Foreign exchange currency trading is big business and a large speculative marketplace. There are $3.2 trillion dollars traded every day in currency trades from large banks, central banks from various countries, brokers and individuals.
About the Global Trading Services Provider
This pioneer in online forex trading provides execution, clearing, custody and technology products. Their client base includes asset managers, broker/dealers and other financial services firms. They also operate one of the major brands in the retail forex industry. This global trading provider has customers and trading partners in nearly 150 countries who have used their award-winning trading platform with $275 billion transactions per month. Based in the United States, they also have regional sales offices across Europe and Asia.
This global trading provider offers 24 hour foreign exchange currency trading across time zones ranging from Asia, to London and then the United States. The business day starts at 7 a.m. in the Australia office and ends at 5 p.m. Eastern Standard Time in the United States. “As the business day winds down in Asia, it is in full swing in London and morning is just getting started in New York City. The marketplace is particularly hot when all three markets are running at the same time. It is most liquid and traders speculating on the currency markets have the highest potential to make a profit,” said the financial operations director.
The Fraud Challenge
Online currency trading sites have always been targets for cybercriminals to perpetrate identification theft and credit card fraud.
“Our managers noticed that fraud was really getting out of control. We were being repeatedly targeted by recurring fraud—it seemed like the scammers had an endless list of new credit card numbers and false IDs that they were using in transactions after their old accounts were shut down,” said the financial operations director.
This caused a three percent spike in chargebacks and resulted in a large portion of the chargebacks being fraud related. A fraudulent chargeback occurs when a fraudster makes foreign exchange trades with stolen credit cards, which then get ‘charged back.’ Credit card companies have limits on chargeback rates. When this firm’s rates approached 3 percent, they were asked what fraud procedures they had in place. At that point, the trading firm had a phone line where customers could call in once the fraud occurred but did not have an easy way to monitor fraud or identify trends.
Expert Fraud Solution
The firm determined early that building a ‘home grown’ method to fight fraud would require extensive research and development as well as technical staff devoted to the problem. An in-house solution was too expensive and time consuming and they needed the help of an industry expert. “It was a frustrating time but we understood that our area of expertise was in trading and not in fraud prevention,” said the financial operations director.
“We chose iovation and their fraud protection solution because the price was right, they didn’t require us to provide PII, and because we would benefit from the shared fraud histories in their global database of nearly five billion devices and associations between those devices,” said the financial operations director.
Fraud Prevention Solution Integration
Using iovation FraudForce resulted in significant savings. “Since implementing iovation the company has saved $500,000 in just ten months!” said the fraud operations director.
FraudForce was integrated in multiple touch points on the trading sites. A team of five fraud analysts trained to use the product described it as easy-to-use, robust and critical to helping them detect and prevent online fraud.
Customizable business rules were configured to automatically evaluate the risk of each online transaction according to the company’s unique needs. Business rules for velocity, geography and evidence-based assessments were put in place as well as risk rules for device anomalies. The company continues to modify their rules over time as new threats emerge.
iovation FraudForce greatly reduced fraud, boosted profits and increased operational efficiencies in the company’s fraud prevention process.
“We went from an excessive chargeback rate of almost 3% to almost no fraudulent chargebacks. What started out as a significant fraud chargeback problem has turned into an almost non-existent issue,” said the financial operations director.