Basic Fraud Prevention
There isn't a single simple solution or tool that prevents all fraud. It
takes an assortment of many tools to mitigate it. The best protection comes
from knowledge and understanding of the latest tools and trends impacting
the marketplace. Reading through the topics listed below will help you
determine what your business could do to reduce your fraud risk. Awareness
is the first step towards fighting fraud.
Find out what steps you should take to ensure
the legitimacy of every card, cardholder, and transaction.
Card Not Present
Six warning signs of fraud
Certain customer behavior could point to card fraud, but it doesn't
necessarily indicate criminal activity. You know your customers, so let your
instincts steer you in the right direction.
Watch out for customers who:
Purchase a large amount of merchandise
without regard to size, style, color, or price.
Ask no questions on major purchases.
Try to distract or rush you during the sale.
Make purchases and leave the store, but then
return to make more purchases.
Make large purchases just after the store's
opening, or as the store is closing.
Refuse free deliver for large items.
Control Frequently Asked Questions
What is a chargeback?
What is a "retrieval request" and
how do I respond to one?
What do I do if I am suspicious
about a card or card holder?
What are the costliest
How can I avoid fraud at the
How can I avoid fraud on
Q. What is a
A procedure whereby the credit card issuer reverses all
or part of the amount of a credit card sale back to the
originating merchant in accordance with Visa and
MasterCard regulations. A chargeback is initiated when
a cardholder or a cardholder's bank disputes a charge
against the cardholder's credit card account.
is a "retrieval request" and how do I respond to one?
A retrieval request is a request from the card-issuing
bank to review a copy of a sales receipt that has been
processed through your business location. This request
can be the result of various reasons, including a
customer disputing a sale, or not recognizing your
business name. However, if you receive such a request,
you should reply to it immediately. If you do not
respond promptly to a retrieval request, the
card-issuing bank will have the right to charge the
amount of the sale back to your business, resulting in a
loss of income for you. Sales receipts can be faxed to
the Chargeback and Retrieval Department at 818-871-7896
or can be mailed to: Innovative Merchant Solutions,
26520 Agoura Road, Calabasas, CA 91302. When mailing
or faxing the requested receipt, please include a copy
of the original Retrieval Request Form. If you have any
questions regarding a retrieval request, you may also
speak with a Customer Service Representative.
do I do if I am suspicious about a card or card holder?
the authorization center and request a Code 10. Code 10
is a term used by the credit card associations to refer
to situations that are suspicious. Call your voice
authorization center for a Code 10 authorization if, for
ANY reason, you become suspicious of a transaction or
cardholder. A specially trained operator will lead you
through a series of questions designed to minimize any
discomfort to your customer and you. The operator may
give authorization or may instruct you to keep the
card. It is for this reason that you should hold the
card throughout the authorization process.
Q. What are
the costliest chargebacks?
A. The following
are the top ten costliest chargebacks?
of merchant to respond to retrieval request. This is
the single most frequent cause of chargebacks.
Fortunately, this is often the easiest to prevent.
Simply keep copies of your sales transactions and
respond to any and all "Media" or Retrieval" requests by
sending copies of sales drafts immediately.
issuers are responsible for initiating copy requests.
Usually they are initiated to resolve billing disputes
or to comply with a subpoena. Fulfilling copy requests
is very important. When requests are not fulfilled
within the prescribed time period, they almost always
result in a chargeback. A chargeback for not responding
to a copy request is non-reversible per Visa/MasterCard
regulations. So it is in your best interest to respond
quickly to copy requests.
Cardholder was billed more than once for the same
transaction. To avoid duplicate processing,
reconcile your batches daily and ensure that the
register/terminal totals match the credit card receipts
for the day. If you do receive a legitimate duplicate
processing chargeback, do not issue a direct credit to
the cardholder - the credit will automatically be
Cardholder denies making or authorizing a transaction.
Make sure all transactions (other than mail/phone
order) are magnetically swiped or imprinted. Again,
timely submission of a copy of the properly completed
and signed sales slip along with a written explanation
of the validity of the charge will be needed to try to
reverse a chargeback. If the disputed transaction is a
phone or mail order sale, the order form and signed
delivery receipt from any courier or handler will also
of merchant to follow correct procedures in completing
the sales slip at the point-of-sale. The sales slip
must include both a cardholder signature and the card
account number to be valid. The account number must be
obtained directly from an imprint of the card itself or
from electronically reading the magnetic stripe.
Manually entering the account number does not protect
you from a no-imprint chargeback even if the sales slip
Account numbers don't match. After swiping a card,
if the card number displayed does not match the number
embossed on the face of the card, ask for a different
form of payment. Always print and double-check the
account number on all phone and mail orders. Accepting
non-matching transactions will leave you vulnerable to
credit or refund was not properly processed. Credits
must be processed correctly and on time. Make your
customers aware of your credit/refund policy at the time
of purchase. Have the policy printed on your sales slips
directly above the cardholder's signature in accordance
with Association policy. Issue credits only to the same
account numbers to which the sales were made - refunds
paid in cash or merchandise, or to a different account
number, will not protect you from this type of
Failure to obtain proper authorization. Be sure to
authorize all transactions, and accurately record the
approval code on the sales slip. If your request for
authorization is declined, do not attempt to
re-authorize transactions to the same account number, as
subsequent approval may not protect you from a
A card was used either before or after its valid date.
Never process a transaction on a card prior to, or
after, the valid date. Instead, ask for a different form
Merchandise or service not received by cardholder.
Sales transactions must not be processed prior to
delivery of the product purchased. Proof of delivery,
signed by the cardholder, should be obtained for every
credit card transaction in which the merchandise or
service is not delivered immediately at the
point-of-sale. Such proof of delivery may be your only
defense if a chargeback occurs.
Cardholder disputes quality of merchandise or services.
Ensure that your customers are aware of your return
policy at the time of purchase. Stick to your policy.
Display the policy at the point-of-sale and print it on
your sales slips, directly above the cardholder
How can I avoid fraud at the Point-of-Sale?
A. Follow these 7 steps to avoid fraud at the
Despite the best efforts of all parties in the payment
processing business, fraudulent credit card transactions
do occur. Take these preventative measures to minimize
the occurrence of fraud:
Inspect cards carefully.
Hold the card throughout the entire transaction.
Verify that the "valid from" and "valid through" dates
include the current date.
Check card numbers.
All Visa® account numbers begin with a '4'.
All MasterCard® account numbers begin with a '5'.
Check that the first four digits of the embossed account
number match the four digits printed just above or below
the embossed number.
Verify that the embossed characters are the same size,
style, and in alignment.
Check card signatures.
Does it match the signature on the sales draft?
Does the signature panel appear to be altered or
When a card is tilted, the hologram on Visa or
MasterCard cards will move and/or change color.
aware of suspicious behavior.
Pronounced anxiety, nervousness or impatience.
Indiscriminate purchases of unusual numbers of expensive
Repeated purchases in a short period of time.
Fast talk or other attempts at distraction.
Appears overly deliberate and painstaking in signing
Gives excuses about card Issuer problems or requests
that you call a "special" authorization number that he
Report suspicious transactions.
Call your authorization center and ask for a 'Code 10'.
The authorization center will help you determine if the
card is valid.
Train employees in fraud prevention techniques.
Conduct brief training sessions in fraud prevention.
Post fraud prevention reminders and materials near
registers or in employee areas.
Offer some reward or incentive to anyone preventing a
How can I avoid fraud on “card-not-present”
Follow these 6 steps to avoid fraud on
is a particular concern for mail order/telephone order
and Internet businesses, since transactions are
generally "card-not-present." But, there are a number of
things businesses can do to minimize the occurrence of
Have the customer provide the name of the bank that
issued the credit card. This may discourage the
potential thief since they may only have the account
number on hand and not the actual card in their
Call information services to verify the telephone number
that was provided by the customer.
Call the telephone number provided by the customer and
verify the information that was originally provided on
the sale. Many times the fraudulent consumer will not be
able to verify the information that they originally
provided since they were ordering at random with no real
record of what they requested.
Obtain the billing address on the transaction in
addition to the shipping address. Perform address
verifications, obtaining the name and phone number of
the issuing bank and then having someone call the
issuing bank and attempt to verify the billing address.
Train sales associates to be alert to unusual activity
during telephone conversations.
sensitive to priority shipments for fraud-prone
merchandise as this is sometimes an indicator that the
transaction may be fraudulent.
Indiscriminate ordering of fraud-prone merchandise.
Background noise that may indicate someone is
calling from a public telephone.
the customer orders a specific size and color, but
will take anything available, this could be a
the customer has difficulty spelling or pronouncing
his name this should alert you to a possible fraud.