Hide And Seek: Geolocation Helps Uncover Fraudsters’ Identities

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Fraudsters follow the money. Take, for example, the Super Bowl. About half of all Americans were expected to place some kind of wager on the game, and online sports betting sites were expected to take in $4.3 billion by the time the championship trophy was raised.

“What may not be so obvious are the bad actors who will attempt to capitalize on this upcoming online event,” noted a report in Security Boulevard. “More than ever, sportsbooks need to ensure that their online channels’ infrastructure can handle the influx of users and fortify their defenses against cybercriminals.”

All of which begs a serious question: How does a company, online gambling or otherwise, find the fraudsters? Given that online thieves and cybercriminals always try to mask their identities to evade detection, it makes sense to tear that veil away and reveal where they’re hiding. It’s certainly an issue that has captured the attention of GeoGuard, a global leader in geolocation-based security, fraud detection and the protection of digital content.

“We know that anytime a bad actor wants to engage in some type of illicit activity against a financial institution, they are going to look at ways to cover their digital footprint,” Elizabeth Cronan, vice president of government relations at GeoGuard, said in a recent chat with PYMNTS. “They want to evade detection. They don’t want to have their true identity and/or location unmasked. They want to get away with this type of activity. And so, they will always rely on some type of tool to mask their identity and location.”

More often than not, those tools include malicious virtual private networks (VPNs) and anonymizing devices or proxies, all of which Cronan said present enormous risks to banks and the wider payments ecosystem by exposing them to regulatory sanctions as well as anti-money laundering (AML) or know your customer (KYC) violations.

“We know that these types of tools are frequently relied upon by a fraudster or by a bad actor to enable them to carry out financial crimes online,” she added. “It’s critical to have the right tools in place to detect when these types of methods are being used by an individual on the other side of a transaction.”

Online Gambling Is More Secure Than eCommerce

Since the U.S. legal regulated sports betting markets have state and federal compliance requirements that make it essential for an operator to provide a geolocation verification before any transaction can be allowed, the rate of fraudulent activity is significantly lower than it is in the broader eCommerce sector, Cronan said.

“So we play a critical role in meeting that compliance requirement,” she explained. “We know that if an individual has to share their location and has to provide consent, that in and of itself is a very strong deterrent to keep a bad actor off their platform.”

When speaking with various payments stakeholders that play a role in supporting gambling and other sectors across the eCommerce ecosystem, Cronan said they always point to the lower rates of fraud in regulated sports betting. And they attribute that, in large part, to the role of geolocation detection and verification.

Not Just A Private Sector Problem

Given the recent spike in government disbursements, Cronan said that public sector authorities and agencies are also prime targets for attack. She believes there’s absolutely a need for the government—whether it’s federal or state—to get in front of this issue, noting that in 2020, the financial sector faced cyberattacks at a rate that was up more than 200 percent over 2019.

Whether it’s through drafting legislation and regulation or forming public-private partnerships to craft policy, Cronan said the private sector and the government’s interests are all aligned in terms of sharing information and exchanging insight on the types of fraud being committed.

“We know that if you can get in front of location fraud, you can eliminate the key tool in a fraudster’s arsenal,” she said. “To the extent that governments can implement the right types of tools to get in front of this type of activity before it goes too far, they are going to save their institutions from potentially higher rates of fraudulent activity.”

For example, the state of California is currently investigating up to $30 billion of fraudulent unemployment claims that it paid out to suspected international crime rings from places like Russia or Nigeria. Had those claims been subject to a geolocation test that revealed their true location — or at least the fact that they were trying to hide it — the state could have prevented many of its problems.

“There is such a strong and direct correlation [between geolocation and fraud prevention] that if there were efforts to identify where these applications were coming from at an earlier stage, they could have been flagged to determine whether an individual on the other side was trying to mask or hide their location,” Cronan explained. “If those checks were done in a seamless, nearly instantaneous fashion, certainly there could have been prevention.”

Consumers Already Know It, Use It, Love It

Consumers are already using and providing geolocation data, whether it’s to check the weather, order food or arrange a ride with Uber. Not only is location sharing widely used, but consumer research also shows consistent support for sharing this type of data, particularly when it’s used to protect people’s accounts and money and thwart potential incidents of fraud, said Cronan.

“Whether it’s a bank or a trusted payments platform, there’s an opportunity for institutions to really strengthen and grow that consumer loyalty by strengthening the trust [consumers] have in their banking partners,” she said. “We know it’s really powerful from a fraud-prevention and detection standpoint, but it can be leveraged by financial institutions and by the payment sector [for customer retention purposes] as well.”

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NEW PYMNTS DATA: BUY NOW, PAY LATER CONSUMER STUDY 

About: Buy Now, Pay Later: Millennials And The Shifting Dynamics Of Online Credit, a PYMNTS and PayPal collaboration, examines the demand for new flexible credit options as well as how consumers, especially those in the millennial demographic, are paying online. The study is based on two surveys, totaling nearly 15,000 U.S. consumers.

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