How to Recognize Fraud

Dec 23, 2020

When you operate a business, recognizing the signs of fraud is one of the most important things you can familiarize yourself with. According to the National Retail Federation, retail shrink totaled 61.7 billion in 2019 due to losses from fraud and theft, and that number can be expected to rise in 2020 amid the world’s current economic state. And when it comes to fraud, criminals have found a variety of unique ways to take advantage of merchants.

While some of the signs listed below certainly don’t constitute fraud on their own, having several red flags appear simultaneously may be a reason to take time to investigate the transaction. By familiarizing yourself with the warning signs below and staying vigilant when red flags arise, you can protect your livelihood from the detrimental effects of retail fraud.

What to Watch for in Online Transactions

Above-average transaction amounts or transactions with high-priced merchandise

In many cases, fraudsters will spend more than your average customers. In some cases, this is because they’re being frivolous with other people’s money; however, it may also be because they’re trying to purchase the items with the most resale value.

Purchasing multiples of the same item

Criminals often have their hand in more than one facet, and for some, that can mean making fraudulent purchases and setting up their own black-market business. This is generally apparent when suspicious transactions contain multiples of the same item – especially when those items are in high demand.

Using the same shipping address across multiple orders (especially with different cards)

When you see the same shipping address on a variety of different orders, it can definitely be indicative of fraud. It’s always a good idea to take a further look at these transactions to determine if they’ve been paid for with multiple cards, as this is another red flag that can signal fraud.

Placing an order with more than one card

Using more than one card, particularly on smaller transactions, is a method commonly used by fraudsters to determine which cards in their possession are still active and have available balances.

Multiple declines followed by an approval

When a criminal obtains a stolen card, they often don’t know the correct information that accommodates it. Many will make several attempts at guessing details such as CVV numbers or zip codes until they obtain approval.

Information that doesn’t line up or make sense

When fraudsters make a purchase with a stolen or fraudulent card, it can sometimes be obvious when information doesn’t line up. Watch for:

  • An email address with a different name from the cardholder
  • Obviously fake details such as phone numbers with sequential numbers or strange alphanumeric email addresses
  • Out of character orders from regular shoppers
  • An IP address that doesn’t match the cardholder’s city and state

What to Watch for in Other Transactions

If you have a storefront, sell goods and services at markets, or conduct transactions over the telephone, there are a few other signs that may be vital to watch for.

Excessive concern about shipping details

Most criminals who are paying for goods with a stolen card are primarily concerned with receiving their purchase before you catch on to their scam. As such, you may find that they’re overly concerned about when their purchase will ship and how fast it’ll get to them.

Making a purchase without paying attention to small details

When someone shopping with a stolen or fraudulent credit card shops in person, they often want to make a purchase as fast as they can and get out. This is especially true for those who are planning to resell or return the merchandise they buy. In this case, you might find that they’re not particularly concerned with genders or sizes and just grab what they can and go.

Paranoid behavior or rushing to complete the transaction

Some criminals might be extremely nervous when they get to the register. If they look like they’re afraid of getting caught, there’s a good chance they are!

Not knowing the correct pin number or taking too much time to sign a receipt

If a buyer tends to be slow at signing their receipt, the signature doesn’t match the back of the card, or they have to look up a pin number, it may be a good indicator that you should ask for ID or call the transaction in for approval.

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