Fraud and Risk in the Electronic Payment Space Michelle Marshall-Thompson VP, Fraud/Risk Officer FirstMerit Merchant Bankcard

General lack of understanding within the payment space “Authorizations” are not a guarantee of payment Settlement of funds to a deposit account does not ensure funds will not be retracted Inappropriate data verification

General lack of understanding of payment risks Chargeback Risks Financial Risks:  Expense of payment acceptance  Loss exposure after payment acceptance Sensitive Data Security Risks:  Human behaviors  Network risks

Opportunities for Fraud Internal Fraud External Fraud Network Breach, Data Theft, Fraud

Internal Fraud Employee Embezzlement:  Fraudulent returns  Credentials theft  Misuse of position  Most unsuspecting person

Internal Fraud Compensating Controls:  Oversight  Password protection  Policies regarding information sharing  Random Google or background searches

External Fraud Fraudulent use of card information Lost/stolen card numbers Alleged fraud Merchant financial exposure

External Fraud Compensating Controls:  Exposure of swiped, keyed & e-commerce transactions  Use of data verification: address, zip, CVV  Additional red flags  Work with banking partners

Network Security Risks PCI non-compliance Human behavior Banking credential hacks Wire fraud, sensitive data breach

Network Risks Compensating Controls:  Utilize the expertise of third parties  Work within well established guidelines  Oversight of employee responsibilities

Where To Turn If you believe your organization/entity could be vulnerable to risks reviewed today, contact me directly at , for further discussion Contact your banking institution to inquire about additional controls and risk mitigating options Don’t expect to “go it alone” - work with your partners

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