Transactions carrying a high level of risk, like medical bills, cash advances, or student loan withdrawals, generally require you to verify your identity through a knowledge-based authentication process. Before initiating these types of transactions (because they’re more vulnerable to fraud, money laundering, and other illegal activities), there’s a few things you should know.

As the name implies, high risk transactions (HRTs) are financial transactions that involve a greater risk of fraud.

While there’s always some risk involved with card payments, high risk transactions are more likely to experience issues like chargebacks. Because of the potential financial reward, it may be tempting for fraudsters to target high risk transactions.

From large-scale instances like international transactions and large cash deposits or withdrawals to more common medical bills or cash advances, high risk transactions can pose significant threats to your identity.

Due to that greater degree of fraud vulnerability, attempting a high risk transaction typically prompts you to complete a knowledge-based authentication process to ensure that you’re who you say you are and that the transaction is legitimate.

Knowledge-based authentication explained

Financial institutions are legally obligated to monitor and identify high risk transactions to prevent financial crimes, adhering to stricter rules and regulations than other industries and making security a top priority.

Enter the knowledge-based authentication (KBA) process that allows for confirmation of a user’s identity.

During a typical KBA process, providing additional, detailed personal information serves to verify your identity such as:

  • What is the name of your first pet?

  • What is the model of your first car?

  • What is the name of your favorite teacher?

  • What city were you born in? 

Adding this additional layer of security helps reduce the chances of identity theft and fraud by protecting sensitive data and systems from unauthorized access. 

Tips to help you prevent fraud

Unfortunately, knowledge-based authentication isn’t always 100 percent foolproof.

If someone steals — or tricks you into giving up — your personal information (through phishing or data breaches) or if the answers to these questions are publicly available or guessable based on your social media profiles or activity, they could attempt to complete a high risk transaction on your behalf.

Stay a step ahead of criminals trying to make fraudulent high risk transactions with your information by: 

  • Being cautious of phishing. Think carefully before responding any time you receive an unexpected or suspicious phone call, text, or email — especially if you’re asked to provide sensitive information out of the blue. 

  • Reporting suspicious activity. Regularly review your bank and credit card statements. If you notice anything suspicious, immediately report it to one of our identity specialists (if you’re an Allstate Identity Protection member), or your bank or local law enforcement agency. 

  • Being vigilant, especially in public. Be aware of your surroundings when using your phone or any mobile device. Never provide personal or financial information where others can hear you. And, if you must use public Wi-Fi, use a virtual private network (VPN) for an extra layer of security. 

  • Signing up for a high risk transaction monitoring service. Similar to credit monitoring services, high risk transaction monitoring can help you stay alert to suspicious activity like when someone tries to use your identity to make a non-credit-based transaction.