Transaction Monitoring for Buy Now Pay Later

by Florian Tanant
Ecommerce merchants know how important it is to keep track of every payment. But did you know transaction monitoring also plays a part in reducing money laundering and identity theft?
Let’s break it all down below.
Payments are the lifeblood of ecommerce, so it’s only natural that merchants would monitor transactions to ensure the following:
Speaking of compliance, there is a very specific use case for transaction monitoring in the context of anti-money laundering, also known as AML. These are regulations set by governments, which some online stores may have to follow to ensure they do not facilitate financial crime.
And financial crime is a very real threat to the economy and to companies. In fact, in 2020, the Chinese authorities arrested criminals who were alleged to launder more than $2 billion through fake ecommerce purchases.
Partner with SEON to boost your AML compliance without friction – as well as stop all kinds of fraud with real-time data enrichment and advanced APIs.
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Criminals have been known to attempt to launder money via retail purchases.
The biggest appeal of traditional brick-and-mortar shops for money launderers is the ability to convert illegally acquired cash into items. These can then be resold online, and the funds will appear to be clean.
In the online world, the techniques may vary, but the goal is the same:
Detecting such criminal activities is difficult due to the complexity of the online payment network and the increase in alternative and high-risk payment methods such as cryptocurrencies or digital wallets.
Fortunately, regulators have caught on to these potential crimes, which is why a growing number of online stores need to comply with AML regulations.
However, these regulations add hoops that legitimate merchants have to jump through to run their businesses, so it’s worth having an AML checklist prepared.
Even with the best intentions, remaining AML compliant isn’t without its drawbacks. These include:
And it goes without saying that failing to meet regulations can have a dramatic impact on your company, including hefty fines, negative press, and a loss of customer trust.
Let’s now look at three examples of the kind of transaction monitoring you could deploy with the appropriate software, and how these work on the SEON platform.
Most online merchants will have their own internal lists about which countries are classified as high-risk but when it comes to AML regulations, the list is updated by government bodies.
Whether it’s to reduce chargebacks or avoid AML fines, the implementation is the same. You want to keep an eye on who is making purchases on your site.
This is an example of a rule we have set up, where the IP address tells us where the customers are connecting from.
In the screenshot above, we’re setting up the system so that any transaction coming from a high-risk country is automatically sent for manual review.
You can, of course, update the list of high-risk countries, per the example below.
This is what our rule looks like once it’s been triggered.
While the AML threshold might vary from one country to the next, it’s always smart to keep an eye on high-value transactions.
In this example, we’re setting our limit at $3000, where the threshold currently is for the United States.
This is another case where we certainly don’t want to block the transaction. We’ll send it for review automatically, so it’s at least easier to track for your compliance housekeeping.
Here is the rule triggered by a user who spent $3,600 on our fictional online store.
This rule illustrates a more sophisticated type of custom rule, called a velocity rule or velocity check.
Put simply, it’s about monitoring certain actions over a set timeframe and considering things like how many times an action has taken place, how much something has changed or increased, etc. In the context of AML, this is perfect for identifying unusual behavior.
Our unusual behavior, in this scenario, is a sudden increase in spending. We’ll set the time window for 24 hours and look for 200% increases over the previous lifetime spend.
Note that we’ve decided that this increases the chance of fraudulent behavior so every time this rule is triggered, it adds 20 points to the fraud score.
Above you can see the triggered rule on the SEON Admin Panel, which has pushed our fraud score above the threshold and sent the transaction for manual review.
You can, of course, customize when risk scores push actions over the limit based on your business model and risk appetite – as well as any applicable laws.
Partner with SEON to reduce fraud rates in your business with real-time data enrichment, whitebox machine learning, and advanced APIs.
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SEON is designed to gather as much data about your customers and transactions as possible without affecting their experience. It’s ideal for online stores using platforms like Shopify that need to reduce chargeback rates, gauge a customer’s real intentions, and even stop account takeovers.
It’s also a growing suite of AML tools, which will allow you to keep an eye on suspicious transactions and behavior that could point to financial crime.
Ready to beat fraud, reduce friction and secure your ecommerce business? Sign up for a free 14-day trial with SEON or arrange a custom demo with one of the team.
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Communication Specialist | Florian helps tech startups and global leaders organise their thoughts, find their voices, and connect with customers worldwide.
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