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Preventing Payment Fraud

Preventing Payment Fraud

Preventing Payment Fraud
Preventing Payment Fraud. Payment fraud is the crime that never goes away. While advances in technology are creating new ways to combat it, those same advances are also creating new ways to commit it. And since it’s constantly evolving, small business owners need to be more vigilant than ever. Click here to download our resource guide on preventing payment fraud.

Payment Fraud is part two of a series of informational resource guides designed to help small businesses understand more about fraud and how to stop it before it starts.

Click here to download part one in this series, Cyber Security: Preventing Data Breach Fraud. This guide deals with potential sources of data breach in your business and how to protect your valuable data. Preventing Payment Fraud. Payment fraud is the crime that never goes away. Defining payment fraud can be complex. Simply put, payment fraud occurs when a transaction is made for gain through identity theft, forgery, counterfeiting or other criminal activity. It usually happens with a credit card or check, but it could be any
form of payment.

Another way to look at payment fraud is that it’s constantly evolving. New payment
types and technologies have emerged recently, changing the tactics used by crooks yet
again. And it’s not only perpetrated by small-timers. Some of the most sophisticated
thieves around commit payment fraud. Preventing Payment Fraud

Small businesses might not be the only victims of this crime, but it could be argued
that they have the most to lose. In 2011, two-thirds of organizations across the country
experienced attempted or actual payment fraud. The typical loss according to one
study was $19,200.1 And most didn’t even know it until much later because another study
reported that it takes an average of 18 months to discover that fraud has been committed.
And in that study, the numbers are even more alarming, with median losses for occupational businesses at $140,000, businesses with fewer than 100 employees at $147,000, and one-fifth of all cases suffered losses of more than $1 million.Preventing Payment Fraud

Lack of vigilance makes small businesses good targets.
According to Javelin, more than half of small business owners use personal accounts
for business-related expenses, and 38% don’t even have separate accounts for their
company.

Another big reason small businesses are targeted is because, in general, they do not
take enough precautions. Just 5% perform background checks on potential hires. Only
18% have installed antivirus software. 3% offer employee training on Internet safety.
38% don’t reconcile accounts monthly. And a whopping 43% don’t have any safeguards
in place at all. Preventing Payment Fraud
Payment fraud comes in many forms.
There are many types of payment fraud. Here are a few of the more popular methods.
Counterfeiting:
With today’s technology, counterfeiting has become easier
for crooks. But there are ways to minimize your risk.
u Only accept money orders, cashier’s checks or
personal checks for an agreed-upon amount –
no more, no less.
u Use magnetic ink so that photocopies can
be detected.
u Make sure signatures are legitimate and not
just printed artificially.
u Look at the checks closely – misspelled
words or obvious changes are
a dead giveaway.
u Look for a Ben Franklin watermark and
vertical security strip on all money orders.
u If you are suspicious, always verify the check
with the financial institution it is drawn from.
Check theft:
One of the fastest ways a criminal can gain access to
your checks is to steal your mail. Once they have the
building blocks of your personal information, it’s only a
matter of time before they start cashing in.
And did you know that blank check stock could be
purchased quickly and easily over the Internet? This
makes it very easy for thieves to mock up fake checks
with your account information on it. Preventing Payment Fraud
Forgery:
One of the most popular forms of fraud is forgery, where
the thief fakes a check owner’s signature in order to gain
access to their money. But that’s not the only way to do
it. Any kind of false writing with the intent to defraud is
considered forgery, but the term writing is not restricted to
handwriting; it could also be typing, printing, engraving and
more. This applies to checks, other negotiable items, wills,
deeds, bonds, receipts, public records and contracts,
to name just a few. Intent is an essential component as
well; it is not forgery if one mistakenly believes what they
are doing is authorized.
Kiting:
Typically, kiting occurs when a bad check is drawn
from one account and deposited into another account
to keep its balance from dipping below zero. In effect,
this form of check fraud is playing with money that’s not
really there, and the crime here is that checks are being
misused as credit instead of as negotiable items. Kiting
can also occur within the same account, as in writing a
bad check for cash and taking it to the bank to deposit
before the account goes below zero. This buys a day or
two of float at a time. However it is accomplished, the
traditional motive behind kiting – in general – is to avoid
bounced checks.
Washing:
One of the most popular types currently is the process
of washing, where checks are physically altered by
using chemicals to remove ink, so that thieves can write
the check from scratch. To discourage this, you might
try using gel or rollerball pens to write checks, since the
ink stands a better chance of bonding with the paper
fibers of the check. Consider also high-security checks –
the combination of a bonding ink with such features as
hologram foil bars and heat-reactive ink circles can offer
you substantially more protection.
Credit card fraud can be devastating.
John L. was happy. His Arkansas computer company had just sent $17,000 worth of
high-end laptops to a buyer out of Denver. That’s a major sale, and would do wonders
for his bottom line.
Later, as the transaction processed, he found that the credit card the buyer used was
stolen. Goodbye, healthy bottom line.
Large orders, especially ones from out of state, should raise red flags for any small business.
Before you commit, check it out. If it’s legitimate, the buyer won’t mind. If not, you are taking a
big chance. In the end, failure to confirm his buyer’s identity cost John L. $17,000. Preventing Payment Fraud
Credit Card Fraud:
Technology is being co-opted in a big way when it comes
to credit cards and gift cards. One of the most inventive
ways is skimming, such as when crooks tap into slide
pads at ATMs so that when you go to make transactions,
you are effectively giving them all the digital information
that is on the card. Then it’s just a matter of transferring
all that information to a blank card, and before you know
it, they’re walking into a store with what amounts to your
credit card. Hidden cameras are usually involved as well
to capture your PIN information.
There are other ways to commit credit card fraud.
Here are just a few:
u The outright stealing of cards and making
purchases.
u Fraudulent purchases made online or
through the mail where a physical card is
not required. This sidesteps the risks of
shopping in a brick-and-mortar store and
security cameras.
u Filling out a credit card application with
someone else’s information
without permission.
u Phishing. Thieves can approach yoyou online
with authentic-looking websites and emails
from your bank or credit cards, asking you
to hand over information.
Don’t do it – initiate contact yourself to
prove that it’s legitimate. Preventing Payment Fraud
Online Payment Fraud: With the Internet being such an integral part of our
modern world, it’s no wonder fraud has flourished there
as well – in fact, an alarming amount of offline fraud
can also be committed online, and there are many ways
thieves can use email, chatrooms, message boards,
websites and more to do it.
One of the most popular is co-opting personal information
to commit identity theft. This can be done by friends
or relatives who have borrowed a legitimate card and
are using it for illegal purposes, or opportunistic thieves
who come across sensitive situations or valid payment
information and decide to act on it. Either way, initial
success could lead these people to repeat their crimes
time and again.
Another popular method of online fraud is stealing credit
card numbers. When it comes to purchasing online or bill
paying, some thieves realize that the only thing you need
to carry this out illegally is credit card numbers. Once
they’ve got your number, it’s incredibly easy to conduct
fraudulent transactions electronically. This is a hallmark
of phishing: Thieves approach you with an official-looking
email or website that asks for personal information. Never
fall for this. Even if you believe them, initiate contact yourself.
Also watch out for internal online fraud, especially where
employees have access to insider customer information.

Fight payment fraud
with these banking solutions.
Take advantage of cutting-edge banking solutions that can help protect you and your
employees from payment fraud.
ONLINE BANKING
u Secure logins. Typically, banks require customers to enter a login ID and
strong password.
u Encryption. Information exchanged is locked down tight with state-of-the-art
encryption such as the Secure Socket Layer (SSL) protocol.
u Firewalls.
u Up-to-date browsers required. Bank systems routinely check visiting browsers
to make sure they’re secure. If not, you are usually prompted to install one
that is built for both safety and privacy.
POSITIVE PAY
With Positive Pay, new transactions are reviewed against a list of approved payments
that you provide to the bank. If the payment is not on that list – it doesn’t get paid,
simple as that.
HIGH-SECURITY CHECKS
u Hologram foil bar – a reflective, 3D graphic that is easy to see, and
is difficult to copy or duplicate.
u Heat-reactive ink circle – this feature fades from color to color when
activated by touch or breath, providing safety from copying and solvents.
u Chemical reactive paper – when treated, visible signs of tampering will
be revealed.
u Fiber security weave – fibers within the check’s fabric can have a unique
design, discouraging counterfeiting, copying and scanning.
u High-resolution borders – detailed, intricate borders make duplication
highly problematic.
u Fugitive inks – washing causes extreme discoloration and fading of
preprinted details.
u Microprinting, fluorescents and more.
AUTOMATED CLEARING HO– — USE (ACH) SERVICES
Increase control over how and when you make and receive payments by engaging the
largest electronic network for financial transactions in the United States. Get improved
cash flow forecasting, greater accuracy, lower expenses and faster collection of funds.
Some banks offer even more protection for your ACH transactions, such as Positive Pay
and blocking or authorization for specific clients. Preventing Payment Fraud
To sum up:
The best defense is a good defense.
There’s a catch-22 when it comes to payment fraud. While advances in technology are
creating new ways to combat it, those same advances are also creating new ways to commit
it. And since it’s constantly evolving, small business owners need to be more vigilant than
ever. Involve your employees. Invest in countermeasures such as the banking solutions
above. Increase your security precautions. Because in this economy, payment fraud isn’t
going to disappear anytime soon. It is in your best interest – and in the interest of your
employees, as well as your customers – to stay prepared.
0To sum up:
The best defense is a good defense.
There’s a catch-22 when it comes to payment fraud. While advances in technology are
creating new ways to combat it, those same advances are also creating new ways to commit
it. And since it’s constantly evolving, small business owners need to be more vigilant than
ever. Involve your employees. Invest in countermeasures such as the banking solutions
above. Increase your security precautions. Because in this economy, payment fraud isn’t
going to disappear anytime soon. It is in your best interest – and in the interest of your
employees, as well as your customers – to stay prepared. Preventing Payment Fraud
To sum up:
The best defense is a good defense.
There’s a catch-22 when it comes to payment fraud. While advances in technology are
creating new ways to combat it, those same advances are also creating new ways to commit
it. And since it’s constantly evolving, small business owners need to be more vigilant than
ever. Involve your employees. Invest in countermeasures such as the banking solutions
above. Increase your security precautions. Because in this economy, payment fraud isn’t
going to disappear anytime soon. It is in your best interest – and in the interest of your
employees, as well as your customers – to stay prepared. Preventing Payment Fraud

June 2, 2013 Today's Business, , , , , , 0 Read more >

Tips to Avoid Telephone Fraud by Tim Jacquet

Tips to Avoid Telephone Fraud by Tim Jacquet

Tips to Avoid Telephone Fraud by Tim Jacquet. Fraudulent schemes range from peddling water purifiers, vitamins, and make-up kits to stock investments and abusive “900” numbers. According to the Alliance Against Fraud in Telemarketing (AAFT), Americans lose an estimated $40 billion each year to telemarketing fraud. Con artists and swindlers use the telephone more and more as their “weapon” to hold up victims. Tips to Avoid Telephone Fraud by Tim Jacquet

If a sales pitch sounds too good to be true, just hang up. If you don’t, you may become the next victim of telephone fraud.

Top Phone Scams

While some of the following products and services can be and are legitimately sold by reputable telemarketers, the Division of Consumer Protection has identified seven areas where fraud can occur and does the most damage to the consumer’s wallet:

Free Prize Offers: If you receive a phone call that you have won a free prize, be cautious! Usually there are conditions to securing those offers such as substantial handling fees, shipping charges, membership fees and/or the purchase of other merchandise.
Ask the telephone solicitor what the prize is worth. It may be of little value, and it may not be worth the money you will have to spend to receive it. A “contest” or an offer of a “free” prize or gift is only a sales tactic. No one is in business to give things away. Look for strings attached. Telemarketers must be registered with the Division of Consumer Protection. Call the Division to verify current registration. Tips to Avoid Telephone Fraud by Tim Jacquet

Charitable Solicitations: Telephone solicitation is one method used by charitable organizations to raise funds from generous consumers. Unfortunately, fraudulent charitable operators may call you, too. State law requires charities to inform donors if they are registered with the state, what the permit number is and what percentage of your donation will actually go to the charity. Call the Division of Consumer Protection to verify the information they give you. Tips to Avoid Telephone Fraud by Tim Jacquet

When you make a donation, it is a good idea to pay by check and make the check out to the organization, not the person collecting the donation. Be cautious of organizations that pressure you to pledge money on the spot or tell you they will send a representative immediately to your home to pick up your donation. A legitimate charity will gladly accept your donation today, tomorrow, or a month from now.

Travel Offers: It can be quite tempting to purchase a bargain-priced travel package over the telephone, but be careful. Many of these scams operate by enticing people to join “vacation clubs” or offering consumers “free trips.” Often the vacation club or free trip has many hidden costs or conditions attached. Your bargain or free trip could end up costing you a lot of money. Tips to Avoid Telephone Fraud by Tim Jacquet
Investment Fraud: Many unsound investment opportunities are peddled over the telephone. Fraudulent sales pitches usually involve such statements as “you must act now,” “there is no risk” or “this must be kept a secret.” Promoters will often try to make you feel guilty or silly for asking questions or exhibiting doubt. Stop and think before you quickly turn your money over to an investment promoter calling on the phone. Ask for written information. And, if you are receiving undue or uncomfortable pressure, or if other “warning flags” arise during the conversation, hang up.

“900” Numbers: When you call a “900” number, you are charged either a fee for the number of minutes you are on the phone or a flat fee for the entire call. These fees can add up rather quickly after you have spent more than a few minutes on the telephone.

Some services will keep you on the line for an extended length of time before you get all of the information you called for, making it a very expensive phone call. Find out the costs of the call before you make it, and never call any “900” numbers that doesn’t disclose the costs up front. Tips to Avoid Telephone Fraud by Tim Jacquet

Recently, unscrupulous telemarketers began transferring calls made to toll-free “800” numbers over to “900” numbers. This improper practice makes it more important today then ever before to know who you are calling. You should also listen carefully to any recorded information at the beginning of the call.

Advance-Fee Loan Scams: These scams often target people who are out of work or have poor credit ratings. Con artists promise “guaranteed” loans, no matter what your credit rating is, in exchange for an up-front processing or application fee. You may wait weeks or months to find out credit has been denied and the processing fee is not, as promised, refunded. Or, you may never hear from the company again, and may even find the company is withdrawing from your credit card or checking accounts using information you disclosed over the phone. Tips to Avoid Telephone Fraud by Tim Jacquet

Credit Repair Schemes: If you are having a problem getting credit, you may be tempted to listen to telephone solicitors who advertise quick and easy solutions to credit problems. Unfortunately, in many cases, these companies take your money and do little or nothing to improve your credit history. Credit repair companies cannot remove bad credit information from your files. If there are genuine mistakes on your credit file, you can remove them yourself–for free. Credit repair companies must be registered with the Division of Consumer Protection. Call the Division to verify their registration. Tips to Avoid Telephone Fraud by Tim Jacquet

First Line of Defense

Your best defense is yourself. Follow some basic rules, and arm yourself with the tools to safeguard your hard-earned money from telephone con artists. Tips to Avoid Telephone Fraud by Tim Jacquet

 

January 10, 2013 Today's Business, , , , , , , , , , , 2 Read more >

Avoiding the Post-Holiday Return Blues

Christmas ChildrenFour tips to keeping customers coming back and sales staying put.

By Sherron Lumley.

Giving back is an admirable holiday tradition, but not one that retailers like to experience at their customer returns desk. And though this holiday season’s sales figures set a new record, the National Retail Federation (NRF) estimates that merchants will have had to give back 10 percent of that revenue—roughly $47 billion—in returns come the end of January.

So how does a small business avoid this blowback effect and ensure its sales stick? Two small business owners share their post-holiday strategies for keeping sales strong and customers coming back (to buy).

Tip # 1: It starts with good customer service

Bill Evans, longtime owner of the Pacific Northwest Shop in Tacoma, Washington, says holiday returns call for “C.S. and that stands for customer service.” For four decades, his store has prided itself on that very trait, so he treats the post-holiday period no differently. Service is what they are known for, he says, from complimentary gift wrap to hassle-free returns. Whatever it is, “we take it off their hands,” says Evans, who chuckles and adds, “the fellows just stand there and say, ‘You do everything!’”

Pull-Quote-Tall.pngAt nearby Dwell Home Décor in Tacoma, Suzanne Molt says their return policy also emphasizes customer service, allowing for refunds or exchanges within 14 days with a receipt. “We don’t want them to worry about their gift purchases,” she says. When customers know their holiday gifts are returnable, she adds, “It makes them more comfortable.”

It’s important to remember, though, that most people don’t bring gifts back. In fact, a NRF Holiday Returns Survey from 2010 found that nearly two-thirds of holiday gift recipients—64.5 percent—didn’t return a single item. Still, retailers would be wise to plan for extra staff during the traditional post-holiday rush to ensure a more seamless experience and to avoid souring the customer on your business as a whole. And that idea that there’s still goodwill to be salvaged in customers returning items is an critical one—the same NRF survey found that the nine out of 10 Americans say they find store return policies to be “fair.”

Tip # 2: An annual January sale

Every January for the last 35 years, Evans’s Pacific Northwest store has had its once-a-year sale. His customers now look forward to the annual event, where he features artisanal products such as paper, clothing, wine, food, books, pottery and tea made by small, local businesses. The five-day January sale achieves about 50 percent of his total holiday rush volume, which means the shop can pay more money to its producers in what is traditionally a tough sales month.

At Dwell Home Décor, Molt sends out a direct mail coupon for 25 percent off one item in January to bring customers back into the store. For customers with returns, Molt says her staff tries to suggest a replacement item rather than just refund the cash.

Tip # 3: Keep the sales momentum going to the next ‘event’

Because Dwell carries many gift items, one thing it does to keep January sales up is to start promoting Valentine’s Day early. Molt, who took over the business with her partner two and a half years ago, says it gives customers another reason to visit the store. For its part, the Pacific Northwest Shop begins to promote several annual charity events right after the holiday season, such as a local Breast Cancer run.

Tip # 4: Tap into online sales (where returns are less common)

“We’ve had Internet sales for five years and we just got our first return,” notes Evans, who recounts the tale of a woman in the eastern part of the country who wasn’t satisfied with the paté she ordered. As part of his hassle-free returns policy, he issued a refund immediately, likely saving her as a customer. “We’ve worked our Internet sales up to 25 percent of our business,” he says. And with a lower rate of returns, e-commerce sales can help a small business to thrive, not just survive.

Internet sales also add to a company’s bottom line by opening up new markets. What’s more, when trying to avoid a post-holiday sales hangover, it’s important to remember international markets also have different holiday seasons. For example, the Pacific Northwest Shop just filled an order to ship tea…to China, where the important New Year’s holiday arrives during a typically slow period in the Western calendar—late January or early February.

Tip #5: Beating Holiday Return Fraud

Unfortunately, the high volume of holiday returns brings with it a higher level of fraud. For the 2010 holiday season, 7.5 percent of all returns were suspected to be fraudulent and four out of five retailers were likely victimized at some point. In all, nearly $4 billion is expected to be lost to fraudulently returned merchandise this year, according to the NRF’s Return Fraud Survey. Stolen merchandise and employee fraud returns were the most common types, but other tactics such as receipt counterfeiting and wardrobing—the return of used, non-defective merchandise—were also pervasive.

There are two commonly recognized (and easy to implement) tactics that business can use to prevent return fraud. One, follows Molt’s lead and establish a firm time period—two weeks, in her case—beyond which returns are not accepted. Then stick to it, especially after the holidays. Two, ask to see customer ID for all returns. This is a particularly effective method for preventing fraudulent returns of those items presented without a receipt, but one-third of retailers still don’t take this simple step.

To beat the holiday return blues, keep in mind that customers returning to the store are an opportunity to generate more sales, not just lose them to returns. Since some shoppers may be visiting the store for the first time, it’s also chance for a small business to introduce itself through excellent customer service in the hopes they do come back. But not to give back.

December 30, 2011 Today's Business, , , , , , , , 0 Read more >