The Blurred Lines Between Payment Fraud and Cybercrime: Implementing Robust Security Solutions to Stay Safe Online

Once upon a time, there was a small business owner named Alice, who fought to keep her retail establishment afloat amid the stormy seas of a global pandemic. Like many other merchants, she embraced the digital revolution and moved her store online. This allowed her to reach more customers and keep her business buoyant. Her store, Alice’s Wonderland, offered a vibrant range of local handicrafts that started garnering attention on social media. It was a tale of small business success. Or so it seemed until the fateful day that a distributed denial of service (DDoS) attack took down her storefront while, at the same time, a series of high-value transactions triggered a wave of chargebacks that initially went unnoticed. Distracted by the DDoS attack, she could not see the fraud attack until it was too late.

Alice’s Wonderland had unwittingly become the setting for a modern-day heist that shows the blurring lines between payment fraud and cybercrime. The distinction becomes less apparent as financial criminals combine threat vectors. Still, there is every reason to be hopeful. For every malicious code written and every fraudulent payment initiated, payment providers who provide services to merchants like Alice can access an array of new, robust security solutions to fortify their defenses. Payments companies can mitigate the risks associated with the digital environment by comprehending the nuances between payment fraud and cybercrime and adopting the right solutions to keep the merchants who depend upon them safe.

The Connection between Payment Fraud and Cybercrime

As early as 2013, the attacks carried out by the Carbanak crime group showcase the merging of different techniques used in financial crime. The organization infiltrated an employee’s computer via phishing and infected the video monitoring system with malware. The infiltration enabled them to capture all activities on the screens of personnel handling money transfer systems. The criminals successfully manipulated international e-payment systems to move funds to offshore bank accounts and make withdrawals. All leading to the theft of over one billion US dollars from global financial establishments.

The growing interconnectedness of digital systems has led to a convergence between payment fraud, cybercrime, and AML. As financial transactions have shifted online and to real-time payments, cybercriminals have exploited the trend by developing sophisticated schemes to target vulnerabilities in digital payment systems. Due to this convergence, payment fraud has become more prevalent and complex. Alice learned the hard way that criminals can distract from their fraud attack by occupying the IT team with a secondary attack, such as a bot attack. While attention is on this, they compromise systems to gain access to sensitive financial data or mount a fraud attack. The stolen funds can them be laundered using mule accounts.

The rise in ransomware attacks targeting businesses has been prevalent in recent news. Ransomware attacks can come in different forms, but a ransom DDoS attack can be particularly difficult to deal with.

Attackers might start with a DDoS attack on an organization’s online services. Through bots, DDoS attacks attempt to exhaust the resources of the victim’s application, website, or network so legitimate users cannot access the service. Following this, they send a ransom note demanding payment to stop the DDoS attack and release the victim’s network back to them. Alternatively, the fraudster may send the threat of a DDoS attack before executing it, demanding an upfront payment so they don’t attack in the first place.

This cybercrime directly affects a business’s financial and reputational well-being, with the potential to become a public relations nightmare. The criminals threaten to make their demands public if they are not paid the ransom immediately. This leaves the organization in disarray, possibly facing vocal backlash from their clients and users, who would be angered and concerned by the prospect losing access to the day-to-day sites and networks they depend on.

The complexity of cyber threats continues to increase when businesses need to accommodate growing numbers and types of online transactions to maintain their competitive edge and meet customer demands. As a result, criminal organizations adjust their strategies to take advantage of any weaknesses they can find in payment systems.

The Impact of the Convergence of Payment Fraud, Cybercrime, and AI

Payment fraud and cybercrime can have significant financial and operational consequences for businesses. As we’ve explored, the lines between payment fraud and cybercrime have become increasingly blurred. But what does this mean for us as individuals, businesses, and society? The impact is vast and multifaceted, affecting personal lives, economic stability, and national security.

For businesses, the convergence of payment fraud and cybercrime can lead to direct and indirect costs. Direct costs are stolen funds, public relations consultants, and measures needed to address the security breach and prevent future incidents. Indirect costs can include damage to a company’s reputation, loss of customer trust, and potential regulatory fines. Moreover, the resources required to fight these crimes can be enormous, diverting funds and resources from other vital areas.

The societal impact is also significant. Large-scale cybercrimes can threaten countries’ economic stability, disrupting critical infrastructure, financial systems, and key industries. High-profile examples of this can be seen around the world:

While this picture might seem grim, it’s crucial to remember that we are not powerless. Increasingly sophisticated tools and strategies are available to combat these crimes, and awareness is the first step toward protection.

Organizational Silos Causing Increased Vulnerabilities

Organizational silos within companies have been a challenge in tackling this convergence effectively. Fraud involves various organizational groups, and fraudsters exploit the gap between information security and fraud and risk teams. For example, in an e-commerce setting, a fraudster could run a credential-stuffing campaign using leaked data, take over accounts, check for stored payment information or add a stolen credit card, and purchase expensive luxury items. This type of fraud affects both the retailer and the customers. Then fraudsters transfer stolen funds to mule accounts, which are often used for money laundering. The fraud and risk team is alerted to the situation through customer complaints or monitoring system alerts. Still, by the time the fraud, cybersecurity, and anti-money laundering (AML) teams have collaborated on the attack, the fraudster often has already achieved their objectives and has cut and run with the funds.

Strategies for Preventing Payment Fraud and Cybercrime

There are several strategies that payment providers, card issuers, and acquirers can employ to prevent payment fraud and cybercrime. These strategies focus on increasing awareness of potential threats, implementing robust security measures, and promoting a culture of security within an organization. Some of the critical strategies for preventing payment fraud and cybercrime include:

  1. Implement Multi-Layered Security Measures: Utilizing multiple layers of security, such as firewalls, antivirus software, and intrusion detection systems, can help prevent and mitigate cyberattacks while implementing advanced payment fraud detection and blocking software to cover both sides of a potential attack.
  2. The right technology: Changes in financial services, such as instant, irrevocable payments, and open banking, require players to adopt solutions that proactively identify emerging fraud threats and immediately block them without negative friction for end customers. Artificial intelligence and machine learning can also help protect against DDoS, BIN, bot, and other high-velocity attacks associated with financial crime. AI and ML techniques offer you the potential to identify suspicious activities and behaviors in real-time, significantly increasing the fraud detection rate while reducing false positives. This approach differs from traditional rule-based systems, which can be cumbersome and less responsive to rapidly evolving fraudulent tactics.
  3. Better interdepartmental communication and processes: The silo approach is a product of traditional organizational structures and processes. A CISO would not have considered a payment fraud event part of their remit. Channel managers wouldn’t concern themselves with evaluating firewall vendors. However, in the face of evolving cyber threats and sophisticated fraud techniques, this approach is proving to be a liability. One effective strategy is to foster a culture of collaboration and communication. Holding regular, cross-departmental meetings about breaches and upcoming trends in both cybercrime and fraud is one way to start. Another is joint training sessions to identify attack vectors better. Establishing shared goals between departments also fosters collaboration. PwC recommends that financial institutions examine their enterprise-wide structure and identify points where streamlining it will give senior management a centralized view of financial crime risk.
  4. Educate Employees: Employee education and awareness are essential for preventing payment fraud and cybercrime. Businesses should provide regular training on cybersecurity best practices, such as identifying phishing emails and avoiding suspicious websites. Employees should also be encouraged to report security incidents or concerns to the appropriate authorities.
  5. Conduct Regular Risk Assessments: Regular risk assessments across departments to identify gaps in security strategies can help businesses identify potential vulnerabilities and develop appropriate security measures to address them. The risk assessment should include testing security protocols, analyzing log data, and reviewing access controls to protect sensitive financial information properly.

INETCO BullzAI: A Cutting-Edge Tool to Fight Convergence

In the battle against the convergence of payment fraud and cybercrime, tools like INETCO BullzAI (BullzAI) are game-changers. Using advanced machine learning and artificial intelligence technologies, BullzAI offers a robust and proactive approach to identifying and combating financial cybercrime. BullzAI uses User and Entity Behavioral Analysis (UEBA) to learn from each transaction it monitors, continuously evolving its understanding of what normal activity looks like for each user. When it detects a deviation from this norm, it will raise an alert, allowing for rapid response, including blocking the transaction. BullzAI achieves this in real-time without causing false declines for legitimate transactions. BullzAI also identifies and surgically blocks cyber-attacks and malicious traffic, including zero-day and DDoS attacks, without causing false positives that negatively impact customer experience. 

BullzAI’s capabilities stem from its advanced analytics and real-time transaction monitoring engines. Keeping a continuous eye on transaction data can quickly identify patterns that might indicate fraudulent activity, anomalies, or money laundering in your payment network. This could be anything from an unexpected surge in transaction volume to a series of transactions originating from unusual locations at an impossible rate or funds that are frequently transferred to a reloadable prepaid credit card.

Protect your business from costly interruptions by cyber criminals and bots. Book a demo with one of our experts and learn how BullzAI can help you keep your company and clients safe from the evolving convergence of payment fraud, cyberattacks, and money laundering.