Mitigating financial crime in a COVID-19 world

01 / 03 / 2021

The pandemic has brought about unprecedented changes in the world of payments and the way customers consume goods.

woman using a mobile whilst holding a credit card

The pandemic has brought about unprecedented changes in the world of payments and the way customers consume goods.

Over the past year, online payments have significantly increased due to lockdown and the number of people internet shopping to buy essential products and services. eCommerce businesses, such as Amazon or eBay, saw millions of additional transactions and new customers, however with more transactions come more responsibilities, more fraud, and more chargebacks. Payment service providers (PSPs) were required to heavily adjust their preventive systems to mitigate and combat fraudulent transactions, with online crime, phishing, and scamming taking a heavy toll on both eCommerce owners and PSPs alike.

A rise in economic crime

What’s more, 2020 saw a substantial increase in economic crime, reaching a record high of $42 billion. This led not only to financial losses but also losses in reputation and customers. What’s also concerning is that only 56% of companies investigated serious fraud incidents. Not surprisingly, the most common types of crimes are customer fraud, cybercrime, and misappropriation of assets. The acquiring market was also subject to increasing cases of fraud rates, family fraud, stolen cards, bot attacks, and scamming schemes, making credit card fraud the most notorious type of identity theft last year.

There were millions of criminal incidents that haunted the financial world in 2020 and they varied massively in scale, range, and financial repercussions. Luckily, some of them were thwarted thanks to organized efforts of banks, financial institutions, as well as enforcement authorities. One such example involved cracking down on an organized network of money launderers. As quoted by Europol, “during the span of the operation, 1,529 criminal investigations were initiated, 4,942 fraudulent money mule transactions were identified, preventing a total loss estimated at €33.5 million.”

The COVID effect

Sadly, some grim statistics made last year even more challenging, looking at the global disarray caused by COVID-19. The pandemic seemed to have been a catalyst for many fraudsters and financial criminals to target individuals who suffered from unemployment and were susceptible to deception. In fact, according to data, the number of complaints regarding bogus prizes, sweepstakes, and free gifts nearly doubled in 2020, as compared to the year before. The Federal Trade Commission reported that it received more than 2.2 million reports about fraud, with an estimated value of $3.3 billion. With online sales booming during the global pandemic there was also a huge increase in customers failing to have their goods delivered on time and some not getting what they purchased at all.

Protection against fraud

As a PSP, it is essential to protect merchants and their customers with a fully global fraud screening service. It is also essential to adapt to the unpredictable and ever-changing landscape of the fraud industry and implement new functionalities to accommodate for the ever-changing financial sector. By offering a bespoke solution each merchant benefits from models tailored to their business requirements and experiences, ensuring quality and accuracy. This offering within risk and fraud prevention encompasses effective fraud control services that are modular for banks, issuers, and acquirers. Such solutions embrace the full payment spectrum and can easily be integrated into any payment ecosystem.

The first benefit is that the solutions are modular, meaning they can easily be adjusted to accommodate for varied needs of clients, depending on their size, products on offer, and risk appetite. By offering advanced transaction monitoring it is possible to detect fraud early and prevent money laundering schemes and behaviours. Pre-emptive actions like monitoring merchants’ websites or regular fraud and anti-money laundering (AML) investigations and data breaches, might save irreversible financial losses or end up in Card Schemes’ Compliance Programs. Mitigating financial risk and financial crimes calls for comprehensive solutions and can provide financial institutions, payment providers, merchants, and ultimately the end-users with piece of mind.

So, what will it take for financial institutions and payment service providers to be able to target economic crimes in 2021 and beyond?

There is no single step or effort that could eradicate financial crime, however, mitigating it through modern technology, AI-based algorithms and proper financial crime compliance will make a substantial difference.

Moving into 2021 calls for more flexibility, collaboration and data use by all players in the payments arena to protect and to serve the frequently unaware victims of fraud. Our expertise and decade’s worth of experience help to effectively mitigate risk and digital crime thereby reducing fraud costs, scheme penalties, and operational costs. All these measures safeguard the transaction process and protect from financial loss.

Marc Docherty

Marc Docherty

Head of UK Acquiring / Large - Strategic Business, at Worldline
Marc Docherty is Head of UK Acquiring / Large - Strategic Business, at Worldline. With more than 20 years’ experience working for blue chip organisations within the banking and payments sector, including Bank of Scotland, RBS, Barclaycard, AMEX and Visa, Marc’s expertise lies in business banking, factoring and invoice discounting, and cross border payments. He also has extensive experience in acquiring, having focused on the large corporate sector across the UK and Europe for several years. Marc is passionate about driving solutions that deliver real value to customers whilst helping organisations reduce complexity and enhance the customer experience by providing a complete end-to-end payment solution.