🔹 Definition
Payment Fraud refers to any unauthorized or deceptive transaction conducted to steal funds, sensitive information, or digital assets during a payment process. It typically involves manipulating payment systems, customer data, or technology infrastructure to divert or misappropriate funds, and may target individuals, merchants, banks, or financial platforms.
This type of fraud is a growing concern in e-commerce, digital banking, fintech, and crypto services, and it is closely monitored within AML/CFT and fraud prevention frameworks.
🔹 Frequently Asked Questions (FAQs)
Q1: What are the most common types of payment fraud?
- Card-Not-Present (CNP) fraud: Using stolen credit/debit card details online
- Account takeover (ATO): Gaining unauthorized access to user accounts
- Business email compromise (BEC): Impersonating vendors or executives to reroute payments
- Friendly fraud: Customers dispute legitimate charges (e.g., chargebacks)
- Synthetic identity fraud: Creating fake identities to open accounts and process payments
- Phishing & social engineering: Tricking users into revealing login or banking credentials
Q2: Who is at risk of payment fraud?
- Consumers using online payments or mobile wallets
- Merchants and retailers accepting digital payments
- Banks, fintech platforms, and payment processors
- Cross-border payment services where KYC/AML gaps may exist
Q3: How does payment fraud impact businesses?
- Financial losses due to unauthorized transactions or chargebacks
- Operational disruptions and additional compliance costs
- Reputational damage and reduced customer trust
- Risk of regulatory fines for inadequate fraud controls
- Increased acquiring bank scrutiny or loss of payment privileges
Q4: How can payment fraud be prevented?
- Enforce multi-factor authentication (MFA) and biometric login
- Use AI-powered fraud detection systems to flag anomalies
- Implement real-time transaction monitoring
- Cross-check data with KYC and device fingerprinting tools
- Educate users to recognize phishing, spoofing, and scam indicators
- Partner with secure payment gateways that comply with PCI-DSS standards
Q5: Is payment fraud considered a predicate offense for money laundering?
Yes. Under many jurisdictions and FATF guidance, payment fraud can be considered a predicate offense that generates illicit proceeds, which may then be laundered through financial systems. As such, detecting and reporting suspicious payment activities is essential under AML/CFT obligations.
