Webinar Recap: Experts Weigh In On How You Can Mitigate Risk & Fraud During COVID-19

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The risk scenario that has resulted from the COVID-19 pandemic is both unprecedented and evolving. The fear and economic uncertainty have changed the way we do business, giving way to a new reality.

In a webinar this week hosted by Infinicept Co-CEO and Co-Founder Deana Rich, industry risk experts shared their perspectives on the trends they’re seeing and the steps payment facilitators, acquirers, processors and other payments companies can take to reduce fraud and losses during the pandemic.

Rich was joined by panelists Timothy Miller, head of global credit and risk at Elavon; Madison Swofford, assistant director of operations at LegitScript; and Jeffery De Petro, SVP and chief administrative officer of merchant services for Esquire Bank.

Rich noted that the changes in the environment have necessitated changes to the way payments providers mitigate merchant risk. In addition to the fraud the industry is accustomed to seeing, bad actors are taking advantage of vulnerable people with fake preventions and cures, counterfeit test kits and other scams. They’re also capitalizing on a changing payments environment to hide illicit activity.

Understanding current events is important, and so is understanding the impact those events are having on local policies, she said. The first thing any risk manager needs to do in the morning is to catch up on news.

“They need to read about what’s happening locally, but also what’s happening all over the world,” she said. “Because that’s going to effect the processing they review.”

Staying up to date is even more important now, she said, because the effect of the virus and the actions taken in response are changing from state to state and even from community to community.

 

Can underwriting still be frictionless?

The panelists agreed that underwriting is a key area experiencing an impact from the current environment. While frictionless underwriting and other automated processes aren’t going away, in many cases, underwriting does need to return to some more “old school” techniques to verify that merchants are who they say they are and that they have the product inventory to support their sales.

The parameters are changing, and more controls are being added after boarding to sort out and monitor businesses that might pose more of a risk, Miller said.

“Previously, we might have been a little more generous in permitting merchants to process beyond certain variables, whereas now we’ve tightened many of those to enable us to monitor them much more closely,” he said.

De Petro said that his organization has recommended to its ISO partners that they slow down and take a closer look at their new merchants as well.

“Look at the applications that are coming through, and look at the business types,” he said. “Do they make sense in the days of COVID-19?”

“If there’s a merchant type that’s coming across to you that just does not make sense, then let’s question that,” he said.

According to Swofford, the crisis has led to a need to more closely review new merchants whose product lines previously would have seemed benign.

“Something like a merchant offering hand sanitizer in the past is not going to raise much of an eyebrow. But here you have tons of people manufacturing their own hand sanitizer at home and selling it. There are multiple FDA warnings about that and the risks involved,” she said.

 

Increased transaction monitoring

According to Swofford, transaction laundering is increasing with the sale of products associated with COVID-19, especially at-home virus test kits, which are commanding a high price.

“I would say, if you’ve uncovered a transaction laundering merchant in the past, keep tabs on that in your system and wait. Because that sort of merchant is going to be the type that’s going to latch on to a trend like this. So, keep those data points and use those to catch them again,” she said.

Keeping in mind that many businesses have minimal sales right now contributes to the need to closely monitor and understand any out-of-pattern activity, Miller said.

“Where previously we looked for larger amounts or excessive amounts, we’re actually now looking for ones that had previously dipped low and are coming back online,” he said.

 

“All in this together”

Panelists noted that, in addition to creating a need for increased vigilance around the new risks, the current crisis calls for working together across the industry.

This might mean waiving or reducing fees in some instances or finding other ways to help merchants weather the storm. But it also means reaching out to others in the industry, including the card networks, to share information.

“We’re all it together, so we all need to keep talking to one another and being very transparent about it,” De Petro said. “I think that’s how we’re going to make this a very safe environment for all of us.”

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