from fraud, keeping up with compliance trends is crucial. Here are the top compliance trends to watch out for in 2023.

Growing Compliance Trends in 2023

1. Financial Crime Extending to Other Industries

Financial services is the most highly regulated industry, especially in the areas of crimes like money laundering, bribery and tax evasion, and other types of crimes.

Regulatory bodies all across the world are making new controls to make it harder for criminals to conduct crimes. This has pushed criminals to use other industries to conduct money laundering crimes.

Some other industries include:

  • Real estate
  • Luxury goods
  • Sports
  • Precious metals
  • Gems and Jewelry
  • Casinos gambling, and others

With growing awareness of financial crimes, regulators are mandating KYC and AML regulations across all high-risk industries.

The U.S., EU, UAE, and India are leading the industry in this space. Fincrime risk assessments for a variety of potential crimes, such as fraud, money laundering, corruption, and others.

2. SWIFT Migration to ISO20022 Will Drive Enhanced Screening

SWIFT’s migration to ISO20022 payment standard for cross-border payments and reporting has been in operation since March 2023.8.16.

With this sudden change, the new payment messages will have richer and more structured data than current MT formats.

Most FIs are currently facing issues with payment screening match accuracy, resulting in a deluge of false alerts while carrying a risk of missing true alerts.

As SWIFT shifts to new standards, FIs will have to enhance their screening process and matching rules by adopting targeted screening of cross-border payments.

3. Instant Payments Require Monitoring

Instant payments have become the norm in several companies. Beneficiary accounts are being credited within a few seconds, so it increases the risk of fraud.

IMPS in India, Faster Payments in UK, and Osko in Australia are the best examples of Instant payments.

EU laid out the foundation in 2017 for instant Euro payments within EU countries. The speed of payments is a crucial factor that is loved by fraudsters. This forces FIs to implement real-time screening and fraud detection systems.

The financial industry is looking to shift money laundering checks to monitoring to create reports for law enforcement to a real-time mode to identify payments that seem suspicious. 

FIs need to strike a balance between fraud prevention and customer experience. Achieving the highest level of accuracy and reducing fraud levels has to be the priority of financial institutions.

4. Adoption of Data & AI Solutions for Compliance

A lot of financial institutions struggle with fraud prevention relying on legacy solutions. Manual processes and fragmented data don’t paint the complete picture and are inaccurate in preventing fraud.

Crimes are getting more complex, higher volume and velocity of payments and growing regulatory obligations make it challenging to prevent crimes.

Regulators advice financial institutions to use advanced technologies which has led to a rapid growth of RagTech solutions. The number of FIs that have implemented new technologies is still small but they have shown promising results.

In coming years, the implementation of data-driven AI solutions will keep on rising, such as:

  • Biometric-based smart identification, verification, and authentication.
  • Natural language processing (NLP)-powered contextual screening and adverse media checks.
  • Network graphs for criminal linkage and corporate structure/beneficial ownership.
  • Machine learning for detection of fraud, money laundering, bribery & corruption, human trafficking, environmental crimes, and others.

5. Focus on Crypto Crime Prevention

Another compliance trend that’s on the rise is crypto crime prevention. This year’s crypto market was plagued by multiple storms and endless regulatory framework developments.

The crypto industry is still recovering from the impact of serious crimes that took place in 2022.

While the overall transactional value of crypto is much smaller compared to fiat currency, the rising adoption of crypto paired with an increasing rate of crime has begun to scare regulators.

During 2022, FATF also expanded the Travel Rule recommendation to include VASP reporting requirements. 

The EU also approved the MiCA Regulation in 2022 to protect businesses against crypto-based money laundering and other crimes.

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Identity Verification In Crypto

Cryptocurrency exchanges serve as both magnets for fraudsters and subjects of regulatory scrutiny. To navigate this landscape effectively, it’s crucial to enhance crypto KYC (Know Your Customer) and identity verification tools, striking a balance between fraud prevention and regulatory compliance.

What Exactly is Crypto KYC?

Crypto KYC, or Know Your Customer, represents a legal obligation for centralized exchanges to authenticate user identities. The primary aim is to prevent illicit activities such as money laundering, tax evasion, and illegal funding through cryptocurrencies.

Given the involvement of monetary transactions and pseudonymous digital assets, crypto exchanges are prime targets for fraud and criminal activities. As a result, governments have enforced increasingly stringent KYC and identity verification rules.

However, these requirements are often met with reluctance by both exchanges and crypto enthusiasts. According to a 2019 Coinfirm report, 69% of crypto businesses lacked comprehensive and transparent KYC processes.

Crypto KYC Process in Action

The procedure for crypto KYC is analogous to that in traditional financial institutions, guided by regulations set by government authorities in alignment with the exchange’s geographical location.

Key elements of the cryptocurrency KYC process include:

While these checks can be carried out manually, automation through specialized KYC software is more common. Such software provides a risk-based approach and incorporates identity verification tools. 

In light of anti-money laundering (AML) requirements, combining KYC with AML checks, encompassing politically exposed person (PEP) screenings, sanction checks, and adverse media scans, further strengthens compliance efforts.

The Advantages of Employing Crypto 

KYC Integrating some form of KYC during user onboarding offers significant benefits to crypto exchanges and platforms. These advantages include:

  • Enhanced Compliance

Many jurisdictions mandate crypto KYC as a legal prerequisite within the FinTech sector. Neglecting proper KYC procedures can lead to fines or regulatory issues related to anti-money laundering and countering the financing of terrorism (AML/CFT) laws. 

  • Reduced Fraud

Robust KYC protocols act as a deterrent against various forms of fraud. Gaining comprehensive insights into customers enables monitoring and potential restriction of high-risk individuals. 

  • Fostered Trust

Implementing robust KYC measures instills confidence in customers, demonstrating the exchange’s commitment to adhering to legal standards and safeguarding their interests. 

  • Ecosystem Protection

Crypto KYC plays a pivotal role in safeguarding the financial ecosystem against money laundering, terrorist financing, and other fraudulent activities. 

  • Preserved Reputation

By showcasing diligent steps taken to secure customer assets and accounts, the exchange’s reputation is fortified and protected. 

  • Advancing The Crypto Vision

A robust KYC process can alleviate reservations that potential investors may have about engaging in cryptocurrency, thereby promoting broader participation and mutual benefits. 

Challenges Encountered in Crypto KYC Despite well-intentioned efforts, crypto exchanges face significant challenges in implementing effective KYC procedures.

Here are four key obstacles:

  1. Variety of Fake Id Types

Fraudsters exploit diverse tactics, including synthetic IDs and deepfake technology, to bypass KYC procedures and gain access to crypto exchanges. 

  1. Balancing Friction And Security

Users seek swift access to volatile markets, necessitating a delicate balance between seamless onboarding and stringent security measures to avoid customer churn. 

  1. Clash With Crypto Ideals

While crypto enthusiasts envision the technology as innovative and exempt from conventional financial regulations, regulatory bodies impose distinct standards. Exchanges may need to incentivize users to complete KYC by offering special deals. 

  1. Risk of Compliance Fines

Inadequate KYC checks expose exchanges to substantial fines. Failure to meet requirements can have serious financial implications. Regulatory scrutiny extends beyond crypto exchanges to encompass various crypto-related entities. 

In a notable example, a crypto tumbler faced a $60M fine in 2020 for non-compliance with AML standards.

Effective Tools and Features for Crypto KYC

Automated processes are standard in crypto exchanges’ KYC checks, necessitating the incorporation of the following tools and features within their KYC software:

1. ID Selfie and Video Verification

Modern identity verification vendors offer seamless integration of document verification into crypto KYC procedures. However, it’s important to note that these tools introduce a degree of friction to the user experience.

Additionally, concerns about falsification arise, as fraudsters can manipulate IDs or use stolen credentials. These checks also carry a significant cost, with automated document verification estimated at an average expense of $2 per check.

2. Digital Footprint Analysis 

Digital footprint analysis serves as a preliminary KYC check or an extra layer of security for crypto KYC. It involves uncovering hidden digital and social signals to gain deeper insights into users. Data points include email addresses, IP addresses, phone numbers, browser types, and device specifications. Notable aspects of this analysis include:

3. IP Lookup

Identifies high-risk IPs, potentially associated with harmful activity, suspicious data centers, or VPNs. 

4. Email and Phone Lookup

Flags free email providers and virtual SIM cards, aiding in risk assessment.

5. BIN Lookup

Helps establish card-issuing banks or detect invalid details, contributing to user profiling. By integrating this information and subjecting it to risk assessment rules, a clearer understanding of user risk is achieved during the crypto KYC process.

6. Device Fingerprinting

Device fingerprinting capitalizes on the unique amalgamation of hardware and software attributes within users’ devices. This distinct fingerprint can serve as a key identifier, aiding in identifying connections between accounts. 

The technology also helps identify and exclude bad actors relying on emulators and virtual machines, which are considered high-risk.

7. Blockchain ID Validation

Blockchain technology presents a novel approach to ID verification, offering potential advantages in terms of anonymity, affordability, and efficiency.

For example, HSBC’s successful experiment with blockchain-based KYC in the UAE demonstrates its potential. However, challenges remain, including limited adoption of blockchain KYC and the need for explicit regulatory approval.

8. Leveraging Digital Footprint

Analysis in Crypto KYC SEON’s track record with crypto exchanges highlights the effectiveness of digital footprint analysis in facilitating KYC checks and reducing chargebacks resulting from fraudulent credit card transactions.

Key advantages include:

  • Seamless experience: Real-time data collection via API minimizes friction for users.
  • Cost savings: Digital footprint analysis acts as a pre-filter, blocking low-quality users before engaging in more resource-intensive KYC checks.
  • Enhanced intelligence: The analysis complements manual reviews, allowing for a more comprehensive risk assessment. Users with incomplete digital footprints or obscured online presence can be subject to closer monitoring.

You can explore this approach by entering an email address or phone number below, discovering the depth of insight a digital footprint can provide about a potential legitimate customer.

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Understanding Fraud Analytics – New Way to Combat Fraud

Fraud analytics relies on the use of big data analysis to detect and prevent online financial fraud. It can help financial organizations learn about ongoing fraud trends and build safeguards to protect themselves.

More and more people rely on online banking for the convenience it offers. The 2020 lockdown acted as a catalyst for online banking. With the ever-increasing number of users, online financial fraud numbers have also gone up. Out of all types of financial fraud, Account takeover fraud is the most prominent.

With fraud analytics, financial institutions can gain deeper insights into financial fraud, fraudulent behaviors, and how to protect against fraud.

Financial institutions today have to apply robust fraud management measures to ensure their and their customer’s security.

Challenge of Financial Fraud

Financial institutions are obligated to protect their customer’s sensitive information from fraudsters. Over time, keeping information secure has become more complex as customers can access their accounts from multiple channels. Customers can use mobile banking apps, online banking, or call the bank’s customer service to perform financial activities.

This opens up the bank to several risk points. A fraudster could log in using the mobile app with stolen credentials and the bank would have no way to distinguish between a legit user and a fraudster.

It is also becoming increasingly easy for fraudsters to steal credentials. To give you an idea, the dark web has over 15 billion credentials that you can buy for next to nothing.

The average price for banking credentials is as low as $15.43 for a single consumer. If a fraudster wants to buy credentials for an organization’s key system, the average price is $3,139.

Types of Online Financial Crime

  • Account Takeover Fraud

ATO is one of the most prominent types of financial fraud. A fraudster uses stolen credentials to take over an existing online account. The fraudster then uses the account to commit financial fraud.

  • Sim Swap

Sim Swapping is another type of account takeover fraud. In this type of fraud, the fraudster uses a victim’s personal information, to try and convince the mobile company to port the victim’s phone to another number.

When the mobile company ports the number, the fraudster conducts financial fraud and the victim is unaware until it’s too late.

  • Phishing Attacks

Phishing attacks are aimed to target less technically proficient users. This type of fraud happens when a fraudster impersonates a legitimate company/service provider. Then the fraudster sends a text/email to the user asking them for their personal information.

Once a less suspecting victim shares their personal information, the fraud begins.

  • Malware

Fraudsters use several methods to gain a victim’s personal information. This includes trying to trick a victim into installing malicious programs on their device. This malware is designed to log keystrokes, corrupt data, or make the device unusable until the victim pays a ransom.

  • Card Not Present

CNP is becoming more prevalent because of a growing trend of eCommerce shopping. Fraudsters use stolen credit card accounts to make online transactions.

How do Fraud Analytics Help in Financial Fraud Management?

Online fraud is ever evolving and financial institutions need to keep finding new ways to combat fraud. Traditional methods of fighting fraud are not up to the standards. Fortunately, there is a huge pile of data that financial institutions can use to predict and detect fraud. 

Just having a username and password isn’t enough to protect customers and institutions against fraud. When someone accesses, or attempts to access a victim’s information, there is behavioral data that banks can use to verify if this is a legitimate transaction or not. 

Vital data that financial institutions can use to detect fraud include:

  • What device a user is using?
  • If the device has been previously registered with the bank.
  • Can the user verify their identity with a fingerprint?
  • Does the transaction data fit the previous patterns?

These types of data can be broken down into four categories:

  • Knowledge: Something that a user knows, such as passwords, identity information, username, etc.
  • Possession: This type of data signifies something that a user has, such as a mobile phone.
  • Inherence: This is something that a user is, such as a fingerprint, retinal data, palm print, etc.
  • Behavioral: Something that a user does. Any activities that form a pattern, such as their requested transaction, or a series of transactions.

By analyzing these data and combining them with big data, fraud analysts can discover hidden patterns. 

Banks, since forever have been operating on a fixed set of rules that examine requests and provide a yes/no decision. These rules are based on increasing fraud techniques which expands the rules sets and these rules end up becoming too complex. 

Even the most complex traditional rules don’t adapt to hidden or unknown threats. Having systems that haven’t adapted to the latest developments leads to a huge number of false positives.

Machine learning solutions can collect massive amounts of data. These solutions can also analyze heaps of data and assign a real-time risk score for a customer. 

This is how fraud analytics help in detecting and preventing online financial fraud.

ML Models for Fraud Detection and Prevention

Fraud analytics is applying machine learning techniques to financial data. Fraud analysts use machine learning to examine all the valuable data to determine whether the transaction is high-risk or low-risk.

Based on the outcome, machine learning solutions offer recommendations to either allow or block the transaction. There are also cases where multi-factor authentication is needed before approving a transaction.

There are two different types of machine learning solutions. Unsupervised, or supervised. Unsupervised machine learning models analyze unstable data sets to find anomalies in the data. The model can also detect otherwise hidden relationships in the data to suggest a function or instruction set to describe the underlying dimensions of the data. 

Supervised machine learning models on the other hand are trained using labelled data. These models predict the likelihood of fraud. The way to train supervised models is by presenting them with legitimate and fraudulent data and commanding them to analyze the data to develop an instruction set or an algorithm. 

This algorithm is then used on other examples to verify the capabilities of the model. A perfectly trained supervised machine learning model can identify known and unknown patterns. These models are most likely to provide an accurate risk score for a requested transaction.

Data Analytics Techniques to Fight Financial Fraud

Data science is also a part of the solution to fight fraud. Financial institutions collect behavioral, device, and transactional data of every customer. Analyzing this data through a fraud detection system can help in the detection and prevention of financial fraud. 

But the analysis can only be as great as the data available in the data set. If a financial institution has great data available, there are several data analysis techniques that a machine learning-based fraud system can use to fight fraud. 

Predictive analysis is looking at available data and making predictions about the future. Using past events to figure out a pattern and then showcase the potential prosperity for fraud.

Pattern recognition is another data analytics technique that businesses can use to combat fraud. Machine learning models analyze data sets to detect anomalies and identify patterns that are different.

Machine learning algorithms can learn from the data and make predictions for future events.

Forensic analytics is examining the causes and consequences of a financial fraud event. By analyzing the data and relationships between the cause and the consequences, it is possible to identify potentially fraudulent behavior and expose cooperation between fraudsters.

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Marketplace Fraud Trends

Marketplace fraud is as the name suggests. A buyer or seller makes false claims through a company. The fraud could be as simple as making false claims about the quality of products and services, or selling different items as advertised.

An online marketplace provides a platform that buyers and sellers to find one another. eBay is the father of online marketplaces. Launched in 1995, it opened the floodgates for other online marketplaces.

Since then, online marketplaces have grown to offer so much more. Any service or product you could think of, you’d be able to find a marketplace for it.

Marketplace Fraud Trends

At its core, the fraud marketplace can be broken into two categories. Buyer scams and seller scams. You’ll be able to find scammers on both sides of the transaction. 

Here’s a breakdown of the common buyer and seller marketplace fraud trends:

Types of Buyer Fraud

Scams that target buyers are more than common on online marketplaces. Here are the most common types of fraud that scammers use to trick buyers.

1. Counterfeit Goods

Millions want the luxury of expensive goods but don’t have the money to experience the luxury. To match this demand, fake luxury goods are produced in countries like China, Turkey, and others. Online marketplaces face a lot of issues with counterfeit goods.

Customers who can’t differentiate between original goods and counterfeit tend to fall for these scams.

Sellers are extremely good at tricking people into believing that they’re selling a legit item. Customers often fall prey to paying absurd amounts of money for a fake item.

The best way to prevent this fraud is to research about possible counterfeits. There are online forums such as Reddit that have communities that can help you decide whether a good is legit or fake.

2. Non-Delivery Scams

This is another common marketplace fraud trend. The best way to scam a buyer is by selling an item that the scammer never intends to deliver.

There are situations where the seller makes up a fake advertisement and doesn’t have anything to sell. You can probably find photos that look suspicious and the seller may not be able to answer specific questions. 

The best way to tackle this fraud is to always ask for secondary images and images from different angles. You can ask the seller to also send a photo of the product and a piece of paper with your name written on it. 

This is in no way a complete solution as a lot of scammers do have the item in their possession. By making fake listings, sellers can sell a single item multiple times to multiple victims without delivering anything. 

Some ways to spot this type of fraud include:

  • Check reviews and comments. Especially look if anyone has mentioned being scammed by this seller. 
  • Ask whether you can pick up the item in person and pay via cash. If the sellers tell you they can only send it via post, it’s probably a scam.
  • Always be wary of people who want you to pay using cryptocurrencies or use any non-secure payment methods. Apart from cryptocurrencies, look out for international fund transfers, money orders, and pre-loaded gift cards.
  • If the seller pushes you to make the money transfer as soon as possible. And if they try to give some enticing offer to sell you the product as soon as possible, they’re trying to manipulate you into buying.
  • If the seller requests that you communicate or pay outside of the Facebook marketplace, then it is most likely a scammer.

3. Phishing Scams

Phishing scams are one of the most common types of scams you’ll find online. These types of scams can be just as common on online marketplaces as they are elsewhere. 

A phishing scam is designed to steal your personal information to defraud you. To make this type of fraud happen, fraudsters make up a fake listing. These listings can contain links to malicious websites that are designed to steal your data.

The best way to identify phishing scams is when the scammer asks for your personal information. Sensitive information that makes no sense to ask for while purchasing something.

Any sensitive information you provide to the scammer can be used to engage in fraud.

4. Rental Scams

Rental scams are growing at an alarming pace. Scammers make up fake listings for properties, rooms, boats, sports arenas, etc.

Once someone shows an interest, the scammer asks for an upfront payment or deposit to secure the rental. After the buyer makes the payment, they lose their money as there is no rental place/equipment to use.

To prevent yourself from getting scammed, don’t rent on marketplaces that aren’t built for specifically renting services. Moreover, you can ask to see the place/equipment first and pay money in person.

5. Ticket Scams

If you’re on the hunt for tickets to a sold-out Foo Fighters concert, seeking a Lollapalooza ticket, or coming across unbelievably cheap entry to a famous art gallery on Facebook Marketplace, beware of ticket scams.

Scammers are adept at selling counterfeit tickets that look genuine but will leave you disappointed on the night of the event. To safeguard yourself, exercise extreme caution and only purchase tickets from authorized sellers and resellers.

While legitimate ticket touts do exist, selling tickets at a premium, there are just as many scammers peddling expensive forgeries, with Facebook Marketplace being a preferred platform for their schemes. Stay vigilant and follow these guidelines to avoid falling victim to ticket scams:

Purchase tickets only from authorized sellers and resellers.

  • Be wary of deals that seem too good to be true or significantly cheaper than the regular ticket price.
  • Verify the seller’s legitimacy by checking their reputation, reviews, or feedback from previous buyers.
  • Avoid using insecure or non-refundable payment methods like bank transfers or cryptocurrency.
  • Exercise caution with electronic or print-at-home tickets, as they can be easily forged and sent by scammers via email.
  • Cross-check ticket details, including the date, time, venue, and seating information, against the official event information to spot potential discrepancies in the scammer’s advertisement.
  • Compare the ticket’s appearance with an official one to detect signs of counterfeiting.
  • Be cautious of sellers who rush you into making a payment.
  • If possible, meet the seller in person to verify the authenticity of the tickets before purchasing. Trust your instincts and thoroughly assess the legitimacy of the ticket purchase from the seller.
  • Maintain all communication and documentation related to your ticket purchase as evidence for potential complaints.

6. Pet Scams

The pandemic and the rise of remote work have sparked increased interest in pet ownership. Unfortunately, scammers have exploited this trend by creating fake listings for pedigree puppies, kittens, and other popular pets on Facebook Marketplace.

To avoid being defrauded by pet scams, follow this simple checklist:

  • Visit the seller in person to verify the existence of the pet, its health, and the conditions it is kept in.
  • Do not make upfront payments for vaccines or unnecessary charges.
  • Only provide a deposit if you are certain about the seller’s legitimacy.
  • Use secure payment services for transactions.
  • Preferably, pay for the pet when you pick it up to ensure its authenticity.

Seller Scams

Sellers are not exempt from fraud, and awareness of potential pitfalls is crucial to safeguard themselves. Here are some common seller scams:

  1. Payment and Overpayment Scams

Always verify that you have received a payment from the buyer and that it has completely cleared before offering any refund. Use payment methods that cannot be reversed at the last minute.

  1. Returns Scams

Wait until you have received the returned item and checked its condition before issuing a refund.

  1. Electronic Payment Delay Scams

Never allow a buyer to leave with the item until their payment has fully cleared.

  1. 2FA Scams

Avoid sharing your phone number and 2FA codes with anyone you meet online, as they may exploit them for fraudulent purposes.

  1. Phishing Scams

Be cautious of suspicious inquiries and limit sharing of personal information with potential buyers. Use secure communication channels and verified payment methods.

Always trust your instincts and proceed with caution when dealing with buyers or sellers on online platforms like Facebook Marketplace or others. Following these guidelines can help you avoid falling victim to scams.