Merchant Minute: Is Your New Client Friend or Fraud?


Bob Sarkisyan October 21, 2019 The holidays are on the way, and, unfortunately this period is a peak time for fraud to occur, as we are rushing to meet deadlines, budgets, and our own family needs. As a small business owner, it’s important to stay educated and alert for potential warning signs that might normally be overlooked, in order to avoid any loss due to a fraudulent transaction. As the saying goes, it’s better to be safe than sorry.

There are three main safeguards that can help prevent chargeback fraud and loss:

·       Obtain a CVV/CVC match.

·       Obtain a full positive address match via the AVS (address verification system).

·       Only ship to the address of which you received a full AVS match. Failure to do so can be one of the key reasons why a merchant will lose a chargeback dispute (a merchant will usually check the address via AVS, but then ship to another address).

The three methods listed above will deter much of the potential fraudulent activity that confronts every small business; however, in some cases, you may have to look past these methods and review the transaction in even greater depth. Ask yourself the following questions and determine if they make sense or if you should dig deeper.

We call them the five “Why Me” questions:

·       First-time customers?

·       Are they local?

·       Why are they ordering through you rather than going through a large online retailer for less?

·       How did they find you?

·       How did they reach out, by email or phone?

Most fraudulent orders come from first-time or second-time customers who are ordering product from out of state. The customer will likely not want to come into the establishment to verify their identity or pick up the product. These customers are clearly willing to overpay with multiple cards with multiple cardholders. Additionally, fraudulent customers will likely not talk to you on the phone and will only communicate via email or text. The communication is typically filled with grammatical, spelling, and syntax errors, since most of the fraud cases come from outside the United States. Furthermore, you should always be wary of Craigslist ads and wanted listings.

Our previous five questions focused on you. Now, you should focus on that order with these six questions:

·       Does the order make sense to you?

·       Is the order typical, in comparison with existing orders with other clients?

·       Are they pushy and in a rush to put the order through, no matter the costs?

·       Did they ask you to charge more on the cards and forward any cash?  

·       Does the name of the customer match the email?

·       Is there a company name in the email domain and do they exist?

Most fraudulent orders will be for specific items in large quantities. Orders that are too good to be true and very profitable at first glance often turn out to be fraudulent charges. Fraudulent customers will target merchants that place orders with little to no questions asked. These customers are willing to pay for any shipping, taxes, and upcharges, without question, and in some cases ask you to charge the card for a courier to pick up the products and to pay the courier in cash, directly. While this may seem normal, these are typical scenarios in which we see fraud occur.

Furthermore, the person making the order will typically use a Yahoo or Gmail account with no company names in the email domain, as it only takes a few minutes to create an account for free without verification. Try searching for the individual making the order and researching the company they are ordering for, to see if everything matches and makes sense to you.

Every business is different and we don’t expect each scenario to be the same. But if you’re ever in doubt, and you hear that voice in the back of your head or your gut telling you something isn’t right, please reach out to us. We will gladly give you our take on the situation. For more information on how to better protect yourself from fraudulent orders, feel free to call (818) 246-6767 or email our Risk Department at