Fraud General

5 Best Ways to Protect Businesses From Cyber Attacks

Businesses of all kinds have an obligation to try and protect their users. Protecting users from cyber attacks is a responsibility that every single business has to take on. Your existing and new customers need to know the best practices they can follow to stay protected. With bad actors becoming more and more creative, you need to be more vigilant and teach your customers to protect themselves from cyber-attacks. 

In this guide, we’ll outline the best 5 ways to protect users from cyber attacks. Let’s dive in.

Best Cyber Security Practices

Even the smallest of mistakes can cost you very dearly if you don’t pay attention online. There are some basic things organizations can do to protect their users and their data. If a hacker or bad actor can gain access to confidential information, it can cost your business millions of dollars. Here’s how to stay safe online:

1. Learn How to Detect Attacks

Cyber attacks can come in any shape and size. They can be in the form of phishing, ransomware, or pretexting. Out of all these attacks, social engineering attacks are the most dangerous and hardest to figure out. Organizations should have the ability to detect them as soon as possible. 

Every single member of your organization should learn how to detect social engineering attacks. Anyone who clicks on the wrong link or sends personal information to the wrong person, it’s an invitation to a data breach. 

Here are some of the most common methods used by bad actors during social engineering attacks:

  • Requests for the user or shared credentials
  • Request for financial or contractual information
  • Requests for user personal information
  • Unusual or suspicious links and files
  • Unusual or suspicious phone calls

2. Educate Users about Devices

To protect your users from cyber attacks, you need to educate them on some things. It helps in ensuring that every member of your organization is aware of the best practices to protect themselves. Businesses should also hold seminars after employee onboarding to prevent cyber attacks. 

Whenever your employees leave their desks, they should always lock their devices. Also, setting up personal passwords goes a long way in fraud prevention. You should educate users and refrain them from using third-party apps that aren’t trusted. 

3. Multi-Factor Authentication and Password Management

If you’re storing user data, and your users can log in to your website, then it’s essential to use multi-factor authentication methods. While a password helps in protecting you, MFA just adds another layer of security for the users and the businesses.

Make sure that all the employees and users change the default passwords as this is one of the biggest ways people get exploited. Also, never ever share passwords. MFA is a key to securing your devices and systems, as it forces the user to verify their identity. As the user has to provide a unique numerical code after entering the username-password, it prevents the risk of credential stealing.

4. Keep Up With Software and Hardware Practices

Software and hardware physical security practices can help ensure that you’re doing all that you can to keep your business secure. It can be anything, from using built-in defense functions or regularly updating software and hardware.

Choosing systems with built-in layers of defense boosts your organization’s cybersecurity the minute they’re running. There are endless solutions containing built-in security functions including data encryption and endpoint protection, these obstacles make it harder for bad actors to access your systems.

When it comes to software updates, most businesses and users ignore their importance. Prioritize updating the software and firmware on all the devices, as this allows them to function at an ideal level.

5. Choose the Ideal Technology

Finding a technology provider that offers all the solutions you need, all the while operating while being transparent isn’t easy. It may take some time to decide which vendor is the right fit for your business. 

Most vendors offer their customer hardening guides, these guides teach users how to keep their devices secure.

Choosing the ideal technology is crucial to a strong cybersecurity strategy. This also includes using the right technology for customer onboarding. DIRO online document verification technology can boost the onboarding process and eliminate the risk of fraud.

When you onboard the right type of users, you automatically reduce the risk of data breaches, account takeover fraud, and so much more.

Fraud Payment

Steps Payment Gateway Can Take to Detect and Prevent Online Fraud?

When you have started your online business, you wouldn’t consider online fraud as a challenge when you’re processing less than 10 transactions a day. However, when your business and the number of transactions increase, you need to be more careful. Statistics state that in 2018, US merchants lost an estimated $6.4 billion in payments card fraud. Small businesses especially face the highest number of frauds and an estimate of $155,000 per year.

Credit card processors offer merchants basic security measures to reduce the risks of credit card fraud. Although some merchants don’t offer seller protection, including PayPal, this is the case in the case of digital goods. You can decide which payment gateway to use. This also tells how your business will be protected in case of fraud transactions.

With the digital goods and services landscape on a boom, businesses of all sizes need to re-evaluate their position and tools when it comes to fraud management. In this article, we will take a look at the most effective techniques when it comes to tackling card payment fraud.

How to Prevent Payment Gateway Fraud?

1. Address Verification Solution

Address verification solutions are used to detect online fraud. When customers purchase items, they have to provide their billing address and ZIP code, and address verification solutions check whether this address is real or not. Part of a Card-not-present transaction, the payment gateway can send a request for user verification.’

2. Card Verification Value (CVV)

The CVV or Card Verification Value is a 3 or 4-digit code on credit cards. The code should never be stored on a merchant’s database. A CVV filter acts as an added security layer, allowing only the card owner to use the card. If an order is placed on the website and the CVV doesn’t match, the transaction should not go through. While making a CNP transaction (online, email, or telephone orders), merchants get the required information from the customers.

3. Device Identification

Device identification analyzes the computer instead of the person who’s visiting the website. It verifies the internet service, and browser to see if the transaction has to be approved. All the devices (phones, computers, tablets, etc) have a unique fingerprint, similar to human fingerprints. 

Fraudsters are unable to impersonate a computer’s unique identity, making it a viable option for your business against online payment fraud.

4. Flag Large Transactions

With stolen card information, fraudsters will take a shot at making transactions before the card is blocked. This would be harmful to your business where you’ll have to take on the cost of allowing fraudulent transactions to take place. Constant instances of fraud can lead to payment processors terminating your processing account.

You can easily limit the number of large transactions by specifying a flat amount. In addition to this, you can limit the number of failed transactions.

5. Payer Authentication (3-D Secure)

Payer authentication, sometimes called Verified by Visa (VeB) and MasterCard SecureCode, is a cardholder authentication measure that secures all online transactions for customers. This method allows cardholders to create a PIN that can be used during checkout. By using payer authentication, merchants are offered chargeback protection and lower interchange rates. 

This is one of the most sought-out fraud prevention tools that businesses rely on. 

6. High-Risk Countries

If you’re sending products overseas, then you need to exercise greater caution for these orders. Pay more attention to orders that come from high-risk countries. Customers in these countries need to be verified by the countries before the transactions are processed. 

According to the online fraud guide, some of the highest-risk countries include Israel, Malaysia, Egypt, Pakistan, Ukraine, Russia, Bulgaria, Romania, Lithuania, Nigeria, and Yugoslavia.

7. Risk Scoring

Risk scoring tools are based on statistical models designed to recognize fraudulent transactions based on a number of rules and regulations. When a payment is done on your website, the risk scoring tools will indicate the probability of the transactions being fraudulent. A higher probability of a transaction being fraudulent means that you should verify the transaction.


How to Prevent Fraud Proactively?

Today’s topic is related to the three important and effective ways to prevent the risk of fraud with a proactive approach. In order to use anti-fraud strategies, you need to be more alert and look around the corners to detect such happenings before they happen.

Since the rise of Covid-19, Fintech companies and other financial services have faced challenges to prevent fraud. 

According to the Aiteo Group, from 2018 to 2020, the cases of mobile and online fraud losses increased. And as per 27% of financial institutions’ surveys, online losses were more than 10%, and mobile losses were also over 10%. So, how can financial institutions and Fintech companies prevent such losses? 

The best way to prevent fraud is to build a proactive approach against the growing number of frauds. Here’s how FinTechs can prevent fraud proactively.

3 Key Elements to Prevent Proactive Frauds in Fintech:

1. Digital and Physical Identity Elements for Accurate Risk Assessment

According to Kount, it is important to have 100% verified documents of each user and customer to prevent fraud. Financial institutions and companies need to focus on verifying all the users’ documents with the help of digital and physical identity elements to ensure the accuracy of the documents. This helps in preventing the use of fake and stolen documents during onboarding.

When we talk about physical identity, we include social security numbers, payroll information, credit history, phone number, addresses, and tax IDs. And, when we talk about digital identity elements, we include account modification information, email addresses, login behavior, device information, payment information, account creations, and geolocation. The physical and digital elements are helpful for Fintech companies. Even financial institutions use digital ID data to get a complete profile of their users to minimize the risk of fraud.

2. Adaptive Authentication for Minimal Friction Customer Login Experiences

Adaptive authentication is an important step to verify a user’s identity to be able to trust the user or customer.  

If a user or customer is doubtful about their identity, then the financial institutions and banks can step up for multi-factor authentication. With the help of multifactor authentication (MFA), it will be easier to determine a user’s trust based on their transaction frequency, billing address, geolocation, IP address, a device used, and account age. 

According to the financial surveys, the account takeover fraud rates are over 10%, which is more than before the pandemic. 

The two key benefits of using adaptive authentication are that it helps prevent account takeover attacks, and the second is that it helps provide a smooth login experience for returning and new customers. Adaptive authentication is valuable for banks and Fintech companies to expand their customer base with less friction and risk of fraud. 

According to Benjamin Teal, Fintech and AltFi Industry Expert for Equifax, “As we start to see younger consumers seek financial services, fraud mitigation strategies need to be refined to incorporate evolving consumer behavior. “

He further said, “We know that younger consumers are digitally native and have fewer obligations requiring them to remain in one place. As a result, they engage in behavior that looks very different to older consumers. Sophisticated strategies will factor in these generational differences and create experiences that lead to higher conversion while keeping bad actors out.”

3. Deep Data Insights to Determine Identity Trust

Financial institutions and FinTech companies need more than just payment-related data to uncover identity theft issues. Identity theft can appear in different stages during the account creation process, application, and payment event, and log in. And, to prevent the risk of identity theft, the FinTech companies and financial institutions need relevant data to decide if the customer is genuine or not.  

In the recent webinar, O’Neill, the Enterprise Account Executive for Kount, said, “It’s not necessarily enough to look at payments data to compete against some of the largest banks and card brands, which have massive data networks. “

O’Neill further said, “When it comes to payments-related data, it’s really easy for big banks to say they know what a normal payment looks like and therefore know what an abnormal payment looks like. And that’s true, but you need more than that to make the best decisions.”

There are other fraud indicators like email addresses, geolocation, country codes, transaction amounts, and BINs.  

And to prevent the fraud related to these indicators, it is better to use a global network of fraud and trust-related signals. 

Once the payment data is combined with all the above elements, you can get a more accurate image to prevent proactive fraud in Fintech.

DIRO for Proactive Fraud Prevention

  1. DIRO’s document verification technology is great for Fintech companies and financial institutes for the instant verification of documents from the original source.
  2. With the help of DIRO’s document verification, the companies can save time and resources.
  3. Manual verification of data can lead to various errors, and the chances are high that manual a person could not identify real or fake documents.
  4. With the help of DIROs, you can get 100% verified documents from the sources, which means no chance of fraud and fake document threats that can lead to huge losses if not identified at the time.

Tips to Protect your Business from Scammers

Businesses of all kinds face various internal and external attacks that can harm the businesses financially and in other ways. False invoices, money laundering, and phishing attempts are some of the most common examples of fraud. With the whole world forced to shift toward digital transformation, online scams aimed at businesses are getting more sophisticated. 

According to industry experts, every second an online merchant becomes a victim of some kind of fraud. What’s even worse is that most businesses take months to notice the fraud. Unfortunately, most businesses don’t know about the best practices they can use to enhance security and keep their businesses protected from fraudsters.

Practices to Prevent Fraud for Businesses

1. Know Your Customer

The COVID-19 pandemic was the primary cause of the surge in the rate of unemployment. Identity fraud costs reached up to $43 bn in 2020 out of the total fraud losses of $56 bn. 

Know Your Customer compliance program is a vital part of running an online business. Businesses are legally obligated to perform customer due diligence (CDD) checks to verify the identity of the customers to future-proof themselves from financial fraud. 

By building successful and efficient digital compliance programs, businesses can mitigate the risk of fraud all the while improving the customer experience during onboarding. The exact type of risk management solutions depends on the business type, but generally, they’re needed to identify and assess the threat a customer can pose to their business. According to industry experts, businesses should have automated checks in place for customers to eliminate the risk of fraud from the early stages.

2. Chargeback Fraud

Another common type of fraud that businesses have had to face since the rise of digital business operations is chargeback fraud. It happens when a consumer makes a purchase online using their card and then disputes the charge with the bank, and requests for a chargeback from the bank even after getting the product or services they ordered. 

Businesses operating in the industries like eCommerce, online dating, online gaming, and other purely online businesses tend to suffer from chargebacks and transaction fees whenever they onboard new customers. Although, businesses can reduce the risk of fraud by identifying the common patterns. 

3. Utilize Multiple Solutions

As there are so many areas where a company can be susceptible to attacks, it is vital to use a combination of digital defensive solutions, including:

  • Online ID verification
  • Online document verification
  • Continuous customer monitoring
  • Real-time transaction monitoring

One simple solution isn’t enough to keep the sophisticated types of fraud at bay, businesses need a combination of solutions for fraud detection and prevention.

4. Machine Learning Solutions

Machine learning solutions can be utilized by businesses regardless of the industry and business type. Firms that don’t have the resources to manage huge teams for customer verification can use machine learning solutions for customer verification and fraud detection. 

Machine learning can learn from huge data sources and detect normal payment patterns and detect suspicious transactions right away. Best algorithms can also identify fraudulent transactions on more than 50 different parameters.

DIRO for Fraud Detection & Prevention

Businesses often face fraud that revolves around fake and forged documents and identities. DIRO’s online business verification software helps businesses in detecting and preventing fraud in the early stages. DIRO can verify documents instantly and provide stronger proof of verification backed by verifiable credentials. By integrating DIRO into their solutions, businesses can easily improve fraud detection and prevention techniques.

Fraud ID Verification

Why AI-Based Online Document Verification is the Best Way to Verify Identity and Mitigate Fraud?

Showing any kind of proof of identity is vital to complete any kind of legal formality or verification process. No matter what industry a customer is trying to become a part of, be it banking, insurance, healthcare, technology, travel, education, or any other online service, the customer is asked and obligated to present an Identity proof to verify a customer is who they say they are. Verifying customer identities can reduce the risk of identity theft.

Verifying identities may sound great, but as a business, you’ll have to spend money, time, and HR to put secure document verification solutions in place. Extra tough verification process reduces the overall customer experience. While most customers don’t like the extra tough verification process, not having a verification process reduces the trust in the brand and can cause businesses to lose more customers during the onboarding process. 

To find the balance between these situations, AI-based digital document verification solutions are viable, effective, and hassle-proof. Here’s why digital identity verification solutions are important and how it helps financial institutions prevent risks?

What’s the Need for Verifying Customer Documents?

Before we go deeper into how digital identity verification works, it’s important to understand why businesses need to verify documents at all be it using technology or human methods. Online document verification serves two key purposes, it prevents risks like financial fraud and identity theft, secondly, online document verification helps in industry-wide legal compliance. 

According to studies, the total loss incurred due to identity fraud in 2020 was about $16.9 billion. The damages that result from theft of identities don’t just revolve around money, it also involves sexual, racial, and gender-related comments on social media which can cause a lot of issues. 

The covid-19 global pandemic has increased the overall online transactions and digital banking, it also improves the number of digital fraud and identity theft cases which will eventually cause more damage than benefit. To reduce this type of fraud, banks and financial institutions are spending a lot of money on AI-based identity verification technologies.

Difference Between Modern and Traditional Document Verification

Traditional methods of document verification were hectic, and inefficient and it makes a lot of challenges for customers. Before the digital revolution in the banking sector, customers used to visit the brick and mortar branches to get the documents verified for account opening and loan applications. Traditional document verification used to take weeks at the same time. Plus, the results used to be extremely inefficient. Fraudsters make counterfeit documents that are indistinguishable from real documents.

However, conventional ways of authenticating ID documents fail to deliver results that are 100% efficient. There is always a probability of having mistakes in their results. That is why conventional document verification isn’t the best idea while fighting fraud. 

To combat the problems in the manual document verification process, online document verification needs to be used by banks all over the globe. Online document verification technologies that rely on Machine Learning and Artificial Intelligence algorithms can be helpful in combating document fraud. Online document verification technologies improve the odds of verifying customer documents and minimizing the approval of fake documents. And, online document verification can boost the customer experience. 

Regulations and Compliances Necessary to Fight ID Fraud

Businesses and industries can’t work without document verification because it is required by law to follow all the compliances. Countries all over the globe have to follow legal compliances such as KYC (Know Your Customer) and Anti Money Laundering (AML) guidelines that are required by law to be followed by businesses. According to the rules set up by the Federal Trade Commission (FTC), verification of documents can be useful to potential identity theft. Complying with KYC and AML guidelines is not just a legal requirement, it is also an effective and appropriate measure that will help businesses fight all kinds of identity frauds.

Types of Document Fraud

There are several types of document fraud that banks and financial institutions have to face. To perform document fraud, fraudsters use counterfeit documents and they also steal documents. Customers demand instant verification and with so many types of document fraud, it’s challenging to verify documents. Here are all types of document fraud:

  1. Modified Documents

Modified documents are original documents that have been altered, and these documents often come in two different types:

  • Forged Documents: Fraudsters change vital information on documents to conduct ID fraud. They often end up changing variable information, adding real pages from other documents, removing specific pages, applying fake stamps or watermarks. 
  • Blank Stolen Documents: All documents start out as blank pages, when fraudsters get access to these documents they can use them to trick banks. 
  1. Illegal Documents

Forged documents are original documents once, but illegal documents are fake altogether. Illegal documents are of different types:

  • Counterfeit Documents: As the name suggests, counterfeit documents are reproductions of originals. Usually, a fraudster will get their hand on an official blank document and they use the blank document to add in information.
  • Camouflage Documents: There are some things that you shouldn’t have on a document. A camouflage or fantasy document often contains information that shouldn’t be there. This is the easiest type of fraud to detect.

How Does Digital Certificate Authentication Work?

The online document verification process verifies the documents using tools and software all using Artificial intelligence. Just as a human officer examines an ID card/ Identity document confirms customers by matching their face against the document provided. AI-powered document verification tools also verify the identities using a different set of documents. 

So how does the online document verification software work? The process is quite simple and usually involves several simple steps:

  • The digital document verification software is usually integrated with your business’s website and other automation systems. 
  • When a customer logs onto your website for the first time, he or she will be asked to upload a government-issued identity proof in an image format. Most software often provides a live image capture feature for comparison.
  • Once the customer has uploaded the images, the software scans the documents using optical character recognition.
  • The extracted information from the image is then analyzed and verified against the government and private databases. Simultaneously, the document is also checked for forgery and signs of tampering. Usually, the verification of documents takes a few seconds. 
  • If the documents uploaded by the customer are genuine and not tampered with, then the user can sign up with your business. Documents that aren’t authentic are rejected and the customer can’t use the services. 

All the AI-powered document verification services verify documents issued by the government only. These documents include passports, driving licenses, photo ID cards, voter’s identification documents.

What are the Fraud Detection Techniques Used by Software?

Most of the major document verification solutions use three types of analytics to determine if a document is real or not. These analytics are data integrity, visual authenticity, and facial biometrics data. 

  1. Integrity of Data: As you may already know, documents issued by the government come with a set of features. Features such as integrated algorithms, data fields available in multiple locations. AI-powered document verification tools check all data features to make sure that they match.
  2. Document Authentication: The software also checks for any kind of anomalies or signs of tampering in the document. These signs of forged documents include pixel quality, holograms, and incorrect logos, barcodes, and micro prints. 
  3. Facial Biometrics: It isn’t enough to verify just the data available on the document and checking the authentication of the document, software also needs to make sure that the person who has uploaded the document is the actual owner.

All these technologies make the solutions more efficient and accurate in verifying the documents in comparison to manual verification. 

Benefits of Using an AI-Based Document Verification

During customer onboarding, consumers are asked to submit a series of ID documents such as government-issued ID cards, driving licenses, passports. It’s not easy to verify documents manually. That’s why online document verification allows clients to submit a selfie and upload online documents for verification. 

After submitting documents, online document verification software verifies documents online and verifies if the document is authentic or not. DIRO online document verification software fetches document data from the issuing source to verify if the document is legitimate or not. 

Online document verification offers a wide range of advantages including faster turn-around time. It can manage to verify several documents easily from all over the globe, each document with different fraud detection rules and elements. 

Moreover, when businesses use AI-powered document verifications solutions, errors reduce by a drastic number. AI-based solutions are known for detecting frauds and red-flag patterns that humans usually miss out on.

Final Take: Importance of AI-Based Document Verification Solutions

Digital transformation of businesses has been going on for a long time, the global pandemic has pushed the digital transformation into overdrive. To reduce the threats of identity theft and financial fraud, businesses often comply with regulations that end up with complex processes that often push customers away.

As we’ve mentioned above, verifying documents offline can be tough, ineffective and they aren’t sustainable. Moreover, they’re expensive and take up a lot of time. To solve the issues banks face with offline document verification, banks rely on online document verification software. 

AI algorithms and machine learning solutions can help banks, credit unions, financial institutions to identify suspicious money laundering activities. Thus online document verification can be crucial in mitigating fraud, and using AI-based online document verification it is possible to reduce the flow of fraud. 

It is imperative to verify documents without having to reduce customer satisfaction. To successfully do that, AI-Based digital document verification solutions are the best choice. To protect your business against identity fraud eliminates the need for maintaining huge teams. AI-Based digital document verification solutions are the future.


Best Practices and Strategies for Fraud Prevention

With global fraud rising beyond control, it’s vital that organizations implement effective fraud prevention policies and procedures that provide security while ensuring a quality customer experience. With the best practices for fraud prevention, businesses can onboard customers quickly and seamlessly.

In the year 2019, the loss because of identity fraud in the U.S was estimated at $16.9 billion. There are more than 40 types of fraud, and businesses need to figure out which type of fraud can affect their business the most and build strategies for fraud prevention accordingly.

The threat of cybercrime is increasing, with the annual cost to the global economy from cybercrime estimated to reach $6 trillion by 2021. Countless online threats pose a significant risk of fraud for businesses. Cybercrime can also break down the internal compliance process, or it can weaken control systems that can detect illicit activities. Top fraud prevention and detection strategies can even help in picking out the best fraud prevention technologies

Understanding the threats and the tactics used by fraudsters to create new fraud opportunities is important for the development of the best practices for fraud prevention.

Types of Online Fraud

Fraud detection is a huge problem for businesses because fraudsters are constantly innovating to keep tricking businesses. To keep up, strategies for fraud prevention must also innovate to stay one step ahead.

Below are just some of the most common online fraud schemes that organizations should consider as part of their fraud prevention strategies.

1. New Account Fraud

New account fraud usually happens within 90 days of opening a new account. New account fraud is often referred to as application fraud or account origination fraud. As fraud happens so close to when the account was opened, the main purpose of the account was to commit fraud such as money laundering.

For businesses, new account fraud can be extremely dangerous as there’s no history with an existing business and no history of trust. The initial activities in the account may be small but they are often to cover future acts of fraud.

2. Card-Not-Present Fraud 

With the financial industry moving towards digital transformation, card-not-present fraud is something businesses would want to keep track of. There are huge risks of CNP fraud and the merchant is liable for any of the costs incurred during the fraud. 

To mitigate CNP fraud, businesses need effective fraud prevention strategies. By understanding the techniques that fraudsters use and the techniques available, you can develop and operate tactics that mitigate costs while being consumer-friendly.

Businesses should only rely on merchants that meet the Payment Card Industry Data Security Standard (PCI). The PCI is an industry-standard for payment organizations to develop standards for payment data security.

3. Identity Fraud

Identity fraud is when a person assumes the identity of another person without authorization to deceive or defraud someone. 

With most of our lives going digital, fraudsters have no limit to the means of acquiring personally identifiable information (PII). Also, the constant rise in data breaches is making it easier for fraudsters to acquire information that they can use to assume identities. 

The data stolen from data breaches can be brought for as low as $4 on the dark web. In upcoming years, the risk of ID fraud will grow even bigger for businesses with synthetic identity fraud.

Synthetic identity fraud (SIF) is a new and more dangerous type of ID fraud where fraudsters combine real PII with some fake ID data to create a completely new identity. One example of what comprises a fake identity is one that contains a real social security number along with fake addresses and other synthetic data points. Fraudsters can then use synthetic identities to get a driving license, credit cards, open bank accounts, and so on.

Managing FinTech Fraud: Bank-FinTech Partnerships for Better Fraud Prevention

Banks have to fight fraud from all directions and recently the situation is worsening. When a bank partners with a FinTech in a Banking-as-a-Service (BaaS) model, it mitigates risks by placing the responsibility for fraud losses onto the FinTech. However, since the economics of the bank and FinTech are linked, it is in the bank’s interest to ensure that controls are in place to help FinTech partners fight fraud while protecting the bottom line.

Additionally, most frauds are financial fraud that requires assessment and sending of suspicious activity reports to the relevant regulatory bodies. This is the reason banks have to be extremely careful while choosing a FinTech to partner with. In this article, we’ll be outlining the risk a FinTech faces while detecting fraud and is there any reason how FinTechs can work together to protect their businesses.

Common Risk to FinTechs

In 2020, the number of fraud cases in that financial sector surged as more people went online for their banking needs. According to industry reports, over $1 trillion was lost globally to cybercrime in 2020. Fraudsters recently have been focusing on the FinTech industry. FinTechs are slowly changing the industry tides by developing cutting-edge technologies to detect and prevent fraud. FinTechs are extremely attractive to consumers, because of the digital environment, low entry bar, mobile-first security and so much more. These are the same reasons why FinTechs are extremely attractive fraudsters within days of launch. 

FinTechs that offer financial services will have to prepare for fraud and will struggle to survive with precious capital to cover the losses. FinTechs with traditional fraud prevention methods like CDD is vulnerable to attack. As FinTechs become a vital part of the financial industry, the risks will keep growing as consumers become more and more familiar with online banking.

Type of Fraud FinTechs Go Through

With the wave of digital transformation, online fraud has grown more than anything. The most common types of fraud include phishing, synthetic ID fraud, online account takeover fraud, and digital transaction fraud. 

1. Phishing

Phishing scams are extremely common, they rely on tricking individuals by unknowingly volunteering personal details or information that can then be used for creating fake bank accounts, and credit cards. Fraudsters who carry out phishing scams build a fraudulent website, a fake text impersonating a government or private entity.

2. Synthetic ID Fraud

Synthetic ID fraud is one of the biggest challenges for financial institutions as of now. To commit synthetic ID fraud, fraudsters combine real “personally identifiable information” and fake information to combine a whole new identity. Such as a legitimate social security number from people who don’t use their credit (child, homeless people, deceased individuals, or someone else), combining that real information with a fake address, phone number, or fake social media accounts. Then this synthetic ID is used to open bank accounts, apply for credit cards and commit more illegal activities.

The first request is obviously denied, but the first application puts that fake identity into the credit reporting system, legitimizing the fake identity. The fraudsters will keep applying for credit cards, switching markets and providers with less mature identity verification processes until the fraudster finally get their hands on credit cards. 

3. Account Takeover Fraud

One of the biggest challenges faced by FinTechs is the Account Takeover Fraud, it costs the whole industry billions per year. Account takeover fraud and account opening fraud cause the most problems. More than 50% of businesses reported higher losses due to account opening and account takeover compared to any other type of fraud. 

Account takeover fraud is a situation where a fraudster takes control of a legit business account that belongs to someone else. Account opening fraud on the other hand happens whenever a fraudster opens a new account using a fake, stolen, or synthetic ID. 

4. Transaction Fraud

Transaction fraud is another common type of fraud where a stolen payment card is used to complete an illegal transaction. Since FinTechs are pretty good at completing real-time transactions, they are also at risk of running into transactional fraud. Quicker transaction times are one of the major factors that fraudsters look for in committing transactional fraud.

Transaction fraud can happen at any given time during a financial relationship. Account creation, login, and wherever money flows in and out of FinTech’s systems such as deposits, payments to merchants, withdrawals, etc.

Implementing Anti-Fraud Technologies During Account Creation

The steps for detecting and eliminating fraud should happen during all stages of a customer-business relationship. Businesses and financial institutions need to prevent bad actors from entering their systems, which can help significantly reduce fraud. 

To build the perfect anti-fraud technology & strategies to reduce fraud, businesses must use a combination of identity verification and authentication methods to deliver the ideal level of risk protection. Here are some of the most common fraud-prevention methods:

1. Identity Verification

Before a new account is opened, Identity verification technologies and procedures can detect potential fraudsters and prevent future damages. Anomalies in a person’s identity documents such as out-of-date information, mismatched data, and even the smallest red flags demand further examination. By cross-referencing multiple data points and data sources for ID checks, financial institutions can create stronger barriers for fraudsters.

While ID verification is extremely important, it shouldn’t create friction for legitimate customers. Finding the balance between a secure ID verification process and a positive customer experience is something financial institutions have to do. 

2. Biometric Authentication

Biometric authentication is another huge part of fraud detection and prevention for financial institutions. Biometric authentication authenticates a person by distinguishing biological traits to uniquely identify a person. Combining online document verification with biometric authentication provides multi-fold authentication for financial institutions. If done properly, this can help eliminate fraud while successfully maintaining a positive customer experience. 

3. MobileID Checks

Smartphones can help financial institutions prevent fraud by collecting a significant amount of ID data, including name, mobile number, address, and device information. To make a proper image of customer identity, this data can be cross-referenced with other ID data points. Mobile ID data can help financial institutions authenticate the individual, and the data collected can also help in finding potential future risks.

Collaborating With Banks for Better Fraud Prevention

As the fraudulent landscape becomes increasingly more complex, it becomes tough for banks and FinTechs to detect suspicious transactions and prevent illegal activities. Fraud prevention solutions that leverage data learning and machine learning can help FinTechs better safeguard themselves and detect fraudulent actions. 

By collaborating with banks, FinTechs can take a better approach to financial fraud prevention. Banks can bring their expertise in complying with ever-changing KYC, KYB, and AML regulations. Whereas, FinTechs can play their part and bring in the much-needed technological expertise. Financial technologies such as online document verification software and online bank account verification software and proof of address verification software tend to enhance the overall fraud detection and prevention programs. With a proper collaborative approach, FinTechs and banks (or other financial institutions) can fulfill the need for digital transformation, while ensuring a positive customer experience and preventing fraud.

Fraud Prevention Technologies for Financial Institutions

Businesses can build as many best practices for fraud prevention as they want, but without the help of the right technologies, fraudsters will find a way to sneak into the systems. By integrating technologies into the fraud prevention workflow, financial institutions can eliminate most of the major risks of fraud. 

DIRO’s online document verification service helps businesses with proof of address verification, bank account ownership verification and so much more to eliminate fraud. DIRO verifies over 7,000 document types from all over the globe instantly and provides stronger proof of authentication. By integrating DIRO into the workflow, businesses can successfully comply with AML and KYC regulations while ensuring a positive customer experience.


Guide on Types of Cryptocurrency Fraud

Almost everyone who wants to invest their money has looked towards cryptocurrencies at least once in the last few years. Cryptocurrencies like Bitcoin, Ethereum, Solana, and a few more are taking the investment market by storm. Most people invest in cryptocurrencies with the prospect of becoming rich instantly. This leads them to risk and invest in risky or complete scams instead of actual beneficial currencies. There are several types of cryptocurrency fraud and it’s easy to become prey if you’re not careful. 

Digital currencies or cryptocurrencies aren’t backed by a central entity or any government. And yet, you can use crypto for the sale and purchase of goods and services. You can even exchange it for any conventional currency. Unlike conventional currencies like the dollar or the pound, the value of cryptocurrencies is driven solely by demand and supply. That’s why the crypto market is extremely volatile, and it can bring tons of losses for those looking to get rich quickly.

As the value of crypto has exploded, so has the amount of crypto fraud. The Federal Trade Commission received almost 7,000 complaints of cryptocurrency fraud from October 2020 to March 2021. The accumulated losses in these reported instances of fraud reached up to $80 million. 

To make sure that you can identify and prevent cryptocurrency fraud, we’ve created this guide of common types of crypto fraud. 

Common Types of Cryptocurrency Fraud

While the cryptocurrency in itself is a new scam for most people, the fraud is mostly a rehash of classic scams. Some of the most common crypto fraud are:

1. Fake Websites

Fake website scams aren’t anything new. They’re often full of fake testimonials, technical jargon, fake profiles, and reviews to trick a user. Fake website scams in crypto often promise guaranteed profits or quick earnings. Those who aren’t familiar with how crypto works end up investing and losing their money.

2. Celebrity Endorsement

A new type of scam that has emerged with crypto’s success is celebrity endorsement. Masses of the population will buy crypto if it’s promoted by a huge celebrity. A recent example of this is Elon Musk’s tweet about Dogecoin.

Con artists pose as online billionaires successful businesses or well-known celebrities to trick you into buying the currency. 

3. Pump-and-Dump

Pump and dump is another scam that came into existence with cryptocurrency. Using messaging apps or social media, crypto promoters try to promote a currency with any means necessary. Their aim is to lure investors to buy, drive up the price and then sell the stake, which then causes the value of the currency to drop. Elon Musk and Dogecoin is the primary example of this. While that can’t be categorized as a scam, it’s categorized as influencing.

4. Ponzi Schemes

Fraudsters and con artists try to sell crypto by creating the illusion of big and guaranteed profits by investing in a particular currency. Federal authorities are pursuing criminal and civil cases against one such scam known as BitConnect, which raised more than $2 billion before it was shut down. 

5. Romance Scams

Fraudsters assume the identities of someone else on social media, dating platforms, and other online channels and try to persuade someone from the opposite gender to invest in a particular currency. The FBI’s Internet Crime Complaint Center (IC3) received more than 2,000 reports of crypto-based romance scams in 2021. The total losses from these types of scams reached $133 million in just 7 months of 2021.

6. Fake Wallet, Exchange, or Custodian

Not only individuals, but businesses also deal with several types of crypto fraud. Most of them involve a fake crypto digital wallet, exchange, or a fraudster assuming the identity of a custodian. As of now, there aren’t many solutions that can help businesses be vigilant about this type of crypto fraud.

Warning Signs about Crypto Fraud

There is some basic information that you can keep in mind while dealing with cryptocurrencies. The best way to prevent being a prey of a crypto scam is by looking out for warning signs. Here are some of the most common warning signs of crypto fraud:

  • Some unknown person sends you a text out of the blue regarding crypto investments. If they’re trying to get you to invest in particular crypto.
  • The pitch for a crypto investment claims that there’s no risk involved or promises guaranteed returns.
  • A call, text, email, or social media message claiming to be from a government entity, utility, or any other entity asking to pay bills with cryptocurrencies.

How to Prevent Crypto Fraud?

It’s becoming relatively easy for fraudsters to trick a business with fake or falsified wallet, exchange or custodian information. As a lot of businesses are becoming crypto-friendly, fraudsters are trying to trick them. 

Without the use of proper technologies, businesses can’t distinguish between a real person and a fake one. DIRO can instantly verify crypto account information within 90 seconds with automated user consent and impersonation check-in over 195 counties. 

The output is a machine-readable JSON file that is accepted as a court-admissible document in case of fraud. DIRO’s crypto verification API allows for real-time verification, thus reducing friction for legit customers and preventing fraud during the initial stages. 


Best Fraud Prevention Tips for Digital Currencies

Cryptocurrencies and digital currency trading and exchange platforms have been becoming increasingly common in recent times. For the first time, investors and crypto enthusiasts entered the market because of the sudden boom in the value of Bitcoin. As cryptocurrency’s core nature is anonymity, financial institutions are becoming increasingly aware of a rise in money laundering cases. To minimize the risk of fraud in digital currencies, financial institutions need to follow the best fraud prevention tips for digital currencies.

The nature of cryptocurrency relies on exchanging coins online or via a phone or computer. This also means that payments can be made almost instantaneously and without many legal protocols. Credit and debit cards have legal protection, this allows you to dispute a payment and get your funds back in case of fraudulent activity. With cryptocurrencies, reversing payment isn’t possible unless the exchange itself has regulations regarding it. 

With the growing interest in cryptocurrencies, the rate of money laundering fraud is also increasing. There are also a series of third-party websites that offer cryptocurrency mining opportunities. The use of these sites will boost the growth of new cryptocurrencies and provide a base of credibility for upcoming currencies.

Digital fraud is also increasingly committed by tricking crypto enthusiasts and new investors into sharing their personal details including bank statements and ID documents to make an investment or deposit into a legit business. These stolen bank details can be used to deposit money out of a person’s accounts and move it into a fraudsters’ behavior. 

Digital currency fraud including growing and well-known cryptocurrencies is becoming increasingly common. Plus, the fraudsters are becoming increasingly sophisticated. This is making it harder for financial institutions to detect fraud.

We’ve come up with a list of the best fraud prevention tips for digital currencies that can be followed by individuals and financial institutions.

Most Popular Online Scams in 2022

1. Social Engineering

Social engineering scams involve tricking customers into sharing their personal information. There are only two types of social engineering scams that you can find online including digital currencies:

  • Baiting Scams: Baiting scams include tricking customers by offering them something. The scams usually are based on impersonating an investment professional, representative of a legit crypto firm, or representative of a non-existent entity. Scammers tend to offer special rewards or extra earning to trick customers into divulging their personal information.
  • Scareware: A scareware attack involves customers being tricked by false threats and alarms. If you’ve ever visited a third-party website, you must have seen a pop-up something along the lines of “Your Device is Being Attacked”. 

2. Phishing Scams

When it comes to the cryptocurrency industry, phishing scams trick customers into providing their information regarding digital wallets. Specifically, hackers are interested in crypto wallets’ private keys. Scammers will try to take control of customer e-wallets and encourage you to disclose your password or other authentication measures. A phishing email asking you to share your information regarding digital wallets.

3. Website Cloning

More sophisticated scammers are able to create a webpage that looks exactly like the original e-wallet website. Once you try to login into the fake website the fraudster will have access to your information. Once you put a little more attention to the website, you’ll find some inaccuracies. These types of sites can usually be identified by differences in the URL link.

How to Prevent Digital Cryptocurrency Fraud?

As cryptocurrencies are becoming increasingly popular globally, crypto exchanges have to comply with KYC regulations and AML regulations. Customers are required to complete thorough ID verification for consumers in order to buy and sell cryptocurrencies.

Here are the best fraud prevention tips for digital currencies:

  • Familiarize yourself with all the basic fraud prevention tips offered by your crypto exchange provider. 
  • Check email addresses and contact names thoroughly before conducting any activity. 
  • Make sure to not share sensitive data such as personal details, passwords, and card numbers to new sites. 
  • Keep on the lookout for clone websites or website URLs.
  • Don’t sign up with crypto exchanges that don’t comply with KYC or AML regulations.

If you feel like you’ve been a victim of fraud, then the first thing you need to do is report to the nearest authority.

Fraud ID Verification

How Digital ID Verification Can Mitigate Crypto Fraud

Cryptocurrencies have seen incredible growth in the last decade and they are emerging as a mainstream market and a viable investment choice. Digital currency has become more famous since the Covid-19 pandemic. While the pandemic has ruined the growth of many industries, it has advanced and expanded the use of online banking and digital payment services, and digital assets like cryptocurrencies. 

While the growth is good news, the bad news is that cybercriminals love the use of digital money. The use of digital currency is like a magnet for criminals because of two primary reasons. 

  1. Global online access to money
  2. Complex and confusing systems make money laundering easier

With an unregulated market, cryptocurrencies are loved by fraudsters all over the world. Identity verification solutions assist in making cryptocurrencies safe for users. As the cryptocurrency markets are growing, the need for robust ID verification solutions is needed even more.

Exchanges Need to Enhance their Rules & Regulations

One of the major reasons why money laundering and other cybercrimes are growing in the cryptocurrency market is that not all exchanges have weak ID verification methods in place. According to a study, 56% of the cryptocurrency exchanges have weak or nonexistent KYC policies that do no good to prevent money laundering

To make things worse, some exchanges intentionally hide their country of origin to avoid complying with any type of KYC guidelines. This only plays a helping hand in the global money-laundering problem.

Compare this with banks and financial institutions, which are using groundbreaking ID verification technology using AI, Machine Learning & massive data sets to manage increasingly strict regulations. 

Some major cryptocurrency players keep up with the demand for improved AML/KYC compliance. Using third-party solutions is a more effective solution to onboard the customers.

Banks and Regulatory Bodies Want Crypto Verified

Tons of banks still consider crypto as a volatile currency and full of risk. A reputation that is upheld by constant cases of fraud and poor crypto exchanges. These behaviors don’t foster the atmosphere of trust that is vital for the future of cryptocurrencies. 

It is vital for digital currencies to create trust among the users and make them a part of mainstream financial services. Better monitoring and analysis capabilities will help mitigate the opportunities for bad actors to hide illicit financial activities among legal transactions. Also, the compliance regulations must not hinder the user experience. 

One way for crypto exchanges to smoothen the frictions associated with AML/KYC compliances is by using Machine learning technology. 

A survey showed that 80% of compliance professionals believe that machine learning could potentially improve the reduced compliance risk. Machine learning solutions are already in place at multiple banks, with a majority of $1 million annually for building strong ID verification solutions.

DIRO Online Document Verification for Secure Crypto Transactions

Cryptocurrency exchange needs to employ strong robust KYC/AML procedures to reduce the risk of increased fraud. DIRO’s online document verification solution verifies documents like bank statements, utility bills, and driver’s licenses, and so on. Verifying documents is one of the primary methods of eliminating fraudsters using cryptocurrency for money laundering.


Protecting Your Businesses from Chargeback Fraud: Best Practices

Chargeback fraud is a common happening in the world of eCommerce. Chargebacks happen when a purchase is reversed and the consumer gets their money back from the seller because of a dispute initiated with their credit card company. Originally, chargebacks were intended to boost confidence in debit and credit card security and also provide a level of protection to consumers. Businesses should be aware of how to prevent chargeback fraud. In the current environment, a customer can dispute a purchase on their bill for the below-mentioned reasons: 

  • They don’t recognize a certain charge on their card
  • The customer never received their purchase or they were billed incorrectly
  • Customers feel that the product or service they paid for isn’t as promised
  • Their credit/debit card information was stolen and fraudulent transactions were made
  • A merchant’s return policy isn’t clear, and the customer doesn’t know how to return a product.

How do Chargebacks Work?

A chargeback happens whenever a customer contacts their credit card company to dispute a purchase on their monthly bill. When they start a dispute on a particular purchase, customers have to provide a reason as to why they feel the charge is an error and provide proof of their position. To keep the cardholders happy, most of these disputes work in the favor of the customers. This is one of the unsung rules for a chargeback.

In the end, customers end up getting their money back in terms of chargeback. Fraudsters all over the globe try to take advantage of this policy, which is known as chargeback fraud. Businesses should be aware of chargeback fraud protection rules and regulations.

Rise of Chargeback Fraud

Chargeback fraud is a huge concern for eCommerce businesses as it has been growing at an annual rate of 20%. The greatest reason for chargebacks is a fraud, including the transactions that weren’t made by the cardholder. There has also been an increase in a new type of fraud, known as “friendly fraud,” where a card may be used by a family member without the knowledge of the cardholder and the consumer doesn’t recognize the purchase at the end of month. Whenever the cardholder learns about this unrecognized charge on their card, they dispute with their card provider about the charge, without learning that the payment was genuine. Businesses should know how to prevent chargeback fraud of this kind or any other kind. 

Chargeback fraud is a growing concern for businesses and it can have huge impacts. A business can lose a significant amount of money, they also have to bear the fees associated with chargebacks. If a merchant is hit with tons of chargebacks they could permanently lose their access to process payments. That’s why businesses need to adopt chargeback fraud prevention practices.

Best Practices to Prevent Chargeback Fraud

eCommerce businesses can follow some of the chargeback fraud best practices to reduce the rate of flow. Some of the chargeback fraud best practices are:

1. Keep Up With Latest Chargeback Codes

Chargeback reason codes aren’t permanent. That’s because each card network has its series of chargeback reason codes, or different categories to indicate the reason for a customer dispute for chargeback or refund.

For proper chargeback fraud prevention, merchants need to stay up to date on all the new chargeback reason codes so they can authenticate if something suspicious is happening. If a consumer suggests that the charge was due to fraudulent activity, but a merchant has the evidence to prove otherwise, they can dispute the customer’s claim and prevent potential chargeback fraud. 

Keeping track of chargeback codes can help merchants understand the biggest reasons for customers requesting chargebacks. If there’s a particular reason for it, merchants can look for a solution to solve that problem.

2. Proper Documentation of All Card Transactions

Some chargeback fraud best practices include merchants to dispute customer claims for chargebacks with signatures and receipts. Maintaining proper and thorough records of customer transactions will help your business from chargeback fraud. 

Now that eCommerce transactions are growing widely, it makes sense for merchants to have physical documentation. In a growing digital economy, sometimes it’s not possible to keep paper-based records, in this case, merchants need to leverage record-keeping technologies. These solutions can help in keeping track of every card-based transaction, including date and time, IP Address, and other information.

3. Utilize Technologies

Customer authentication technologies such as 3D secure can provide an additional layer of security to the card acquisition process and prevent chargeback frauds for merchants. This authentication process transfers the liability to the card issuer, compared to chargebacks landing on the merchant for responsibility.

Additionally, whenever a business invests in a fraud prevention solution, it can help them in identifying chargeback fraud opportunities before they happen, by identifying high-risk transactions. Having an always-on fraud prevention technology can help in reducing the flow of chargeback frauds.

4. Well Trained Teams 

If your team has a great understanding of payment processor compliance rules, they’ll be able to detect and spot suspicious activities instantly. Training your team in transactions when a card is present and when a card isn’t present can help in uncovering fraud before it even happens, which is the best way to prevent chargeback fraud. Businesses should build secure payment processes that aim in strengthening defenses against fraudsters. Regularly training your team on changing compliance is a great way to detect and prevent fraud.

5. Respond to Customer Issues Quickly

85% of consumers initiating disputes admit that they do this because it’s convenient, making it imperative that merchants make it just as convenient for consumers to get their issues fixed as soon as possible. With “friendly fraud” rates expected to cross over $130B in damages from last year, merchants must follow preventive measures to eliminate fraud before it happens. The best way merchants can make this happen is by providing 24/7/365 customer support, allowing customers to contact the business and settle concerns as soon and as seamlessly as possible. 

Not all businesses may be able to provide this level of support. In these cases, merchants and their teams must solve customer problems as soon as possible. Businesses should also provide clear return rules and regulations on their website, along with answers to other FAQs.