Regulators continue to ramp up their efforts to keep up with today’s sophisticated criminal networks – for example, taking steps to increase corporate transparency. But what’s really behind trends like this in the payments industry? At a recent webinar for the Merchant Risk Council (MRC), EverC thought leaders Maya Shabi and Anna Pogreb pinpointed globalization as the catalyst for many of the trends they’re seeing.
“Globalization is touching regulatory. It’s touching our industry. It is touching really every aspect of our lives now,” said EverC Content Director Aileen McDonough, who moderated the webinar.
Maya and Anna covered key trends being driven by globalization, such as regulatory changes, tactics to evade sanctions and perpetrate nefarious activity online, and the shift of responsibility to marketplaces and platforms. They also discussed the value of industry collaboration in addressing the risks associated with these trends.
The impact of globalization on ecommerce
Here are some of the key takeaways from the MRC webinar, which is available for members on the MRC website.
Increased regulatory scrutiny
To close gaps and put a stop to criminal activity, regulators in the U.S. and across the globe have been cracking down. One example is the push to increase transparency of beneficial ownership, to reveal where the proceeds for a business eventually end up. In the U.S., the Financial Crimes Network (FinCEN) has enhanced its rules for customer due diligence by requiring any natural person (foreign or not) in connection with a company or organization operating in the U.S. to be registered with their agency.
Zeroing in on UBOs is directed at reducing sanctions evasion. Referencing the International Consortium of Investigative Journalists (ICIJ) report that was released in November 2023, Maya described how Russian oligarchs use countries like Cyprus to circumvent sanctions by taking advantage of the “weak disclosure laws and a fairly complicit central banking authority to host tens of billions, if not hundreds of billions of dollars,” she said.
Maya also talked about how shell companies and offshore accounts are used to hide where funds end up: “They’re registering shell companies, which often provide an air of legitimacy. If they’ve registered a company in a place like the U.K., then they connect to a virtual address, they run their money through offshore services and accounts, and eventually their money arrives back in the hands of the bad actor.”
The globalization trend has broken down barriers, creating a vastly interconnected financial system that bad actors can exploit. Money moves quickly around the world, through new methods and channels, along paths that can obscure its purpose. UBO transparency is key to uncovering it.
Increased competition for marketplaces
The rapid proliferation of large international marketplaces has upped the ante for existing ecommerce giants. Anna mentioned Temu, TikTok, and Shein, pointing out that the newest player, Temu, is currently leading the three.
“Nobody saw them coming, and this is the effect of globalization. Most of the huge marketplaces grew their presence by bringing sellers from all over the world, which is amazing for consumers and really good for the sellers themselves. But it’s also an environment that’s ripe for fraudsters,” Anna explained. “Bad actors from all over the world can operate wherever they want, abusing the platforms and resources created for good international sellers.”
Shift to more proactive controls by marketplaces
When consumers have a bad experience, they tend to blame the site owner rather than the third-party seller, which poses reputational risk to the marketplace. She also expects to see more interaction between marketplaces. “I believe there will be more collaboration between all the players in the industry. Marketplaces will start collaborating between themselves and data sharing. There is already an Amazon initiative for this.”
The sale of counterfeit products continues to be a major problem for marketplaces and a major concern for regulators, said Maya. “The recent Notorious Markets Report focused on counterfeit products that cause harm, such as OEM car parts and software, or toys for kids, things that should go through rigorous safety testing standards.”
AI technology
With GenAI, bad actors can create deep fakes that make it difficult, or even impossible, to tell the difference between what’s real and what’s not. This opens the door for criminal activity on social media platforms, dating sites, and beyond.
Want to catch fraudsters? Think like a victim
In the end, even solutions for global problems come down to perspective. According to Anna, “Everybody in our industry is always told, ‘Think like a fraudster.’ But fraudsters don’t think like fraudsters. They think like victims. They think, ‘Okay, what are these people expecting? I can pretend I’m giving it to them, and they will give me their money.’”
Maya added, “You have to put yourself in the place of the person on the other end [the victim], not the person conducting the crime. But think about all the ways that somebody could get scammed. What would they be looking for in the first place?”
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