Skip to content

Holistic Fraud Risk Management Programs Look Like This

fraud risk management

Taking a holistic, proactive approach to fraud risk management helps your organization mitigate risk, remain compliant, protect your customers, and avoid scrutiny from card brands and regulatory agencies. Discover how LegitScript Merchant Monitoring and Merchant Onboarding fit into your merchant risk management program, and then contact us for a quick strategy session.

What Does a Holistic and Proactive Risk Mitigation Program Look Like?

The first component of a successful risk management strategy is identifying the payment service provider’s risks. The next component includes measuring and assessing the known risks to determine how best to proceed. Then, the company must implement risk mitigation measures to eliminate or mitigate the most severe risks.

In regard to merchant risk specifically, a comprehensive strategy typically pairs an internal risk and compliance team with third-party partners that can provide valuable risk data or monitoring services, such as LegitScript’s Merchant Monitoring. Additional elements of a holistic fraud risk management program include compliance technology and risk governance. Keep reading for a more detailed breakdown of the steps involved in fraud risk management.

The Holistic View of Fraud Risk and Compliance Management in Payments

Fraud risk management should be embedded within the payments organization and guided via stages or phases of a program cycle. Because illicit or problematic activities trend toward consistent change, risk management programs must evolve to stay ahead of trends.

Here is a breakdown of the different stages of a holistic fraud risk and compliance management program.

Identification
The first stage when implementing a holistic fraud risk and compliance management program is to thoroughly identify the various risks the organization faces, including but not limited to financial, transactional, reputational, and security risks. This also includes legal, operational, and privacy risks. Risk assessments should be performed periodically as risks change over time.

Measurement and Assessment
The goal behind the measurement and assessment component is to create a risk profile for each risk that has been identified. Risk can then be prioritized based on severity and pervasiveness.

Mitigation
Risk mitigation involves examining the risks that have been identified and determining which risks can and should be eliminated, as opposed to the risks that are deemed to be a lower priority.

Onboarding, Monitoring, and Reporting
Onboarding helps to prevent or mitigate merchant risk before it enters your ecosystem. Conversely, risk monitoring and reporting track existing merchant risk to make sure that the risk mitigation strategies the organization has adopted are having the desired effect.

Compliance Training
Conduct risk-focused compliance training and develop training plans and role-based training programs that are updated and maintained. For professional development, risk and compliance professionals can seek out third-party training, such as LegitScript’s educational webinars.

Compliance Technology
Develop detailed business requirements that identify and document critical technology platforms that are leveraged by compliance teams. Primary goals should be to utilize automation where possible for risk assessment, monitoring, testing, reporting, and issue management.

Regulatory Response
Establish standard communication protocols and processes to receive and respond to regulatory inquiries by identifying key stakeholders to engage during key discussions.

Governance
The last component in the process is risk governance. Risk governance is the process of making sure that the risk mitigation techniques that have been adopted are put into place and that the employees adhere to those policies.

Merchant Risk Monitoring and Reporting Can Benefit From a Third-party Monitoring Solution

LegitScript Merchant Monitoring is a third-party solution that falls into the monitoring and reporting stage within a holistic fraud risk management program. We ensure you have merchant-level insight into your downstream or merchant portfolio – mitigating the risks associated with illegal or problematic activity.

Contact us for a quick strategy session.

Recent Blog Articles

Navigating URL Shifts: Understanding Ownership Changes and Their Impact

URL changes are relatively common in the world of e-commerce. Motivations for such changes may be born out of a desire to adapt to organizational shifts such as mergers or rebranding, take advantage of registrar incentives, or sell the domain to an interested party. While the process is often relati...

What You Need to Know About Medical Spa Risks and Regulations

The med spa industry is fast growing, attracting consumers, investors, and entrepreneurs alike. However, as regulations remain in constant flux and legislators place the industry under increasing scrutiny, it is essential to understand how to operate your business compliantly. Read more on how Legit...

Key Takeaways: The Challenges of Detecting IP Infringement Online

According to the National Intellectual Property Rights Coordination Center, cases initiated against intellectual property theft are up 21%, with the sharpest growth occurring in the online space. In a recent webinar hosted by LegitScript, Peter Szyszko, CEO of White Bullet, delved into the pressing...
AI and ROI in trust and safety.

Navigating Marketplace Risk: AI and the ROI of Trust and Safety

Every year, professionals from around the world come together at the Marketplace Risk Management Conference to discuss issues of risk on online platforms and other technology. Explore the most critical takeaways from 150+ industry-leading speakers spanning 70+ sessions. Then contact us to see how Le...