Fraud Protection Tips

Keeping Customer & Card Information Safe

In today’s increasingly electronic business world, keeping credit card and customer information confidential is progressively more important -- and difficult. The Card Associations (Visa®, MasterCard®) mandate that all merchants maintain the highest information security standards, and it’s just good business practice to be vigilant with your customers’ information. Fraud comes in all shapes and sizes, and while non face-to-face transactions may carry a higher potential for fraud, it can happen in retail storefront businesses too.

To help you be mindful of the various forms fraud can take, the First Horizon Merchant Services’ Loss Prevention Team has developed some tips and guidelines to help you protect your business. In addition to these tools, more loss prevention information is available online at www.merchantconnect.com, as well as other sources listed herein.

“Code 10” - Your First Line of Defense

Whether you sell goods and services in a face-to-face environment, or via mail, phone or Internet, you can employ a “Code 10” authorization to verify additional information on a suspicious transaction. You may be prompted by your processing terminal to call for voice authorization of the charges (CALL AUTH), or you may simply not feel right about the transaction. In either case, you can use “Code 10” to gain additional information before you release your merchandise.

How to use “Code 10”
Call the voice authorization phone number provided by your merchant processor. This number can typically be found on the sticker on your terminal or call your merchant service provider and asked to be transferred to the voice authorization department where a representative will ask a series of questions about the transaction.

NOTE: Never call a phone number for the card issuing bank provided by a customer, or let the customer call the card issuing bank for you to obtain an authorization code. Do not accept an authorization code given to you by a customer. If an authorization request is declined, request another form of payment other than a credit card. Do not split a declined transaction into smaller increments to obtain an authorization.

Always obtain an authorization code before shipping merchandise. An authorization code does not guarantee that a transaction will not be disputed later. An authorization code simply identifies that the amount of credit requested for that particular transaction is available on the card at the time of the sale. An authorization code does not protect you in the event of a chargeback regarding unauthorized transactions or disputes involving the quality or delivery of goods and services.

It is highly recommended to use Code 10 before charges have been placed on the credit card and before a product has been shipped. Doing so will allow you to avoid being billed for processing fees and the loss of shipping costs on the transaction in question. Please note that you may still request a “Code 10” if the product has been shipped, but your chances to recover the product will be reduced.

CUSTOMER FRAUD:
Look Out For Suspicious Behavior & Requests

As fraudsters become more sophisticated, so do their schemes. Particular favorites target transactions that most often happen via phone or e-mail. Here are some examples to watch out for at your business.

• Relay Calls – A relay call is an operator-assisted telephone call, usually used by someone who is hearing impaired. While this is a valid service, criminals have also used the service to place fraudulent orders. It is recommended that a “Code 10” authorization request is made for all orders obtained via relay call.
• Bulk Orders – Customers ordering large quantities of the identical or similar items. You should also be cautious of large bulk orders with a delivery address of an apartment or self-storage unit.
• Multiple Cards – Customers who provide multiple card numbers for the same purchase, especially when the card numbers are different by only the last few numbers.
• Money is No Object – Requests for overnight delivery, without regard to cost.
• Immediate Shipment – Customers who request immediate processing of the order and want the shipment’s tracking number ASAP.
• Immediate Pick Up – Customers who place phone orders, request immediate processing of the order, and then advise they will have someone come to the store to pick up the product.
• Alternate Deliver Address – Requests for delivery to an address other than the billing address, or delivery to a freight forwarder. (Criminals will use United States based re-shippers to avoid detection of foreign shipments.)
• Not Sold Here – Telephone or online requests for merchandise you do not sell. Most common requests are for cell phones and laptop computers.
• Free E-mail Orders – Communication via a free e-mail service (Yahoo, Hotmail, Gmail, etc).
• Other Schemes to Watch For:
• Excess Funds Request - A customer may request that you process a VISA® or MasterCard® transaction for an amount greater than the purchase price of the goods or services and then request the excess funds be sent by wire transfer, money order or Western Union®, to a freight forwarding company or other person. This type of transaction is also a violation of VISA®/MasterCard® regulations, so you would not have the ability to favorably resolve a chargeback, should it occur.
• Counterfeit Check Scheme – The fraudster overpays for goods or services with a counterfeit check and requests you to wire transfer the difference back to them or an accomplice. This scheme has been reported on personal checks, business checks, cashier’s checks and money orders.
• Fraudulent Customer ID – With today’s technology it is possible to alter a photocopy of a credit card or personal identification such as a driver’s license or passport. Always verify the order information with the authorization center before proceeding with an order.

Hot Spots For Fraud (Sales originating from these countries into the U.S. via phone or Internet order)

• West Africa: Nigeria, Ghana, Gambia
• Asia: Indonesia, Singapore
• Eastern Europe: Bulgaria, Romania, Russia

Employee Fraud Prevention Tips

• Reconcile your work daily rather than monthly.
• Password protect your POS Device (credit card terminal) and other payment processing equipment and software if the feature is available.
• Password protect the credit function on your credit card terminal.
• Secure your POS Device or software during non business hours .
• Fully investigate credits without matching sales.

Fraud Prevention Resources

Here are a few helpful Web sites and toll free numbers to provide more information and assistance on avoiding credit card fraud in your business.

~www.merchantconnect.com
~www.visa.com
~www.mastercard.com
~http://zip4.usps.com/zip4/welcome.jsp - United States Postal Service
~www.ic3.gov - Internet Fraud Complaint Center (IFCC) The IFCC is a partnership between the FBI and the National White Collar Crime Center.
~www.forwarders.com - This is a list of freight forwarders.
~VISA Merchant Verification Service: 1-800-847-2750 (AUTOMATED)
~MasterCard Assist: 1-800-622-7747
~Discover Address Verification: 1-800-347-7988 (AUTOMATED)
~American Express Address Verifications: 1-800-528-2121

This information is brought to you by First Horizon Merchant Services. For questions on the association’s credit card processing program, call Kimberly Layton toll free at 1-866-638-8614; e-mail kalayton@fhms.com.

Reprinted from Floor Care Professional, July 2008