Fraud Risks

• Card-Present Fraud
  • Use of stolen or counterfeit cards at the point of sale.
• Card-Not-Present Fraud
  • Higher risk with online transactions for expensive items.
• Chargeback Fraud
  • Customers disputing legitimate charges to avoid payment.
• Return and Warranty Fraud
  • Returning stolen or counterfeit merchandise for refunds or exploiting warranty policies.
• Employee Theft
  • Internal fraud through unauthorized discounts or manipulation of transactions.

Regulatory Challenges

• PCI DSS Compliance
  • Ensuring secure handling of payment card data.
• EMV Liability Shift
  • Responsibility for fraudulent transactions if not using chip-enabled terminals.
• Consumer Protection Laws
  • Adherence to regulations on warranties, disclosures, and product safety.
• Tax Compliance
  • Accurate collection and remittance of sales taxes.
• Environmental Regulations
  • Proper disposal of electronic waste and compliance with recycling laws.

Chargeback Triggers

• Unauthorized Transactions
  • Charges not recognized by the cardholder.
• Billing Errors
  • Incorrect charges or duplicate transactions.
• Product Quality Issues
  • Complaints about defective or misrepresented products.
• Non-Delivery
  • Failure to deliver online orders or significant delays.
• Service Disputes
  • Dissatisfaction with repair services or extended warranties.

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High-Value Online Orders

• Expensive electronics purchased online by first-time customers.

Mismatch in Customer Information

• Discrepancies between billing and shipping addresses.

Multiple Transactions in Short Succession

• Rapid purchases using the same card or different cards from the same IP address.

Unusual Shipping Requests

• Requests for expedited shipping to high-risk or international locations.

Repeated Declined Transactions

• Several failed payment attempts before a successful charge.

Bulk Purchases of Popular Items

• Buying large quantities of easily resellable products, like smartphones or gaming consoles.

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Business Verification

• Confirm valid business licenses and registrations.
• Verify the physical store location and inventory.
• Check compliance with industry regulations and environmental laws.

Financial Assessment

• Review financial statements for revenue stability and profitability.
• Analyze average transaction amounts and monthly processing volumes.
• Assess the impact of seasonal sales and product launches on cash flow.

Risk Evaluation

• Examine historical chargeback ratios and reasons.
• Assess fraud prevention measures and employee training programs.
• Review policies for handling returns, warranties, and refunds.

Policy Review

• Ensure clear return, refund, and warranty policies are in place.
• Verify that terms are prominently displayed and communicated to customers.
• Evaluate procedures for accepting financing and installment payments.

Technology Assessment

• Confirm the use of secure, up-to-date POS systems.
• Ensure compliance with PCI DSS and EMV standards.
• Verify implementation of encryption and tokenization for data protection.

Reputation Analysis

• Check online reviews and ratings on platforms like Yelp and Google.
• Investigate any history of regulatory violations or legal issues.
• Assess customer satisfaction levels and complaint resolution effectiveness.

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Spike in Chargebacks After Online Promotions

• Increased disputes following an online sale, possibly due to miscommunication or fraudulent purchases.

Large Orders Shipped to Freight Forwarders

• Orders sent to addresses associated with reshipping services, potentially indicating fraud.

Employee Fraudulent Activities

• Staff manipulating transactions to offer unauthorized discounts or divert funds.

Unusual Purchasing Patterns

• Bulk purchases of high-demand electronics not typical for retail customers, suggesting potential resale or fraud.

Multiple Returns Without Receipts

• Frequent return attempts without proof of purchase, indicating possible fraud.

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Business Operations

• What types of products do you sell (e.g., computers, smartphones, home appliances)?
• How many locations do you operate, and where are they located?
• Do you sell through multiple channels (in-store, online, mobile app)?

Payment Processing Methods

• What percentage of transactions are card-present versus card-not-present?
• Do you offer financing or installment payment options?
• How do you handle high-value transactions and verify customer identity?

Employee Practices

• How many employees handle payment transactions?
• What training do you provide on payment security and fraud prevention?
• Do you conduct background checks on staff?

Fraud Prevention Measures

• What steps do you take to secure customer payment data?
• Do you utilize any fraud detection tools or services for online transactions?
• How do you handle suspicious transactions or chargebacks?

Policies and Procedures

• What is your policy on returns, refunds, and warranties?
• How do you address customer complaints and disputes?
• Are your terms and conditions clearly communicated to customers?

Compliance and Certifications

• Are you PCI DSS compliant?
• Do you adhere to environmental regulations for electronic waste disposal?
• Do you have any industry certifications or affiliations?

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Transaction Monitoring

• Implement real-time alerts for suspicious activities.
• Regularly review transaction reports for anomalies or patterns indicative of fraud.
• Monitor high-value transactions and frequent refund requests.

Chargeback Management

• Analyze chargeback trends and implement corrective measures.
• Maintain documentation to dispute illegitimate chargebacks effectively.
• Provide clear communication to customers regarding policies to reduce disputes.

Employee Oversight

• Conduct regular audits of employee transactions and cash handling.
• Update training programs to address new fraud tactics.
• Enforce strict access controls and segregation of duties.

Compliance Checks

• Ensure continuous adherence to PCI DSS and EMV requirements.
• Stay updated on changes in regulatory standards and implement necessary adjustments.
• Conduct periodic reviews of environmental compliance practices.

Customer Feedback Analysis

• Monitor reviews and social media mentions for service or product issues.
• Address negative feedback promptly to improve customer satisfaction.
• Use feedback to identify potential areas of risk or concern.

Technology Updates

• Keep payment systems and software up to date with security patches.
• Implement advanced security features like encryption and tokenization.
• Regularly test and update online sales platforms for vulnerabilities.

Merchant Communication

• Maintain open dialogue regarding changes in business operations.
• Provide resources and support for fraud prevention and compliance.
• Encourage proactive reporting of any suspicious activities or security concerns.

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