Education

While we hope you find this content useful, it is only intended to serve as a starting point. Nothing in this article, nor in any associated resources, should be construed as financial or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared. CSB disclaims any liability arising from the use or misuse of these materials and, by visiting this site, you agree to release CSB from any such liability. Do not rely upon the information provided in this content when making decisions regarding financial or legal matters without first consulting with a qualified, licensed professional.

Safeguarding your business against fraud is important, particularly if your business is accepting credit cards. Credit card fraud is something that can never be eliminated, but rather something that must be managed.

Preventing the Cause of Fraud

If you can and it’s appropriate, avoid the chance of any credit card fraud by asking for and offering alternative payment options for customers. Ensure your bank facility is approved to process mail, telephone and/or internet orders prior to accepting credit card payments.

If you don’t have to accept credit cards, then your fraud rate will be zero.

But credit card orders are part of your business model, either over the phone or the internet there are some things you can do to reduce the chance of fraud:

• Take extra care to validate the customer's full name, address, and contact details and question any changes if customers request you amend their credit card details. Talk to someone you trust to confirm the change.
• Be wary if the address the goods are sent to differ from the cardholder's address (especially if the credit card address and shipping destination are different countries).
• Question an order to be shipped overseas if the customer could purchase the goods locally for a similar or lower price.
• Have deliveries made 'signature required' with a courier of your choice to minimise the risk of carrier collusion and never deliver goods to unattended premises.
• When receiving card payments ensure you never request for credit card numbers to be sent to your business by email. Email is not a secure channel and card details can be intercepted and used for criminal gains.
• For paper invoices and mail or telephone orders, utilise options such as click-to-pay invoicing solutions. They allow your business to create a payment order that can be copied into an email. This is a far safer why of processing card details.
• If you are an e-commerce merchant, using an approved outsourced third party to capture and process payments is the safest option.
• Be vigilant about unusual spending patterns or behaviour could help you identify early warning signs that something may not be right.

Protecting Your Business

Credit card fraud is less if the cardholder is physically present to swipe, insert and/or enter a PIN, as it’s easier and faster to defraud you from a distance online.

If you do experience credit card fraud, possibly the first you’ll know is when you get a chargeback (a reversal of a credit card payment from your account). For this reason, it is important that merchants take steps to identify the purchaser and ensure that every transaction is legitimate.

Authorization Approval

Authorization approval does not mean that the merchant is guaranteed payment. Approval only indicates that at the time the approval was issued, the card hasn't been reported stolen or lost, and that the card credit limit has not been exceeded.

If someone else is using the credit card number illegally, the card holder has a right to dispute the 'approved' charges and the transaction could be charged back to your business

Refund Fraud

Refund fraud is a common type of fraud often committed by employees processing refunds to their own debit and/or credit card. To avoid detection, they may create a large sale on a fraudulent card then process a refund to their own card.

To guard against this type of fraud, we recommend you closely monitor all refunds, checking they all correspond to a legitimate sale and are refunded back to the card used in the original purchase.

Shipping Scam

An increasingly common scam we are seeing is what’s called a ‘shipping scam’. These types of scams involve a malicious third party using a stolen credit card to pay for goods. The scammer contacts the business requesting goods to be shipped overseas and the price plus freight charges to be billed and split between several credit cards.

The scammer insists that the business use a particular shipping company and provides a phony email address. The business then contacts that ‘shipping company’ which requests the freight charges be paid upfront by cash wire transfer.

The business is fooled into making the transfer after having checked that the credit cards have sufficient funds and are not stolen. But the shipping company’s email address is a front for the scammers and the credit card details are stolen, probably from online card accounts which may take some time to discover.

At the end of the day, the business can be out of pocket for the cost of the shipping.

Ticket Scams

Another prominent scam on the rise relates to sales (generally for tickets – tourism activities, travel passes) via private sellers on social media app’s or resale sites.

The scammer poses as an independent re-seller offering discounted prices for tickets via this online platform. The seller purchases the tickets from the rightful ticket company using illegally obtained credit card details.

These tickets are then sold on to the unaware consumer, who pays for these tickets at a discounted rate via bank transfer. The ticket company then receives a reversal/chargeback for the fraudulent transaction a short time later.

You are within your rights to decline suspicious orders, as it will be your business who will be liable for any loss if the legitimate cardholder disputes the transaction.

While we hope you find this content useful, it is only intended to serve as a starting point. Nothing in this article, nor in any associated resources, should be construed as financial or legal advice. Furthermore, while we have made good faith efforts to ensure that the information presented was correct as of the date the content was prepared. CSB disclaims any liability arising from the use or misuse of these materials and, by visiting this site, you agree to release CSB from any such liability. Do not rely upon the information provided in this content when making decisions regarding financial or legal matters without first consulting with a qualified, licensed professional.