Nov 30, 2023
< 1 min read

Ask Sumsubers: What are the most dangerous types of fraud in terms of regulatory penalties and monetary losses?

Time to talk with Sumsub’s Chief Product Officer, Andrew Novoselsky, about preventing fraud.

Sumsub keeps getting questions from our followers about the specifics of regulatory compliance, verification, automated solutions, and everything in between. We’ve therefore decided to launch a bi-weekly Q&A series, where our legal, tech, and other experts answer the most frequently asked questions. Check out The Sumsuber and our social media every other Thursday for new answers, and don’t forget to ask about the things that interest you.

This week, our Chief Product Officer Andrew Novoselsky will briefly discuss the most dangerous fraud types and strategies to prevent them.

Follow this bi-weekly series and submit your own questions to our Instagram and LinkedIn.

What are the most dangerous types of fraud in terms of regulatory penalties and monetary losses? And what are some practical prevention strategies?

Here are some of the biggest fraud-related challenges for r companies (and how to deal with them):
  • Chargebacks and account takeovers. Always make sure that a bank card transaction or other form of payment is made by someone who has passed identity verification.
  • Failure to comply with Anti-Money Laundering (AML) regulatory requirements. Companies need to to detect, respond, and eliminate money laundering, terrorist financing, and fraud-related risks. Depending on the industry, businesses need to keep an eye on dozens of AML guidelines, rules, and regulations.
  • Inappropriate background check. It sounds simple, but often basic data (e.g., first name, last name, date of birth) is not enough to determine whether a user is subject to sanctions. That’s why additional procedures, such as background checks, must be implemented.

However, there is no magic tool that can solve all fraud and compliance issues. Yet, there is a principle that can help companies effectively deal with different types of threats. It’s called the Swiss cheese principle, which involves multi-layered protection. According to the Swiss cheese principle, you can install several layers—each of which can be relatively simple—that, when combined together, prevent complex threats. For example, Sumsub’s liveness technology—in combination with document verification and database checks—can prevent fraud far more effectively than if implemented alone. Still, simple onboarding checks won’t be enough to confront professional fraudsters. Scammers can simply buy an existing account from a legitimate user and gain access to your system. Therefore, you need to implement additional checks throughout the user journey.

In short, if you keep adding different verification and authentication checks, fraudsters will fail at some point. So, don’t be shy about implementing additional levels, be it email and phone number risk scoring or behavioral analysis. But don’t forget that, with more levels, comes more data—which is why having a proper data flow and verification orchestration tool is paramount.

If you want to learn more about the current state of fraud detection and identity theft, download our complete report here.

Andrew Novoselsky

Chief Product Officer

Chargeback FraudFraud PreventionKYC