Peer-to-peer payment platforms and rails facilitate payments between parties through online transfers. 

Play:

Keeping in mind refunds are nonexistent and with no middleman involved, any outbound P2P transaction should be considered lost in case of a dispute. 

To combat P2P scams and fraud, implement the following strategy:

• Monitor both inbound and outbound activity.
• Label any account that might not fit the business purpose of the feature. 
• Learn about the correlation between users leveraging network analysis capabilities. 

Taking these steps is essential to flagging potential bad players. 

Additional Resources:

• Types of Fraud MSBs Need to Know

• How Organizations Will Collaborate to Prevent Money Mule Schemes

Unlike the peer-to-peer payment (P2P) platforms, Real-Time Payments are a new, faster payment rail that enables financial institutions in the U.S. to clear and settle payments in real-time. The Clearing House RTP Network was launched in November 2017, and the FedNow Network is scheduled to launch in 2023.  

Play:

The use of historical customer data along with implementing additional security measures is the key to managing RTP risk. 

Take the following actions to make detection of RTP abuse easier:

• Deploy a manual “review and approval” process for high-dollar / high-risk transactions. 
• Implement a real-time monitoring strategy that can automatically take action based on historical customer data. 
• Add friction (such as 2FA to a known mobile phone number before executing the actual transaction) as this can act as an added security layer. 

A cryptocurrency is a form of currency that exists digitally on the Blockchain. Units of cryptocurrency are created through a process called mining, which involves using computer power to solve complicated mathematical problems that generate coins.

Play:

Customer education along with the implementation of a robust on-chain monitoring solution is critical.

Deploy the following strategy to keep your customers safe:

• Develop programs to educate your users on how to protect their digital assets.
• Monitor both on-ramp and off-ramp activities. 
• Utilize tools such as network analysis to better understand correlations between users and wallets on your platform.
• On-chain monitoring vendors can provide additional risk indicators for specific wallets based on historical activity on the chain.

* Based on a survey we found average risk teams get less than 15 hours of engineering time a week

Additional Resources:

• Cryptocurrency Fraud: How to Keep Your Crypto Exchange Safe

• How to Use Unit21's Link Analysis for Catching Crypto Fraud

Wires are another form of electronic payment. Although there are some similarities to ACH transfers, there are important differences. Banks in the United States usually route wire transfers through the Federal Reserve Wire Network (Fedwire). The network operated by the 12 Federal Reserve branches handles millions of transactions worth tens of trillions of dollars on monthly basis.

Play:

The best way to prevent wire transfer fraud is to separate the action your customer takes to request a wire, and the actual money transfer to allow a manual review.

Because including wire transfers might open your customers up to risk in that they might not be able to recover their funds after sending them, it is imperative to implement the following steps to protect customers:

• Enable a larger scope of control over the wires by separating the action that the customer takes on your platform from the actual act of sending the wire away. 
• Allow the opportunity for customer profile review and manual verification.
• Create friction on the action the user takes on your platform, for instance, add a two-step verification process.
• Limit the number of transactions and the amounts per single business day based on internal customer segmentation.  

Additional Resources:

• How to Prevent Wire Fraud With Customer Profiling 

Buy Now Pay Later (BNPL) is essentially a financial offering that enables consumers to purchase goods, products, or services without paying for them at once and at the time of purchase. Examples of BNPL companies include Klarna, Affirm, Afterpay and Sezzle.

Play:

While BNPL is different from traditional lending, similar principles and rules might apply if you’re considering entering this market.

Here are some things to consider before offering BNPL to your customers:

• Perform due diligence, KYC, and/or KYB as well as underwriting. This is the key to success and should limit the access of bad actors to the product. 
• For synthetic or first-party fraud (initially good users who try to get away from repaying the loan) additional risk vectors should be considered. 
• Collect risk insights beyond the PII of the borrower, especially around the phone number, address, email, device, and IP as this will provide additional insights in order to keep the bad actors away from your platform.

Additional Resources:

• Customer Due Diligence (CDD) - What is Required? 

• First Party Fraud: What It Is and How to Prevent It

Referral and rewards programs are used as a way to incentive customers to spread the word about your platform, app, or eCommerce brand by exchanging goods, services, or monetary prizes for new customer referrals or when certain spending thresholds are achieved.

Play:

These programs can be beneficial for promoting brand awareness and influencing new customer acquisition when implemented thoughtfully.

Deploy the following actions to avoid being taken advantage of:

• Limit the number of times a customer can use his/her referral code.
• Offer non-monetary rewards like product-related gifts or loyalty points for each referred customer.
• Reward your customers based on product engagement (purchases or utilization) not solely invites. 
• Constantly monitor the referral program performance by looking at the login session and detecting similarities between the users who initiated the invite and the user who ended up onboarding the platform, such as IP addresses, email domains, and device fingerprints.

We know that today’s fraudsters are more well-funded, technologically savvy, and agile than they've ever been before. With fraud schemes constantly evolving, the weight falls on fraud professionals to understand that mitigating fraud risk requires continuous effort.

For Fintechs, Neobanks, and Crypto companies like Chime, Binance, and other financial institutions to stay ahead of the game, they have started to view fraud detection as a dynamic, proactive process instead of adopting a “set it and forget it” mentality. Organizations that fail to do this run the risk of increasing fraud losses and stagnating growth.

‍To truly balance fraud prevention with growth objectives, your organization must adopt technology that can be as agile, flexible, and adaptable as you need to be when new fraud schemes arise.

Unit21 is a risk and compliance infrastructure that allows fraud prevention professionals to run the plays outlined in this guide in a fraction of the time that it would take to deploy them as compared to the industry standard. Unit21’s customizable transaction monitoring and case management solutions put fraud teams in the driver's seat.

‍This means catching and preventing more fraud, faster. All without the overhead of additional engineering resources. With Unit21, your engineering teams can focus on delivering better customer experiences and revolutionary products while your risk team keeps your customers safe. 

* Based on a survey we found average risk teams get less than 15 hours of engineering time a week

Interested in discovering how Unit21 can be used to execute the plays listed here?

Schedule a free consultation with our Head of Fraud Risk, Alex Fauvisovich. Alex has been fighting financial fraud for the past 13 years and has led the implementation of fraud prevention technology in several businesses. As a professional fraud fighter and subject matter expert, he can show you how to set up an effective fraud program that will stop bad actors, protect your bottom line and surpass your growth goals.

Schedule your free fraud consultation.