Merchant Newsletter - December 3, 2005

Holidays are the Fraudster's Opportunity

Fraudsters take advantage of high sales volume


Online Merchants have a much harder time.  One of the front line protections is AVS (Address Verification System) which will tell you if the address given is actually the billing address of the credit card.  Shipping (with proof of delivery) is the primary protection against chargeback. 

The fraudsters will do ANYTHING to get you to ship to an alternate address.  Long time readers of this column know Dennis' Law:  "The longer the story, the higher the probability of fraud" Fraudsters use US addresses that forward packages to them, anywhere in the world!  Companies like Access USA specialize in this activity, forming the perfect US based "front" for overseas fraudsters.  Remember, the fraudster can "re-route" your shipment from the verified address to another unless you take the proper precautions!

AVS can be beaten, using a trick described here.  Just make sure to check the second address line to catch this simple, but ingenious technique.   We also compiled a newsletter issue devoted to AVS and shipping issues.

AVS works only in the United States.  We have an entire "Fraud Watch" column for the International merchant here, but the gist is: If you ABSOLUTELY must sell something to someone in one of these "dangerous" countries, have them send you the funds Western Union.  They have HUNDREDS of offices in Nigeria alone.  Chances are, you will get a "long story" from the customer "why they cannot use Western Union". 

CVV2 or Card Verification Value (the three rightmost digits on the signature panel) can also help the online merchant.  Reject any order where the CVV2 comes back as NO MATCH, and if possible, configure your store to REQUIRE CVV2.  A valid CVV2 number is NOT a guarantee that the card is valid, these numbers were stolen along with the credit card numbers in the now-famous CardSystems break-in involving up to 40 Million cards!


The COMBINATION of good AVS, CVV2,  proof of delivery, and common sense are the "front line" defenses of any online merchant.  If we made you a little paranoid with this issue... GOOD.  We love talking to our merchants, but we want to AVOID the call that starts with: "I just got a chargeback because of fraud". Hopefully, this information can help you make your holiday profitable, and problem-free.




With the holiday season already started, fraudsters are coming out of the woodwork.  They use the long lines at retailers as camouflage, knowing the overworked, rushed attendant will probably not ask for ID.  They flock to the online stores, knowing that they cannot give the same careful attention during the peak season that they usually do.  

The successful retail fraudster is well dressed and confident.  Shopping at peak hours, often right before the store closes.  They usually know just what they want, an expensive, easy to sell consumer item (i-pods and GPS are targets this year).

Retailers have it easier than online vendors, all they need are the 5 MAGIC WORDS.  "May I see your ID?"  Ask them for their ID BEFORE THEY SIGN, and retain it until they do.  Compare the face on the ID to the customer, and the signature to the one on the ID.  A common method of getting free merchandise is to purchase something and when signing, use your "other" hand, and sign a different name.  Go home, call the card issuing bank and claim that your card was lost or stolen.

Retail merchants can also use an inexpensive imprinter to prevent chargebacks due to fraud.  We devoted an entire newsletter issue to the method of using imprints to successfully win chargebacks due to fraud! 

Some of you will think all of this is just too much to do.  The next time you go to a store, and they INSIST on seeing your ID, ask them why!  They will probably tell you it's because they recently got ripped off by a stolen credit card.  If you REALLY need to lose an expensive item before you get a grip on reality, just package one up and sent it to me....  At least when you DO get nailed, it will not be your first loss.


One of our merchants who sells at the swap meets, takes a picture of anyone using a personal check.  Another merchant takes a photo of the customer's driver's license for large dollar amount purchases.   You may want to check and see if there are any ordinances or regulations in your state, county, or city against doing this, but according to the reports, it REALLY cuts down on fraud and chargebacks.  If a customer knows you have a picture of them holding the merchandise, it's pretty hard for them to call Visa, and claim he did not make the purchase.  Likewise, a bad check passer will walk away knowing you will have his picture to give to the police!  Most states have laws against passing bad checks, and here a picture speaks more than a thousand words!


An inexpensive black light can also help validate cash (large bills), credit cards, and drivers licenses!  We have a Micro-UV “black” light which is perfect for spotting those fake credit cards, counterfeit currency, or any other item that has Ultra Violet (UV) properties. Simply push the button on the side of the light and a bright blue UV light is emitted. Small enough for our mobile merchants to take anywhere!

ORDER FREE MERCHANT MATERIALS HERE!!!

Copyright (c) 2004 Advanced Merchant Solutions, Inc. All Rights Reserved
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