With more and more instances of fraud popping up in the news, devastating businesses across the globe, let’s take a moment to learn about three of the most common types of fraud businesses may have to deal with. These types of fraud are bust out fraud, identity fraud, and transaction laundering. In this blog we’ll explore these three types of fraud and provide examples of each to demonstrate their complexities.
1. Bust Out Fraud
Bust out fraud is a type of credit fraud where an individual (or someone utilizing a false identity) acquires credit, then maxes out the account with no intention of repaying. According to TransUnion, bust-out fraud is specific types of account behavior that is part of overall credit delinquencies, but with unique characteristics for severity, utilization and multiple bad tradelines.
Example:
An example of bust out fraud is the classic creation of fake businesses and the securing of credit lines. A person will create a complex scheme involving various banks and credit card companies making their fraud look like legitimate business on paper, but as they start defaulting on credit lines, then liquidating the expensive purchases for cash their fraud is detected. Bust out fraud can go undetected for years, highlighting the difficulty in distinguishing between legitimate and fraudulent businesses.
2. Identity Fraud
While bust out fraud may sound new, identity fraud likely doesn’t. With over 9 million cases of identity fraud happening every year, it’s likely you know someone that’s been a victim of identity fraud. Whether it’s the classic stolen credit card, or more complex tactics, these fraudsters utilize social engineering or data breaches to gain access to sensitive information that is vital to you and your business.
A great way to prevent identity fraud is by protecting your online accounts by enabling two-factor authentication on your profiles that have it as an option, like Gravity Dashboard. Click here to learn how to activate two-factor authentication on your Gravity Dashboard. Learn more about two-factor authentication.
Example:
We all know this one, someone stealing a credit card or social security number to open fraudulent lines or credit or accounts in the name of someone else, leaving the victim liable when those accounts eventually default. This not only impacts the victim’s finances but it also impacts their credit history, inhibiting them from being able to make large purchases, like a car or home, until the issues are resolved and their credit recovers.
3. Transaction Laundering
As discussed in this InfoSys article, transaction laundering is the nefarious practice of moving an illegal transaction through a complex network of legitimate business transactions. This makes it challenging for authorities to trace the origin of the illicit funds to the source.
Example:
Imagine an online storefront selling furniture. Behind the scenes, this online store is a front for illegal services and activities, think selling counterfeit luxury items. The fraudsters utilize this seemingly permissible online shop to process payments for the counterfeit goods, making these transactions look legal on the surface. Because of this, transaction laundering is difficult for financial institutions and law enforcement agencies to identify and stop.
In Summary
Fraud is an ever changing landscape. Bust out fraud, identity fraud, and transaction laundering are only a few ways fraudsters could negatively impact your business. Staying vigilant against these attacks is necessary and you can learn more about How to Protect Your Small Business Bank Accounts here.
By continually monitoring your business’s accounts and financial transactions, you’ll be quick to spot anything that may seem suspicious and take action fast. Your financial institutions are also staying one step ahead and implementing increasingly advanced technologies and compliance measures to both detect and combat these forms of fraud effectively.
Here at Gravity Payments, we are playing our part by staying vigilant in protecting your data by implementing new card testing filters that allow us to see if anyone is attempting to run fraudulent transactions against your business so we can notify you immediately and stop those transactions before they negatively impact your business.
Eager to learn more about protecting your business from fraud? Start with How to Protect Your Small Business Bank Accounts from Fraud.
