Fraud Prevention & Detection Flashcards

What is the primary purpose of a fraud score generated by an authorization decisioning system?

Answer: To rank the likelihood that a transaction is fraudulent so a decision can be made

Fraud scores quantify risk at the moment of authorization, enabling issuers or acquirers to approve, decline, or step up authentication based on risk level.

Which fraud type involves a cardholder intentionally disputing a legitimate transaction to obtain a refund while keeping the goods or services?

Answer: First-party fraud / friendly fraud

Friendly fraud (first-party fraud) occurs when a legitimate cardholder falsely claims a transaction was unauthorized to receive a chargeback.

Which authentication method provides the strongest protection against card-not-present fraud by requiring possession of the cardholder's mobile device?

Answer: Out-of-band one-time passcode (OTP)

An out-of-band OTP sent to the registered mobile device confirms physical possession, making it far harder for fraudsters who only have card credentials.

In the context of APRP, 'bust-out fraud' typically involves:

Answer: Building credit history and then maxing out credit lines with no intent to repay

Bust-out fraud is a credit fraud scheme where a fraudster gradually builds a good credit profile before suddenly maxing out all available credit and disappearing.

Which data element is most useful for detecting 'card-present' counterfeit fraud at the point of sale?

Answer: EMV cryptogram validation

EMV chip cryptograms are unique per transaction and cannot be replicated from skimmed magnetic stripe data, making them the key defense against counterfeit card fraud.

A risk professional identifies a network of seemingly unrelated accounts all funding the same recipient. This is an example of:

Answer: Mule network detection

Mule networks use multiple accounts (often unwitting individuals) to funnel fraudulent funds, and link analysis revealing the common recipient exposes the scheme.

What is the role of a 'negative file' or 'deny list' in fraud prevention?

Answer: It contains identifiers associated with past fraud that trigger declines or alerts

A negative file is a database of known fraudulent identifiers (cards, accounts, devices, IPs) used to automatically block or flag matching future transactions.