Fraud risk in electronic payment transactions
DOI | https://doi.org/10.1108/JMLC-09-2015-0039 |
Published date | 03 May 2016 |
Date | 03 May 2016 |
Pages | 148-157 |
Author | Levente Kovács,Sandor David |
Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
Fraud risk in electronic
payment transactions
Levente Kovács
Secretary General Hungarian Banking Association, Budapest, Hungary and
Institute of World and Regional Economics, Faculty of Economics,
Department of Economic Relations, University of Miskolc,
Miskolc, Hungary, and
Sandor David
Payment and SEPA expert, Hungarian Banking Association,
Budapest, Hungary
Abstract
Purpose – The purpose of this paper is the timely review of regulations on the security of electronic
payments, payment innovations and their vulnerabilities and discussing the recommendations
elaborated by the European Forum on the Security of Retail Payments.
Design/methodology/approach – First, the article presents a serious fraud case which happened in
the Hungarian banking system. This case demonstrates all risks associated with the security of
payment channels being used. Next, the article examines those international SecuRe Pay Forum
recommendations which target the elimination of such fraud risks. Finally, the article compares current
domestic regulations with these recommendations.
Findings – The fraud incidents and the speed of penetration of new fraud techniques and methods
caught the attention of payment service providers, customers, supervisors and overseers. The result of
their cooperation is the European Forum on the Security of Retail Payments. The forum elaborated three
sets of recommendations on security of Internet payments, payment account access services and mobile
payments, which are missing elements of the present Hungarian and pan-European regulations. Both
domestic and international regulators should build on the revised Payment Services Directive and the
recommendations in question, to avoid fraud incidents like the one this article initially portrayed.
Originality/value – The article presents a specic, true case which took place in Hungary in 2014.
Keywords Fraud, Authentication, Payment risk
Paper type General review
The fraud incident
A client signed a HUF 500-million (approximately €1.7m) contract with a construction
company. On the building site, according to regulation, both parties displayed their
important data, like their names, addresses, telephone and fax numbers and e-mail
addresses. Upon seeing these data, the fraudster had the idea to acquire the nancial
details (amount, account numbers, cash-ow, etc.) of the contract. He appeared at the
building site disguised as an inspector of the tax authority, ready to make an on-site
revision. With the help of a fake identity card (like that of the authority), it was easy for
him to “prove” his identity to the parties. Like this, he was able to look into the
JEL classication – G39, K29, K49
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
JMLC
19,2
148
Journalof Money Laundering
Control
Vol.19 No. 2, 2016
pp.148-157
©Emerald Group Publishing Limited
1368-5201
DOI 10.1108/JMLC-09-2015-0039
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