Patterns and trends: Visa helps curtail fraud for banks, merchants and consumers

Over the past few months during the pandemic lockdown, as digital transactions boomed, fraudulent activity and identity theft did as well.

As easy as digital transactions made our lives during the pandemic, it also became easier for cybercriminals to find personal information in just a few seconds on the "dark web" or breach data on company sites that we've come to rely on and trust.

Through the pandemic, a fraudulent practice that received a lot of press was unemployment fraud. Using a consumer's information, cybercriminals registered for unemployment insurance benefits through the state's Unemployment Development Department system. The fraudsters then secured the money via a prepaid account service and mobile app and were able to cash out and take the money, perpetuating the fraud.

The practice grew so rapidly that in July, the FBI released fraud warnings and several states, including Maryland, that had a massive 500 million unemployment claim scheme, and financial institutions and merchants became seriously concerned over the rise in fraudulent activity. Did fraud accelerate more due to the pandemic, or did the pandemic offer new opportunities never explored before for fraudsters to act?

"I think, fraud is continuous, it's always going to be there and we should always be aware and alert because fraudsters are opportunistic people," Mike Lemberger, senior vice president and regional risk officer for Visa, North America, told this website.

"In the payments industry we obviously see more transactions and commerce, and the pandemic just accelerated that. As more people go online, and the world digitizes more and more, there's more opportunity. And where there's more opportunity, innovation enters into the market and then there's going to be additional fraud," Lemberger said.

"One of the things we set up as a company is the Visa Payment Fraud Disruption program to protect our customers at all times. We are constantly looking at trends and patterns, and if we see something that looks fraudulent, we can use our tools and shut down the activity pretty quickly and stop the transaction from happening. We conduct real-time monitoring with our merchant partners and banks and investigate anything that looks suspicious."

Following are Lemberger's answers to questions posed by ATM Marketplace.

Q: How does this Visa program help prevent unemployment fraud?

A:We don't exactly have a role in unemployment fraud when it occurs, but we do have a role when it enters the commerce area. We have a part to play and we work differently with different players. We look at patterns and irregular activity and work with government agencies to provide data and information for each state's platform. We can see how they are onboarding or authenticating and who is applying for the benefits. We can help them secure their system, making it harder for fraudsters to get in.

Q: What do you mean you look for irregular activities and patterns to indicate fraud?

A:What happens when you see funds go into an account is you can see a pattern with what happens to the money. You can see how quickly it goes in and out of the account. Fraudsters often try and come up with ways to "launder" that money. A common way is to buy gift cards or electronics. Fraudsters will steal from an account and then go into a Walmart or Walgreens and buy several $100 gift cards and sell them online. If we start seeing a lot of $100 gift cards online, it's a red flag for us.

Q: With the use of mobile apps accelerating, is the dark web something consumers using apps need to be aware of, in terms of fraud?

A: What you find as technology grows and people digitize, established banks or new banks with mobile apps sign up customers so they can do their business digitally. When someone signs up for an app, they instantly provide access to their information. What we've seen is [fraudsters] use the dark web to gain that information. They may have gained access a year or two before, but they hold on to it, waiting for the perfect time to use it. And when they do, although the app is legitimate, they can easily breach the data and cause fraudulent activity.

Q: How successful has Visa Payment Fraud Disruption program been to date?

A: We're constantly working with financial institutions and merchants, and whenever we see a pattern that causes concern, we contact them and go over their own data to see if fraud has occurred. And financial institutions are getting smarter using algorithms, authentication and authorization. We continue to work with them and together we share data and address any issues. It's been a great partnership.