What is a possible indicator of a merchant attempting a bust-out scheme?

A merchant attempting a bust-out scheme is likely to engage in larger than expected transaction volumes as a key indicator of this type of fraud. In a bust-out scheme, a merchant sets up a business intending to defraud financial institutions, typically by processing an unusually high number of transactions shortly before disappearing or declaring bankruptcy.

When the transaction volume exceeds the typical levels expected for a legitimate business operation, it can signify that the merchant is not transacting in good faith. This spike in volume is often followed by rapid cash withdrawals or purchase of high-value items, indicating that the merchant is attempting to maximize their profit before the fraud is detected. As a result, monitoring transaction volumes that are larger than expected is a critical factor in identifying potential bust-out schemes.

In contrast, consistent chargeback rates might indicate issues with customer satisfaction or payment methods rather than outright fraudulent activity. Monthly volume within expected limits suggests the business operates normally without any red flags, and low credit volume does not indicate fraud but could imply a struggling business. These elements do not effectively point to the high-risk situations associated with bust-out schemes.