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5 Common Payment Fraud Risks and How to Stay Compliant

From phishing scams to synthetic identities, the landscape of financial crime is evolving — and so are the regulatory expectations. For businesses handling high volumes of transactions, staying ahead of these threats isn’t just about protecting customer trust — it’s about ensuring full compliance with global standards like AML, PCI DSS, and PSD2.
Let’s explore five of the most common payment fraud risks facing businesses today and how smart detection, monitoring, and prevention strategies can help companies reduce risk and stay compliant in real time.

Phishing and Social Engineering Attacks

Phishing remains one of the most widespread forms of payment fraud. Cybercriminals use deceptive emails, fake websites, or even phone calls to trick employees or customers into revealing sensitive data like login credentials or card numbers.

Compliance Risk:

These attacks often lead to data breaches, which can violate financial regulations such as GDPR, PCI DSS, or PSD2. Organizations must demonstrate that they’ve taken adequate steps to protect transaction data.

How to Stay Compliant:

  • Implement multi-factor authentication (MFA).

  • Train staff on fraud awareness and screening techniques.
  • Use software that flags suspicious login behavior in real time.
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Card Testing and Stolen Credit Card Use

Fraudsters often test stolen card numbers by making small transactions to see if they go through. If successful, they proceed with larger fraudulent payments.

Compliance Risk:

High volumes of chargebacks and unauthorized transactions can trigger audits and fines under payment industry standards like PCI DSS.

How to Stay Compliant:

  • Use real-time transaction monitoring to detect unusual patterns.

  • Deploy fraud detection software that can identify card testing behavior.

  • Set velocity rules to limit the number of transactions per IP or card.

Account Takeover (ATO) Fraud

In an ATO attack, a criminal gains access to a legitimate user’s account and initiates unauthorized payments or changes account settings.

Compliance Risk:

ATO incidents can lead to violations of AML (Anti-Money Laundering) and KYC (Know Your Customer) requirements if not properly detected and reported.

How to Stay Compliant:

  • Monitor for changes in customer behavior or device fingerprinting.
  • Use AI-powered detection tools to flag anomalies.
  • Ensure your software logs and reports suspicious activity in real time.

Synthetic Identity Fraud

This sophisticated form of fraud involves creating fake identities using a mix of real and fabricated data. These identities are used to open accounts and make fraudulent transactions.

Compliance Risk:

Synthetic identities can bypass weak screening processes, leading to AML violations and regulatory scrutiny.

How to Stay Compliant:

  • Strengthen customer onboarding with biometric verification.
  • Use data enrichment tools to validate identity information.
  • Integrate compliance software that supports advanced screening and monitoring.

Chargeback Fraud

This occurs when a customer makes a legitimate payment but later disputes the transaction, falsely claiming it was unauthorized.

Compliance Risk:

Excessive chargebacks can result in penalties from card networks and may indicate weak fraud prevention controls.

How to Stay Compliant:

  • Maintain detailed transaction records and customer communication logs.
  • Use software that automates dispute resolution and evidence submission.
  • Educate customers on your refund and return policies to reduce misunderstandings.

By investing in robust fraud detection, transaction monitoring, and screening tools, companies can reduce risk, ensure regulatory alignment, and maintain trust in every payment they process. Compliance is your first and best line of defense.

FAQ

Need to learn more?

Financial fraud refers to any illegal activity aimed at deceiving a company or individual to gain a financial advantage, often through fraudulent transfers or embezzlement

Identity theft, phishing, CEO fraud, and fake wire transfer orders are among the most frequent.

By implementing strict internal controls, raising employee awareness of potential threats, and using fraud detection software solutions.

Unusual transactions, urgent or non-compliant communications, and changes to banking details without verification are often indicators of potential fraud.

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