security and fraud

How A Local Lens For Risk Analysis Can Fight Global Money Laundering And Fraud

Knowing what fraud risks challenge a merchant sector in the U.S. is not enough to safeguard that sector in other markets — and that could hurt payments processors operating on a global scale. Different social norms and customer-merchant expectations impact what fraud looks like in a given region, explains Dan Sketcher, head of product for Global Payments’ AU/NZ region. In this month’s AML/KYC Tracker, Sketcher discusses why global fraud fighting requires a more localized approach.

Payment processors typically integrate into back-end business software and help merchants accept funds, but their role exceeds helping companies pay and be paid. They also offer connections, allowing money to flow between customers and merchants, positioning payment providers to halt suspicious transactions before fraudsters make off with ill-gotten gains. Providers serving a wide array of businesses have access to more card or customer data than individual merchants, meaning they may be more able to flag individuals showing signs of fraudulent or unusual behavior. 

Payment processors expanding their operations into new industries and markets have their work cut out for them, however. Each sector and country encounters different fraud types that providers must be ready to detect and thwart. These concerns are a focus for Global Payments, a worldwide payments processor that includes eCommerce payment processing brands eWay and Ezidebit in Australia and New Zealand. eWay supports card payments and Ezidebit enables transactions through Australia’s BPAY bill payment system as well as via electronic funds transfer at point of sale (EFTPOS), direct debit and real-time rails. 

Such companies must keep clients safe and only onboard honest merchants, not those that may be secretly laundering money, according to Dan Sketcher, head of product for Global Payments AU/NZ brands eWAY and Ezidebit. In a recent interview with PYMNTS, he discussed tailoring fraud-fighting to merchants’ needs and how attention to local trends primes processors to fight money laundering and misbehavior when taking their operations global. 

Understanding The Merchant Sector

Payment companies must be aware that transaction types that work in one business context might raise red flags in another. Buy online, pickup in store (BOPIS) purchasing is one example. Fraudsters can use fake IDs and stolen cards to place orders and quickly make off with items before retailers catch on. This is especially effective in the furniture industry because high-value items like couches can easily be resold, Sketcher noted, but the scheme is not as risky for other retailers. The restaurant industry must remain vigilant against online orders placed with stolen credentials, but its merchants are unlikely to encounter fraudsters trying to nab meals for resale. That sector more often suffers from customers falsely claiming chargebacks for online deliveries, he said. 

“All industries have different fraud and processing dynamics, so it’s really important to understand the industries you’re working with to identify those suspicious activities and potentially fraudulent customers,” Sketcher said. 

Merchants at high risk of BOPIS fraud — and the payment providers that support them — can fight these threats by scrutinizing customers who are using new accounts or cards, for example. Providers are also tapping artificial intelligence (AI) and machine learning (ML) to enhance their understanding of transaction risk factors and arm themselves with deeper insights, Sketcher said. 

“AI and ML have really seen a massive resurgence in the past few years,” he explained. “Using the large data flows that international payment processing sees can give you great local and regional and international forewarning of behaviors. [That includes at] the market level and at the level of seeing individual email addresses or card numbers being correlated around the world so that you can better know whether something is likely to be fraudulent.” 

Payment processors can help detect fraud by noting if a card is being charged where it is not typically used, for example, or if it is associated with past fraudulent transactions. Different retail and payment sector players are also sharing this kind of data to improve such insights. The card industry’s 3D Secure 2.0 standard enables payment providers, merchants and FIs to send each other transaction details and customers’ histories to better inform risk assessment, for example. Such strategies can boost security by giving companies that facilitate payments more comprehensive knowledge regarding transactions and their participants. 

Attuning To New Markets 

It is not enough for payment providers to understand the risks associated with particular merchant sectors, though. One industry may also experience other fraud types in different countries due to each locale’s social norms and customer-merchant interactions. The only solution, then, is to be “hyperlocal,” Sketcher said. That applies to both safeguarding merchants from dishonest customers as well as filtering out criminally-minded businesses that may be trying to onboard with the payment company. 

“The different social dynamics and payer behaviors change the way fraud behavior works,” he explained. 

Global Payments partnered with a Hong Kong-based mobile point-of-sale (POS) provider in 2013 to handle card payment processing and brought its eWay brand into the territory in 2018. Building a presence there required learning how transactions looked in the region, Sketcher said, noting that there were different fraud risks in the fitness and health sector that were not typically seen among such businesses in Australia and New Zealand. It was then common for Hong Kong consumers to pay one or two years of health club or gym membership fees in cash up front, for example, which enabled bad actors to establish gyms, collect prepayments and then claim bankruptcy, vanishing with the funds. 

Business-to-business (B2B) companies like payment providers must take extra care to ensure they do not serve illicit businesses. This can mean thoroughly investigating merchants before onboarding them, checking details like directors’ and beneficial owners’ identities — the latter group consisting of those who hold shares or other equity without being legally recorded as owners — and confirming whether they are included on blacklists or sanctions lists. 

Ambitious payments processors hoping to expand globally must be ready to understand and combat the fraud prevalent in each region. Combining wide arrays of global customer, card and other payment-related data with an attentive focus on each industry and locale’s transaction norms could be key to stopping financial criminals in any market. 



The September 2020 Leveraging The Digital Banking Shift Study, PYMNTS examines consumers’ growing use of online and mobile tools to open and manage accounts as well as the factors that are paramount in building and maintaining trust in the current economic environment. The report is based on a survey of nearly 2,200 account-holding U.S. consumers.