Payment Fraud
Hello Investigators!
Hope you enjoyed our previous article on Investment Fraud! There are many other types of investment fraud, so if you liked that article, do let us know via LinkedIn or Contact Us page and we could release a part 2 in the future!
Today, let’s look at something closer to our daily lives: Payment Fraud.
What is Payment Fraud?
Payment fraud is any type of false or illegal transaction on the Internet, done by a cybercriminal. It is typically characteristized in 3 ways:
Fraudulent or unauthorized transactions
Lost or stolen merchandise
False returns for a refund, return or bounced checks
Payment fraud is becoming a problematic issue. According to The Business Times, 9 in 10 Singapore firms lost revenue due to payment fraud in 2020, speaking to the rising sophistication of fraud methods (Lee, 2021).
Payment Fraud and its many forms
Similar to investment fraud, payment fraud exists in many different forms. Let’s look into some of the more common types:
1. Synthetic Identity Fraud
In this fraud, the fraudster uses both real and fake information to create a fabricated identity. This is an upgraded version of identity theft. Instead of merely using another person's personal information without their knowledge, fraudsters create a “fake person” using both real and fake information, making it more challenging to track. For instance, by having a valid email address, make-up name and date of birth set in profiles, anyone (including fraudsters) can create an account on almost any platform.
Synthetic identity fraud is usually committed to ease the process of getting loans from banks, as it helps to swiftly bypass credit checks since the “fake person” does not have a bad credit history.
2. Account Takeover Fraud
With the introduction of hacking tools in an information era, account takeover fraud has emerged to become one of the top few on the list of payment frauds committed. In this type of fraud, the fraudster obtains personal information of others through hacking - taking over victims’ accounts and using them to make fraudulent transactions. Such a scenario may not be foreign to you - let this also serve as a reminder to change your password regularly, as doing so would reduce the opportunity for fraudsters to break through your data protection controls.
3. Credit Card Fraud
In this fraud, the fraudster uses a stolen credit card to make online purchases. The victim (or original owner of the credit card) will usually discover the transactions and try to dispute the payment transaction. Nonetheless, the Merchant loses the most, as both the goods and the payment made initially end up being lost/given up.
Are we safe?
Unfortunately, with the amount of tools widely available to fraudsters to use and manipulate consumers, it has become increasingly simpler for them to commit these frauds. However, we can still play a part to avoid falling victim to payment fraud! For instance:
Having a strong password and changing it regularly can help to minimize the possibility of hackers guessing and hacking into your accounts
Never share your personal information on the internet to anyone, even if it is your good friend. You never know if your “good friend”’s account is being compromised as well
Never click on suspicious links or email. They usually contain virus / hacker tools embedded in it that will trace your personal information from your computer
For businesses, it is always important to have a secure network. It is also important to constantly keep your employees updated on the latest type of fraud going around
How does the Fraud Triangle apply here?
As usual, let’s see how payment fraud links to the fraud triangle!
Incentive → Fraudsters might have personal reasons to defraud consumers through the various methods. These sources of reasoning range from family, to satisfying their own desires.
Rationalisation → Fraudsters might feel that the society owes them the money. Additionally, they might be jealous of the consumers that are purchasing expensive goods online, and might be “borrowing” from them to purchase their own as well.
Opportunity → The opportunity arises when greed overcomes the consumers, especially when they see attractive deals hidden in fake advertisements uploaded by fraudsters. Fraudsters take advantage of these weaknesses in the victims.
References
Lee, J. (2021, July 8). BT Explains: A look at payment fraud, which hits Singapore firms more than in region. businesstimes.com.sg. https://www.businesstimes.com.sg/banking-finance/bt-explains-a-look-at-payment-fraud-which-hits-singapore-firms-more-than-in-region.
Payment fraud: What is it and how it can be avoided? BigCommerce. (2021, August 29). https://www.bigcommerce.com/ecommerce-answers/payment-fraud-what-it-and-how-it-can-be-avoided/.
Sevskis, D. (2021, July 16). 6 most common online payment Fraud trends and solutions to prevent them. ECOMMPAY. https://ecommpay.com/blog/6-most-common-online-payment-fraud-trends-and-solutions-to-prevent-them/.
Wróbel-Konior, S. (2021, March 19). What is payment fraud? SecurionPay. https://securionpay.com/blog/what-is-a-payment-fraud/.
