Introduction

In today’s rapidly evolving financial landscape, third-party payment processors face increasing risks of fraud and compliance violations. This white paper details a recent case in which ACME Pay (a pseudonym for confidentiality), a payment processing company and new client of Straddle's identity and fraud prevention products, effectively identified, investigated, and mitigated significant risk from a fraudulent merchant during their initial compliance assessment using Straddle’s advanced analytics platform.

Background

ACME Pay processes payment transactions for various merchants across industries. Given the sensitive nature of financial transactions, ACME Pay sought out Straddle’s robust compliance solutions to mitigate risks such as fraud, money laundering, and unauthorized activities. This case study highlights the identification and resolution of a merchant, “FinSolutions LLC,” violating ACME Pay’s Acceptable Use Policy by processing prohibited transactions under the guise of legitimate business operations.

Identifying the Issue

During the initial compliance onboarding using Straddle’s advanced analytics and fraud detection solutions, ACME Pay’s compliance team identified suspicious transaction patterns from FinSolutions LLC:

• Large, repetitive debit and credit cycles involving identical bank accounts, but spaced out over time to avoid traditional screening.

• Transaction patterns inconsistent with the stated business model.

• Activities linked with high-risk and prohibited sectors.

These red flags prompted an immediate and comprehensive compliance review facilitated by Straddle’s transaction analytics capabilities.

Investigation and Analysis

Using Straddle’s comprehensive reporting and insights tools, ACME Pay quickly confirmed:

• Substantial fraudulent ACH transactions processed by FinSolutions LLC.

• A clear pattern over time indicating deliberate misrepresentation of merchant activities, posing serious anti-money laundering (AML) risks and potential exposure to regulatory penalties.

• Evidence that FinSolutions LLC was actively misleading customers by falsely claiming the ability to process prohibited transactions.

Straddle’s advanced transaction analytics significantly streamlined this discovery process, enabling ACME Pay to swiftly assess the scope and severity of the violations.

Results and Benefits

Utilizing Straddle’s analytics and risk mitigation services enabled ACME Pay to:

• Quickly identify fraudulent activity during initial onboarding, averting potential losses exceeding $600,000.

• Minimize financial and reputational risks through rapid termination of the merchant account.

• Strengthen internal compliance protocols, informed by insights from Straddle’s robust analytical tools.

Conclusion

This case demonstrates the crucial role Straddle’s advanced analytics and real-time monitoring capabilities play in protecting payment processors from regulatory, financial, and reputational risks. By swiftly identifying and addressing fraudulent activities during the initial onboarding phase, ACME Pay effectively reduced potential damages and reinforced its commitment to compliance and integrity.

Continued partnership with Straddle ensures enhanced risk detection, faster response times, and overall improved operational resilience.