January 23, 2023

Combating Christmas scams with counterparty data analysis

The holiday season is quickly approaching and with it comes an increase in scammers looking to take advantage of unsuspecting victims. As a financial institution, it is important to be aware of the different types of scams that can occur during the holidays. Understanding these threats and putting preventive measures in place will ensure your institution is ready for any attempts at fraud.

Combating Christmas scams with counterparty data analysis

EAC (Email Account Compromise) is one type of scam to be aware of this holiday season. This involves scammers sending emails from a legitimate email account that has been compromised, usually via phishing or malware infection. The email will contain malicious links or attachments designed to steal sensitive information such as passwords and credit card numbers. Fake e-commerce sites are also a common threat during the holidays, as they are designed to look like legitimate websites but contain malicious code which can steal data or infect your device with malware. Finally, fake charity fundraising campaigns should also be on your radar; this type of scam involves perpetrators asking for donations through unverified sources such as emails or social media messages, claiming to support charitable causes but taking the money for themselves instead.

Financial institutions can protect themselves against these types of scams by utilizing their fraud and AML toolkits.

Accurate KYC measures can help detect suspicious activity, while transaction monitoring can alert you when identifies unusual patterns around a customer’s account. On-going due diligence is also important to identify any potential red flags, such as a target counterparty that is new to the customer or is a newly reactivated dormant account. Scammers may also apply the practice of front company cycling – opening and shutting down firms at the same physical address within short periods.

When a business account performs frequent ATM usage, that can also hint at suspicious activities. Fake web shopping services usually offer virtual products (e.g., gift cards) but do not invest in e-commerce analytics, so the easiest way to find out if they managed to grab a purchase is to check their balance frequently. Lastly, network analysis and transaction monitoring may help detect payments that make no sense compared to customer behavior, are typically done in the same amount, or show strong geographic diversity (typically mobile transfers).

Wasting Resources

When it comes to preparing for Christmas scams, one of the biggest mistakes FIs can make is wasting resources. According to a recent study of ACAMS and Verafin, 23% of wires are sent to new counterparties. Out of these transactions, 85% have an established history with the customer — meaning they are less likely to be fraudulent. Still, 60% of investigation time is spent on customers of these unknown counterparties.

How Can You Conduct an Effective Investigation?

The key is finding ways to reduce false positives and optimize investigations. One way an FI can do better is by alerting on the counterparty instead of each customer individually. Additionally, a visualization tool can help identify patterns that may indicate suspicious acts. Knowing when to stop investigating and file a Suspicious Activity Report (SAR) can also be beneficial; leaving it up to law enforcement to figure out the case details at the right time, can save time and resources while still detecting potential threats quickly.

Think Outside the Box

Finally, FIs need to think outside the box when it comes to preparing for holiday scams this season. For example, looking at geographic patterns in transactional behavior can help uncover mobile transactions to fraudsters who may be attempting scams around the Christmas season. Additionally, keeping an eye out for Front Company Cycling — where criminals use multiple companies or accounts to hide their activities — could help detect suspicious activity before it happens. Finally, utilizing the benefits of a Network Monitoring system and collaborating with other FIs could help uncover structuring that might not be visible within your own institution’s data set.  


As Christmas draws close , financial institutions must begin preparing for potential scams that may occur as part of the festivities. Being aware of common strategies fraudsters use, such as wasting resources on false positives alerts or front company cycling, can help keep your institution safe from these schemes during the holidays and beyond. Moreover, using data-driven approaches such as alerting on counterparty rather than individual customers or collaborating with other financial institutions are essential steps in protecting your customers against scammers this Christmas season!

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