Merchant Fraud refers to fraudulent activities carried out by a merchant, which can include activities like processing stolen credit cards, selling non-existent goods, or using the merchant account to launder money. Merchant fraud can lead to severe penalties, including:
- termination of the merchant account
- financial loss
- legal consequences
- being placed on the MATCH list
Other forms of merchant fraud can include card testing, where a fraudster uses a merchant’s platform to test the validity of stolen card details, and factoring, where a merchant processes transactions on behalf of another business.
Payment processors and card networks take merchant fraud very seriously and have systems in place to monitor for suspicious activities. Merchants should implement strong internal controls and regularly monitor their transactions to prevent fraud.