Emerging Payment Risks Flashcards

What is 'synthetic identity fraud' and why has it become more prevalent with the shift to digital onboarding?

Answer: Fraudsters combine real and fabricated PII to create fictitious identities that pass automated digital verification checks

Synthetic identities blend real SSNs (often from children or deceased individuals) with fabricated names and addresses, and digital onboarding's reliance on database checks rather than face-to-face verification makes detection harder.

Under the FTC's INFORM Consumers Act, what new risk compliance obligation does it create for high-volume third-party marketplace sellers?

Answer: Marketplaces must collect, verify, and disclose high-volume seller identity and bank account information to consumers

The INFORM Consumers Act requires online marketplaces to collect and verify government ID, bank account, and tax information from high-volume third-party sellers and disclose certain seller information to consumers.

A neobank issues prepaid debit cards with pass-through FDIC insurance. Which risk scenario could cause that FDIC coverage to fail?

Answer: The program bank fails to maintain properly segregated sub-accounting records identifying each cardholder's beneficial ownership

Pass-through FDIC insurance on pooled accounts requires the program bank to maintain accurate records of each beneficial owner's balance; without proper sub-accounting, the FDIC may treat all funds as one uninsured entity account.

Which emerging fraud vector specifically exploits the 'Request for Payment' (RfP) feature in real-time payment systems?

Answer: Fraudsters impersonate legitimate billers and send fraudulent RfP messages to trick consumers into authorizing payments

Fraudsters send RfP messages impersonating utilities, government agencies, or known contacts to manipulate victims into approving fraudulent real-time payments they believe are legitimate bills.

What risk does 'super-app' payment ecosystems (e.g., WeChat Pay model) present that regulators are most concerned about in the US context?

Answer: Concentration of financial, commerce, and social data in a single platform creating systemic and surveillance risks

Super-apps consolidate payments, social media, commerce, and communications, creating unprecedented data concentration risks, systemic failure exposure, and potential surveillance capabilities that concern US regulators.

In the context of quantum computing threats to payments, which cryptographic standard used in current payment security is most immediately vulnerable?

Answer: RSA and elliptic curve cryptography (ECC) used in TLS and EMV chip authentication

Quantum computers running Shor's algorithm can break RSA and ECC asymmetric encryption, which underpins TLS connections and EMV chip cryptograms, making these the most urgent targets for post-quantum migration.

A payment network mandates 3DS2 for card-not-present transactions. Which emerging fraud tactic has evolved specifically to defeat 3DS2's risk-based authentication?

Answer: Device fingerprint farming where fraudsters condition devices to appear low-risk before executing fraud

Fraudsters 'season' devices by using them for legitimate transactions over time to build a trustworthy device fingerprint, then exploit the low-friction frictionless flow when committing fraud.