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Insights and Expertise

Fake online reviews merchant-hopping behavior helps them evade black-

lists and consistent transaction pattern detection.
pose a payments • Cross-border activity: Fake review operators may
spread different parts of the operation across mul-
tiple jurisdictions. This decentralization can obscure
compliance risk the true nature of the merchant's activity and make
identification difficult.
By Sarah Craven Escalating legal and regulatory risks
G2 Risk Solutions Payment providers must navigate growing legal uncer-
tainty, learning to monitor and respond to a new set of
ake online reviews were once isolated to shady red flags effectively. The risks are focused in two primary
sellers looking to boost their ratings. But now? areas:
Fake reviews are an entire economy of their
F own, powered by AI. While regulators and 1. FTC enforcement: In 2024, the FTC finalized the
online platforms are cracking down on merchants that Trade Regulation Rule on the Use of Consumer Re-
sell this deceptive content, payment providers are get- views and Testimonials. Among other things, it prohib-
ting swept into the compliance and financial fallout. its the sale or purchase of fake consumer reviews, tes-
Fake reviews are no longer just a "buyer beware" risk for timonials or fake engagement indicators, such as likes,
consumers. The sprawling fake review economy has big shares and follows. Importantly for payment provid-
financial consequences for global commerce and the pay- ers, it gives the FTC authority to impose penalties up
ments industry. to $51,744 per violation. Heavy FTC penalties and the
Fake reviews are big business resulting bad press can drive a merchant out of busi-
ness, leaving its payment provider to absorb locked-up
Until recently, fake reviews were often easy to spot. The reserves and unpaid chargebacks as losses. The abrupt
manual efforts of bad actors behind them produced tell- collapse in transaction volume can then push the pro-
tale signs of artificial attempts to build consumer trust. vider's risk scores above card-network thresholds, ex-
posing it to higher fees or sanctions.
The landscape has matured dramatically with support
from AI. Sophisticated actors now produce large volumes 2. Card network fines: Card networks recognize the
of AI-generated content that can convincingly simulate profound damage fake reviews inflict on consumer
authentic human opinions. It's a full-fledged economy of trust and on payment system integrity, so they are in-
deception, and payment providers are being drawn in by creasing their enforcement actions against payment
unintentionally facilitating the transactions that sustain it. providers. Those in non-compliance with network rules
can face sizable fines. Card networks are conveying
Unfortunately, the problems for payment providers can't that the responsibility for maintaining a trustworthy
be solved by denying merchant accounts to fake review ecommerce environment extends to every link in the
sellers. These merchants use deception to appear legiti- payment chain. The consequences for failing to meet
mate and benign, using complex tactics to mask the real that standard can be swift and severe.
purpose of their business. They may easily bypass tradi-
tional diligence and merchant onboarding checks, expos- Stopping fake reviews involves
ing their payment providers to serious fines and reputa- the whole payments chain
tion damage.
To protect both business and the broader integrity of digi-
tal commerce, payment providers must treat fake review
How fake review merchants exploit the system
sales as a serious risk. Regulators, card networks and con-
sumers are demanding greater accountability, making
Payment providers must understand fake review sellers' stringent due diligence a necessity. This requires evolving
deceptive tactics to effectively counter them. beyond static underwriting or periodic merchant audits.
• Transaction laundering: Fraudsters often use an in-
nocuous-looking front site as the face of the business. A modern risk management strategy means greater pro-
They use the benign-appearing merchant account to activity in merchant onboarding, continuous monitoring
process payments, but the product sold behind the and AI-powered risk assessment. Payment providers that
scenes is fake reviews. Typically, the site content is take action won't just avoid costly penalties; they'll play an
built well enough to pass traditional underwriting, important part in restoring trust across the entire ecom-
then left dormant while a high-volume deception merce ecosystem.
business runs in the background.
Sarah Craven is the director of strategic innovation at G2 Risk Solutions,
• Rapid merchant cycling: To avoid detection, fake which provides risk management services to 75 percent of payment
review merchants may frequently change their busi- acquirers worldwide. Contact her at https://www.linkedin.com/in/
ness names, merchant category codes and URLs. This sarah-c-522529179.

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