Heightened Due Diligence: How Should You Adjust Your Operations in Response to the Crisis in Ukraine?

By Dan Spalinger, VP of Global Advisory Services, Infinicept

Fraudsters and other criminals are opportunists. Whenever there’s a crisis anywhere in the world, you can count on illegitimate players using the situation for their own personal gain. And when you operate a platform that’s moving money, these players will attempt to take advantage of it.

The current situation in Ukraine is no different. Actors large and small are targeting the payments system in a wide variety of likely scenarios:

• An unscrupulous online retailer with an otherwise legitimate business could add a button at checkout inviting customers to top up their order amount in support refugee relief efforts, planning to keep the additional money for themselves.
• Similarly, bad actors may set up nonprofits and fundraising efforts under the guise of helping people in Ukraine, but have no intention of forwarding the money. Even merchants that genuinely intend to send supplies or funds to affected people run a risk of funneling resources where they aren’t supposed to go if the recipients aren’t fully vetted on the back end.
• The war in Ukraine is not only a military war; it’s an economic and monetary war as well. People in Russia looking to avoid sanctions or the effects of currency controls may be funneling money out of their country by buying large-ticket items of value from retailers abroad.
• Criminals whose funding is otherwise being cut off may look to databases of stolen consumer card information for new sources of income.
• Hacktivists with a bone to pick against the West are likely targeting its payments institutions in an effort to disrupt and cause a lack of confidence in its economic systems.

As events play out in Eastern Europe, payments providers – including payment facilitators – must increase their due diligence to guard against the many ways people are looking to take advantage of the system.

This is a good time to talk with your merchant monitoring service provider regarding its capabilities to review websites or changes to merchant checkout pages, as well as for increased activity or traffic related to the conflict in Eastern Europe and what it may have seen to date beyond your own portfolio.

Would it be appropriate to make your transaction risk monitoring parameters more stringent? You can adjust them to watch more closely for differences in transaction volume and amounts. Merchant monitoring is always a balancing act between customer experience and your risk situation, which means that you may sometimes need to adjust parameters to meet the needs of the current environment.

It’s also imperative to make sure your sanction list screening practices are staying up to date with the ongoing changes as new entities, individuals, and regions are being added, sometimes on a daily basis. You also may need to run the screening more often in order to capture these changes.

You should also consider adjusting your underwriting procedures, adding keywords to look for mentions of the involved countries and regions as well as references to refugees. New merchants that reference the current events are going to merit a closer look.

It’s also especially important right now to look more deeply at the history of any merchants you’re looking to onboard. When were they formed, and how long have they been operating? You’ll want to know if they’ve sprung up in response to the crisis seeking to take advantage of it.

And finally, it’s worth watching even more closely than usual where your traffic is coming from. If a retailer in the U.S. sees a spike in activity originating from Russia, for example, or traffic using a VPN – which could be an attempt to mask where the traffic is coming from – that merits further attention.

How the events in Ukraine affect your business operations will depend on your unique portfolio and the environment in which you operate. But as with any crisis, it’s imperative for you to heighten your vigilance, stay informed about how the situation evolves, and work with your service providers to determine the appropriate response for your business.