A common scam is to use a stolen card to process a large sale , then ask the merchant to refund to a different card. Always be suspicious of large refunds.
This scam works well in a retail environment that's fast-paced, and utilizing workers who may have many different duties, or who aren't trained in fraud mitigation. It's unfortunately easy to defraud a business with an unauthorized refund - so make sure you always refund sales to the original card.
Step 1: A fraudster goes into a luxury clothing store and spends 30 minutes trying on several outfits with the clerk. She seems well-dressed and knowledgeable about fashion. After trying several items on, she couldn't decide on a few specific items, but decided to buy all of them. The fraudster heads to the counter and pays $1,000 for the new items, and cheerily heads out of the store. Little does the retailer know, she paid with a stolen credit card. Now this by itself - not the end of the world. Assuming the merchant used a chip reader, they should be absolved of the fraud, as it's the issuing bank's responsibility.
Step 2: Unfortunately for the retailer, this story doesn't end here. Five minutes after making her purchase, the fraudster heads back in. Still in her cheery mood, the fraudster finds the same clerk and lets her know that she had a change of heart - those 4 pairs of $250 jeans, well, she just doesn't need them anymore. She realized she was caught up in the moment and just spent too much money! She asked if she could just do a refund for the time being - she might be back though! Of course - the clerk isn't going to say no to a refund for a purchase from 5 minutes ago. So she heads to the counter and refunds the order, asking for the fraudster's card - and the fraudster hands her a different card, that actually belongs to the fraudster. They process a $1,000 refund.
Result: Now, the fraudster just walked away with $1,000. Plus, there will be a chargeback on the original sale, and the merchant will have to spend money and time fighting it. They should win, but the original cardholder's bank will also be out the $1,000. All because of a simple, quick scam that's totally avoidable. Make sure your employees are well versed on fraud tactics to help protect your business! Make it policy to require that refunds be processed in the same manner as the original sale, and on the same card as well.
It doesn't stop there. Unfortunately, another common scam is for employees to run unauthorized refunds on their own credit cards. The better fraudsters will even refund common values to their card, to be less suspicious. Always compare your daily batch reports to your POS/inventory/reporting software, so that you can find discrepancies quickly. If gone unnoticed, a nefarious employee can easily embezzle thousands of dollars, totally under the radar. Stay vigilant and keep a close watch on your daily sales.
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