CHARGE BACKS, A QUIET BUT EFFECTIVE FRAUD TACTIC
This scheme has always being in existence and mostly perpetrated by the amateur fraudster. However, the experienced fraudsters are now cashing in on it by identifying and utilizing the amateur fraudster. Why? because it is one of the easiest ways to rob you of your hard earned revenue and profits. You are hit at least twice; first hit comes from the perpetrator and the second is from the bank charges incurred for the charge backs. All or most banks will charge you if a credit card company rejects a credit card transaction processed by your business.
Here is a short scenario of a case I worked on. It involved several mid sized grocery stores. The customer of the grocery stores would come in once every two weeks and purchase over a hundred dollars worth of groceries from the grocery stores and two days later would call the bank and the police to make a report that his credit card was stolen.
He would complete an affidavit, the bank would do their normal due diligence and after three days his card is re-issued and money is given back to him. In the meantime, the money is charged back to the grocery stores. Because of the amount, the grocery stores paid very little attention to the accumulation of the losses. But at the end of the year they realized there was but so much of that money the IRS was willing to allow them to write off. They also realized at that point that it was cutting deeply into their profits as well both in cash and shrinkage of goods sold. The money he charged for the groceries was refunded every single time and charged back to the store. That meant the grocery store had to give back that money to the credit card company without recovering their groceries.
This customer stole over $300,000 in a year and a half before he was caught. Each grocery store lost at least $50,000 or more to this scam. So, business owners, please read the article, take notes, implement the suggestions and call me if you need any questions answered. You do not have to be a grocery store to experience this scam. If you take credit cards or checks as a form of payment for your services or goods you are vulnerable and trust me soon enough you will fall victim.
Fraud is a Violent Crime- Prevent IT
