Avoiding Fraud Liability

It is estimated that nearly half of the fraudulent card payments in the world occur in the United States. More than ever before, there is immense pressure on merchants and businesses to up their security, and avoid being liable for fraud.

  1. If you haven’t switched to the Europay, Mastercard, and Visa (EMV) chip reader system, it’s time to do so. Any business who chooses to avoid making the switch is exponentially more likely to experience a security breach, and will be held accountable for not making the switch. Check with your payment processor to learn more about EMV chip readers, and set up your EMV POV terminals right away.
  2. Ensure that your staff is fully-trained on new technologies. After switching to the EMV chip readers, explain the technology and how to properly charge the card. Also ensure that you monitor your staff to watch for possible security risks, as a lot of security issues and fraud can come from within the business. Trust your employees, but do so with discretion. Open an anonymous system for your employees to report fraud or liabilities for fraud. Teach your employees to spot bad checks, counterfeit money, and fraudulent credit cards, and to keep themselves and customers in check.
  3. Create a system of checks and balances within your business. While it can seem efficient to assign all accounting and auditing tasks to one or two individuals, all internal and external auditing and accounting practices need to be divided evenly between a handful of people—this keeps your employees accountable, and makes it easier to identify the responsible party when a task hasn’t been performed properly, or there are signs of fraud. Your employees can also keep each other in check, and feel incentivized to report suspicions of fraud.
  4. If you accept payment through an online payment portal, gather all of the information related to the card. This includes the full name on the card, the number, the expiration date, and the CVV number on the back.
  5. Recognize certain signs of fraud—however, keep in mind that these signs don’t automatically validate an instance of fraud. Some of these signs include: the credit card is declined, billing and shipping ZIP codes don’t match, buyer places an order via email or phone, an unusually large order is requested in addition to same day/next day shipping, buyer asks to split order between multiple credit cards, and buyer includes special instructions that include paying a third-party vendor, person, or shipping company. Remember that there are often reasonable explanations for some of these actions, but they should always be approach warily.