Important Indicators That Will Help You Identify Bank Fraud
Verifying the party on the other end of a digital transaction is tricky for a lot of different reasons. Not least because you can’t physically see or interact with the other person.
Given that limitation, how do you tell the difference between a legitimate purchase and a fraudulent one?
Luckily, illegitimate purchases often come with several warning signs, which range from unusual payment patterns to sudden surges in high-value orders. In this chapter, we’ll go through a checklist of red flags to watch for so you can detect fraud before it disrupts your business.
It’s easy to understand why fraudsters often target financial institutions. After all, banks are where money is deposited, stored, and withdrawn. What’s less well-understood, though, is how bank fraud occurs, and how often it happens.
While bank fraud is an ever-present threat, the one silver lining is that nearly all forms of fraudulent activity appear distinct — or at least “off” in some way — when compared to genuine, non-malicious behavior. When trying to identify bank fraud, you can look out for:
Unusual Payment Patterns
Be wary of orders that are significantly larger than your average order value, or multiple orders placed in quick succession by the same customer. These can be attempts to max out a stolen card before the actual cardholder reports it to their bank.
Multiple Failed Payment Attempts
While a legitimate customer might have a card declined once, multiple failed attempts with different cards can indicate that a fraudster is cycling through a list of stolen card numbers.
Mismatched Billing/Shipping Information
A common tactic for fraudsters is to ship products to a location that is different from the card’s billing address. While there are legitimate reasons for this, it should be considered a risk factor, especially when combined with other red flags.
Requests for Rush Orders
Fraudsters want to get their hands on stolen goods as quickly as possible. So, they often opt for the fastest shipping method available, regardless of the cost.
Unexpected Password Reset Requests
A password reset request that the legitimate user didn’t initiate is a clear sign that someone is trying to get into that account.
Login Attempts From Unusual Locations
Modern security systems can often track the geolocation of a login attempt. An attempt from a country where you don’t do business is a major red flag.
Changes to Bank Account Information
One of the most direct ways for a fraudster to steal from their victim is to change the bank account where their funds are deposited. Any change to this information should be heavily scrutinized.
New User Additions to Accounts
Fraudsters may add new users to your account to give themselves a backdoor, even if their initial point of access is discovered and shut down.
Urgent Payment Change Requests
A customer or vendor who is pressuring you to change payment information or use a different payment method should be treated with suspicion. They may not be a legitimate buyer or supplier at all.
Suspicious Customer Inquiries
Inquiries that show a lack of knowledge about the product or the account in question — or that are focused entirely on payment or shipping methods — can be a sign that you’re dealing with a fraudster.
Pressure to Bypass Normal Procedures
Any attempt to get you to go outside of your normal, established procedures for payment, shipping, or any other business operation should be a major red flag. Fraudsters thrive on creating chaos and confusion.
Transaction Red Flags
Unusual payment patterns
Multiple failed payment attempts
Mismatched billing, shipping, or account information
