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 high-value items
• Chargeback Fraud
  • Customers disputing legitimate charges to avoid payment
• Return and Exchange Fraud
  • Returning stolen merchandise or exploiting return 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
• Product Regulations
  • Compliance with safety standards for certain equipment (e.g., helmets, protective gear)

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 equipment rentals or custom orders

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High-Value Online Orders

• Expensive equipment 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 Resalable Items

• Buying large quantities of popular products, such as branded apparel or equipment

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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 safety standards

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 sports events on cash flow

Risk Evaluation

• Examine historical chargeback ratios and reasons
• Assess fraud prevention measures and employee training programs
• Review policies for handling returns, exchanges, 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 custom orders and deposits

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 Major Sports Events

• Increased disputes following events like the Super Bowl or World Cup, possibly due to impulse purchases or fraud

Large Orders Shipped to Freight Forwarders

• Deliveries to addresses associated with reshipping services, indicating potential fraud

Employee Fraudulent Activities

• Staff manipulating transactions to offer unauthorized discounts or divert funds

Unusual Purchasing Patterns

• Bulk purchases of high-demand items 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., general sporting goods, specialty equipment)?
• 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 exchanges?
• 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 product safety regulations?
• 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 safety 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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