Anti-Fraud Methods to Prevent Suspicious Transactions

What is a Suspicious Transaction?

A suspicious transaction is an activity that shows an unusual pattern, such as an unusually high transaction amount, payments made from locations that differ from a user's typical behavior, or a sudden spike in transaction frequency.

Anti-Fraud Methods to Keep Transactions Secure

In general, anti-fraud methods for maintaining transaction security range from identity verification (KYC or KYB) and multi-layered authentication (MFA) to monitoring.

1. Identity Verification (KYC and KYB)

Ensure the user's identity is valid before transacting.

• Know Your Customer (KYC) is the process of verifying a user's identity before they can access services or make transactions. This process usually involves checking identity documents, personal data, and biometric verification, ensuring that the user is a legitimate individual.
• Know Your Business (KYB) is a verification process aimed at businesses or merchants. This verification includes checking the company's legality, licensing documents, ownership structure, and other business information to ensure that the merchant joining is a valid and trustworthy entity.

2. Multi-Factor Authentication (MFA)

Adding a security layer through OTP, biometrics, or additional authentication. Multi-Factor Authentication (MFA) adds layers of security by requiring more than one verification method when users log in or make transactions.

At DOKU, merchants can implement 2-Step Verification, which requires them to pass through two authentication stages before being able to access the DOKU Dashboard. In addition to an email and password, users also need to enter a verification code sent via email, SMS, or an authenticator app such as Google Authenticator or Microsoft Authenticator.

3.  Tokenization and Encryption

Protects sensitive data by converting it into a format that cannot be read by unauthorized parties.

• Tokenization: replaces sensitive information such as card number or payment data with unique tokens that have no value if stolen.
• Encryption: scrambles data while it's stored or transmitted so that it can only be read by a party holding the corresponding decryption key. This minimizes the risk of data leaks and misuse.

4. AI and Machine Learning

Automatically identifying fraud patterns and anomalies.

Artificial Intelligence (AI) and Machine Learning technologies help detect fraud patterns that may be difficult to identify manually. The systems can learn user behavior over time and identify anomalies that could potentially indicate fraud.

5. Device Fingerprinting

Recognizes the device used to detect suspicious access.

Device fingerprinting is a technique for identifying a user's device based on a combination of unique characteristics, such as the operating system, browser, IP address, and device configuration.

With this method, the system can distinguish between a device that's regularly used and a new device that could be potentially suspicious.

6. Geolocation and Velocity Checking

Geographic location checking is used to detect transactions made from an unlikely location, such as two transactions from different countries within a very short time span.

Velocity checking monitors the frequency and speed of transactions to detect unusual patterns, such multiple small transactions in a row, which typically indicate card testing (using a stolen card in small increments to test its validity).

7. Real-Time Transaction Monitoring

Detecting activity that doesn't fit normal transaction patterns.

Real-time transaction monitoring allows the system to detect unusual activity while a transaction is in progress. If a risk indicator is found, the system can immediately trigger additional checks or temporarily halt the transaction.

How to Protect Personal/Business Data from Fraud Attacks

1. Do Not Share OTP

The OTP code is confidential and should only be used by the account owner. Sharing it could give fraudsters take over the account and allow them to complete unauthorized transactions. 

2. Enable Transaction Notifications

Notifications help users stay informed about all account activity in real time. This way, any unrecognized transactions can be reported or acted on immediately.

3. Use a Strong and Unique Password 

Strong passwords are harder for cybercriminals to guess or crack. Avoid using the same password for multiple accounts.

4. Check Transaction History Regularly

Regular checks help detect unusual activity sooner. The sooner suspicious transactions are discovered, the greater the chance of preventing losses.

5. Enables 2-Step Verification

Use the 2-Step Verification feature, which requires additional verification when logging in or performing important actions on the account. By combining a password with a verification code via email, SMS, or an authenticator app, you can minimize the risk of account takeover and access abuse.