How to watch your step with fraud prevention

Industry view from Covery

by Pavel Gnatenko

Fraud is getting more and more sophisticated, but it doesn’t have to affect your business.

Fraud disturbs a huge number of organisations in various industries every year. It is the main reason businesses lose money, yet it’s also one of they things they tend to ignore.

According to The 2018 Global Fraud and Identity Report conducted by Experian, 72 per cent of businesses cite fraud as a growing concern in 2018, and 63 per cent report the same or higher levels of fraudulent losses over that same period.

So what’s going on here?

A simple lack of risk awareness makes a business vulnerable. While CEOs and founders of huge enterprises frequently worry about if and when their company will go to the dogs, small businesses can think they will never be affected. Many managers and business leaders only have a vague idea of what risk assessment and fraud prevention are, and what constitutes an anti-fraud platform.

There is no room left for unawareness. To be forewarned is to be forearmed.

“Fraud scenarios become more and more sophisticated,” says Pavel Gnatenko, Covery’s Product Owner. “Once a new solution against fraud is developed, fraudsters immediately find a new loophole. And it seems that the risk professionals are always a step behind. As fraudsters follow the growth of the cashless economy online, anti-fraud companies are building powerful tools and techniques that mine various data for detecting fraudulent behavior patterns.”

Here is a very short guide which will help business owners set up anti-fraud policy and choose the anti-fraud platform for any industry:

1. Set up an anti-fraud policy

Start with the simplest stage. The anti-fraud policy is a set of rules and terms managing the fraud prevention and risk assessment process within a company. Anti-fraud policy usually contains information about the applicability of this policy to specific people, processes and entities in the company. It defines the risks and types of fraud occurring in this type of business, denominates the responsibilities of a team for risk assessment, fraud detection, prevention and reporting, and describes the used anti-fraud solution and its fraud-preventing services together with process and rules for reporting.

There is no need to write endless lists of rules and “what-ifs”. Keep it simple.

2. Define the risks of your business

Continue with the understanding of risks. Answering these three simple questions will help you visualize the face of your enemy:

• What are the risks in your industry? (For instance, risks typical to e-commerce.)

– identity theft

– credit card fraud
– bad affiliate traffic
– chargebacks
– money laundering

• What are the industry risks that can affect your business?

– define risks from the list above

• Where do these risks come from? (Define the sources of risk.) Match risks with fraud types in your industry:

– affiliates sending bad traffic
– customers not passing KYC procedure
– stolen credentials

Risks and fraud always have a cause-and-effect relationship, but there are plenty of fraud prevention and risk management services on the market that can help, providing businesses within various fields with distinct solutions.

Having a fraud prevention platform is a must – it can solve all issues, and can prevent all types of fraudulent activities which exist in your branch. They will enable you to detect different types of fraud, and come up with different solutions for your type of business.

Whether you are in e-commerce, payments or i-gaming, or whether you want to save marketing budgets, put an end to unexpected finance losses, ensure responsible gambling (an emerging trend and a new must within the gaming industry), you’ll need to score affiliate traffic to save marketing budgets, detect friendly fraud to reduce your chargeback ratio, set up and automate KYC procedures to know your customers and track device fingerprint to prevent payment fraud.

When it comes to technologies, fraud prevention services use rule-based or machine learning approaches in data collection. The most advanced use both approaches, as well as unsupervised techniques, with an industry focus and an adaptation for the business’s individual characteristics and requirements.

To sum up, choosing the right fraud prevention and risk management service will protect your business from losing money and time, and by working out what kind of fraud you face will lead you to solutions and the right platform.

Don’t wait until fraud has already affected you – be ahead of the game.

What’s next?

Industry View from Covery