Fraud Types Money Services Businesses (MSBs) Need to Know

Types of Fraud That Money Services Businesses (MSBs) Should Know

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"When it comes to money service businesses, I'll separate my response into two parts.

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Part 1: P2P

If we talk about the P2P segment, the real challenge is about understanding what is a legitimate activity on the platform.

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The goal is to try and build a business case around whether a customer or user of your platform is genuinely using your platform, or if they are abusing the system and operating as a money mule.

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This can be challenging because the transactions might be too small to raise any eyebrows. There are no longer tens of thousands of dollars. You can have many different small transactions and many different entities interacting with each other. The way to go about it is, first, to have powerful link analysis capabilities and to understand how different users interact with each other.

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Build scenarios that detect activities, (one-to-many and many-to-one), and have those different scenarios working together. Then, use link analysis to understand if a user is a legitimate user or if they are moving money from one place to another, and there's no business, just occasion to whatever activity you're seeing.

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Part 2: Gift Cards

Another money service business that's always a target for fraudsters is a company that either offers resale or provides direct access to buying gift cards.

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Basically, you're selling the money, and it's always an excellent target for fraudsters to come and try to buy those gift cards because once they have them, they don't need to do anything else. That's it. That's real money they can use and resell again.

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Here, the problem is that you can have the same bad actor coming to your platform over and over and over again because what they do is try to have a very frictionless experience for buying those gift cards. So many of those services will only require you to sign up with an email, and fraudsters have no problem generating hundreds of different emails and signing up over and over and over again.

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To identify these bad actors, you need to look for different signals like devices and geolocations. Try to understand anomalies, not on a customer level, but on a platform level. For example, if you have way too many users who try to access your platform from a certain geolocation where you usually don't have those users coming from there, this could be a red flag.

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Monitor things more on a platform level rather than on an entity level because the entity keeps changing over and over again."

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Looking for more insights? Check out our second session of Fraud Office Hours on-demand for a deeper dive into current fraud trends and which preventative measures to consider.

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