Are you onboarding high-risk sub-merchants? You might be signing up fraudsters too – here’s how to spot the difference Skip to content

Are you onboarding high-risk sub-merchants? You might be signing up fraudsters too – here’s how to spot the difference

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2 minutes

If you’re a Merchant Acquirer, Payment Facilitator or ISO that works with high-risk sub-merchants, or you’re considering doing so, you should be aware that along with legitimate businesses, you could also be unwittingly onboarding fraudulent sub-merchants.

These types of fraudsters take advantage of payment processors that are willing to work with high-risk sub-merchants that others may not want to sign-on by exploiting weaknesses in their KYC processes. In order to stop these bad actors, it’s imperative that you’re able to detect them during your onboarding processes before they can start their fraud.

There are valid reasons a sub-merchant may be called high-risk, such as the type of business they’re in including online pharmaceuticals, travel companies, CBD distributors, telemarketing and other industries associated with increased risk.

This particular niche also includes companies with sales techniques that tend to be categorized as risky, such as multi-level marketing or cold calling. It also could be that the sub-merchant has a history of excessive chargebacks and fraud, which means that card networks list them as high-risk regardless of their business type.

At GeoComply, we are already very familiar with one category of sub-merchants that are sometimes considered high-risk: iGaming and online betting. In these highly regulated markets, our geolocation solutions have been shown to cut fraud by 90%.

Our technology has already been proven in this dynamic and fast growing market, isn’t it time you started using the same technology?

If you’re thinking about onboarding high-risk sub-merchants, a simple yet effective way to identify potential fraud is to incorporate accurate, authentic and unaltered location data into your onboarding process. This simple step will help to ensure a sub-merchant is not spoofing their location in order to circumvent KYC and other fraud detection safeguards during onboarding.

Fraudsters know it’s easy to use a VPN or Proxy to spoof their IP address, so Merchant Acquirers and Payment Facilitators should utilize the new data points that are now available to them, the most important being accurate, authenticated and unaltered geolocation data, in their onboarding process, to stop fraudsters before they can even start.

Take a look at our white paper for more information about how to use accurate, authenticated and unaltered location data for detecting fraud.

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