Fraud, scams and costly mistakes: cross-border wire transfers’ risks exposed

By Kenny Tsang, Managing Director, PingPong Payments

In a world where business is dominated by e-commerce and purchasing habits trend more towards digital platforms, online transaction safety is paramount.

Yet, in 2018, a reported total of $423 million was lost in wire transfer scams, and in 2020 the Federal Trade Commission (FTC) received more than 2.2 million reports concerning fraud. As a result, losses connected to fraud in 2020 reached almost $3.3 billion. Figures like this show that online crime trends will only continue to grow, corroborated by the FBI’s Internet Crime Complaint Center (IC3).

The center took almost seven years to record its first million complaints, while the most recent million, in comparison, was logged over only 14 months. The center’s six millionth complaint was logged in May 2021 – making it clear: now more than ever, online vendors must be prepared against fraud and scams as they conduct their business.

Online sellers must be particularly careful regarding fraud when sourcing inventory and interacting with different suppliers overseas, an ever more common occurrence given the growth of cross-border e-commerce. Forecasts predict the global cross-border e-commerce market to reach over $2.2 billion by 2026, after being valued at $578.57 billion in 2019.

A global e-commerce forecast released in July reported that after an increase of almost 25% in cross-border e-commerce buyers in China in 2020, Asia-Pacific would lead the regional rankings for retail e-commerce sales this year. Thanks in large part to China’s dominance, Asia-Pacific will account for 60.8 percent of worldwide sales, with North America taking second place at 20.3 percent. Given the importance and amount of cross-border transactions between major cross-border payments players, security should be the first thing on sellers’ minds. In many cases, international transactions of this kind are increasingly vulnerable to fraud, and being unaware of the risks could be a costly mistake.

How to spot a fraudulent request

Nowadays, scam artists are so successful online because consumers are all used to interacting with strangers daily. Rarely do we vet individual accounts on e-commerce platforms as we buy products; we expect platforms to do that for us. On the other hand, sellers must be vigilant when engaging with new or unknown suppliers and hyper-aware of suspicious behavior when completing transactions.

For example, suppliers who change the payment recipient in the eleventh hour or request additional payments for customs clearance should trigger a red flag. Similarly, suppliers who only accept payment through specific platforms or request payments to personal accounts may need to verify before committing to their terms.

An easy way to manually verify a supplier’s identity is to contact them via their listed phone number, which should be readily available on their website. If their site does not contain their basic contact information, or if this information is difficult to access, this is a red flag. Additionally, vendors can use forums such as the Better Business Bureau to check out the validity of websites. However, while these are helpful strategies, sellers should not have to spend hours of their time manually verifying other vendors, suppliers or customers. That’s where a payments partner can help.

Long-term fraud prevention tactics

Picture this: after deciding to open a new bank account, you wander into your local bank branch and make a request. Would your bank teller offer you an account without asking your name or address, or checking your ID? Of course not. So why should online seller or supplier verification work any differently?

Anti-money laundering policies for online vendors and suppliers should reflect processes just as rigorous as those conducted by brick-and-mortar banks today. Verification at both ends of the supply chain is essential: ensuring that your seller, supplier or customer is who they say they are will protect you from the damaging implications of online scams.

Furthermore, knowing your online “colleagues” (be they a supplier overseas or the seller next door) will prevent money laundering, and any efficient online payments partner will understand this.

In addition to a localized understanding, the best online payments partners conduct the verification process for you. They will match suppliers to their company name, bank accounts, and passports and ensure that the person with whom you are conducting business is who they say they are. Meticulous identity checks and verification processes should be expected of any online vendor, and the best online payments partners know this.

One exciting perk of the online world of commerce is its immediacy, but this shouldn’t mean that processes are not recorded or authenticated. Maintaining a paper trail from one end of a transaction to the other leads to better transparency and reduces the risk of fraud. Payments partners should serve as a guide throughout the international payments process, lifting the weight off your shoulders and allowing you to focus on your business.

Although online crime shows no signs of disappearing, businesses should not live in fear of losing valuable resources to digital fraud and should instead profit from the globalized marketplace of suppliers and customers without worrying about the safety of their payments. Cybercrime may feel like a monster looming over your online business, but sellers aren’t fighting this menace alone.

By Kenny Tsang, Managing Director, PingPong Payments

In a world where business is dominated by e-commerce and purchasing habits trend more towards digital platforms, online transaction safety is paramount.

Yet, in 2018, a reported total of $423 million was lost in wire transfer scams, and in 2020 the Federal Trade Commission (FTC) received more than 2.2 million reports concerning fraud. As a result, losses connected to fraud in 2020 reached almost $3.3 billion. Figures like this show that online crime trends will only continue to grow, corroborated by the FBI’s Internet Crime Complaint Center (IC3).

The center took almost seven years to record its first million complaints, while the most recent million, in comparison, was logged over only 14 months. The center’s six millionth complaint was logged in May 2021 – making it clear: now more than ever, online vendors must be prepared against fraud and scams as they conduct their business.

Online sellers must be particularly careful regarding fraud when sourcing inventory and interacting with different suppliers overseas, an ever more common occurrence given the growth of cross-border e-commerce. Forecasts predict the global cross-border e-commerce market to reach over $2.2 billion by 2026, after being valued at $578.57 billion in 2019.

A global e-commerce forecast released in July reported that after an increase of almost 25% in cross-border e-commerce buyers in China in 2020, Asia-Pacific would lead the regional rankings for retail e-commerce sales this year. Thanks in large part to China’s dominance, Asia-Pacific will account for 60.8 percent of worldwide sales, with North America taking second place at 20.3 percent. Given the importance and amount of cross-border transactions between major cross-border payments players, security should be the first thing on sellers’ minds. In many cases, international transactions of this kind are increasingly vulnerable to fraud, and being unaware of the risks could be a costly mistake.

How to spot a fraudulent request

Nowadays, scam artists are so successful online because consumers are all used to interacting with strangers daily. Rarely do we vet individual accounts on e-commerce platforms as we buy products; we expect platforms to do that for us. On the other hand, sellers must be vigilant when engaging with new or unknown suppliers and hyper-aware of suspicious behavior when completing transactions.

For example, suppliers who change the payment recipient in the eleventh hour or request additional payments for customs clearance should trigger a red flag. Similarly, suppliers who only accept payment through specific platforms or request payments to personal accounts may need to verify before committing to their terms.

An easy way to manually verify a supplier’s identity is to contact them via their listed phone number, which should be readily available on their website. If their site does not contain their basic contact information, or if this information is difficult to access, this is a red flag. Additionally, vendors can use forums such as the Better Business Bureau to check out the validity of websites. However, while these are helpful strategies, sellers should not have to spend hours of their time manually verifying other vendors, suppliers or customers. That’s where a payments partner can help.

Long-term fraud prevention tactics

Picture this: after deciding to open a new bank account, you wander into your local bank branch and make a request. Would your bank teller offer you an account without asking your name or address, or checking your ID? Of course not. So why should online seller or supplier verification work any differently?

Anti-money laundering policies for online vendors and suppliers should reflect processes just as rigorous as those conducted by brick-and-mortar banks today. Verification at both ends of the supply chain is essential: ensuring that your seller, supplier or customer is who they say they are will protect you from the damaging implications of online scams.

Furthermore, knowing your online “colleagues” (be they a supplier overseas or the seller next door) will prevent money laundering, and any efficient online payments partner will understand this.

In addition to a localized understanding, the best online payments partners conduct the verification process for you. They will match suppliers to their company name, bank accounts, and passports and ensure that the person with whom you are conducting business is who they say they are. Meticulous identity checks and verification processes should be expected of any online vendor, and the best online payments partners know this.

One exciting perk of the online world of commerce is its immediacy, but this shouldn’t mean that processes are not recorded or authenticated. Maintaining a paper trail from one end of a transaction to the other leads to better transparency and reduces the risk of fraud. Payments partners should serve as a guide throughout the international payments process, lifting the weight off your shoulders and allowing you to focus on your business.

Although online crime shows no signs of disappearing, businesses should not live in fear of losing valuable resources to digital fraud and should instead profit from the globalized marketplace of suppliers and customers without worrying about the safety of their payments. Cybercrime may feel like a monster looming over your online business, but sellers aren’t fighting this menace alone.