The Tyro Blog

12 October 2015 - 4 min read

Business Strategies

Identify fraud before it hits your business

Cashless payments hit a staggering $1.84 trillion in transactions in Australia last year. But with the money comes the crime. Are you protected?

According to the latest figures, fraud on Australian payment cards exploded by 35% in one year and almost all was card-not-present (CNP) fraud which jumped 42%. A recent Australian Payments Clearing Association (APCA) report reveals that fraud on Australian payment cards continues to blow out online reflecting a worldwide trend towards increasing cybercrime risk.

Results from the Australia Payments Fraud–Details and Data 2015 show that in 2014 the rate of fraud on domestic payment cards increased to 59c in every $1000 spent which is up from 47c in 2013. Almost all (94%) of this was CNP fraud such as online, phone or mail.

CNP fraud is the hardest to detect and the loser is always the merchant. This is how it works:

Telling a credible story

Initially, a fraudster places an order over the phone or via email using one or more stolen card numbers.

Most commonly the order comes from overseas, is higher than the usual sale amount and the customer is increasing the size of the shipment until the card is maxed out. After the payment has been made, the fraudster informs the merchant that the order has been cancelled and wants the amount charged back into a different account. Once the merchant transfers the sum to the account, the criminal has succeeded and the money is gone.

The legitimate cardholder is unaware the card details have been compromised until charges on the statement appear. All the merchant can do is to count his losses, as the full risk falls on the merchant in all CNP transactions.

Placing a large order

Another common deception scheme is to place a large order over the phone or mail and to pay substantially more money than the original invoice amount.

The fraudster would explain to the merchant that the excess money was destined to another business that has no EFTPOS facility available. Raising no suspicions because the card seems to be valid, the fraudster would ask the merchant to send the excess money via a person-to-person money transfer system to the other business.

Usually, the recipient of the money is the fraudster who ordered the transfer and, as in the previous example, the money is gone.

How Tyro protects you

Tyro’s fraud team was able to prevent a substantial loss when the internal detection system spotted a suspicious transaction recently. It showed a series of failed transactions between a Canadian cardholder and a Tyro merchant, an equine business in Queensland.

When Romesh, a member of Tyro’s fraud team, called the merchant and asked about the reason for the failed transactions, he was told a familiar story. A buyer from overseas, allegedly the general manager of a polo club, had called to order a large number of horse saddles.

The fraudster had led his victim to believe he was ordering the saddles for the next polo season and provided four different credit card numbers to settle the invoice. “He told me he had so many credit cards and couldn’t remember on which card he had the funds available,” the victim explained to Romesh.

When one of the card numbers was finally working, the fraudster kept on increasing the amount of saddles. “This was a strong indicator for fraud. The alleged buyer was testing the credit limit to make the order as large as possible to achieve the maximum chargeback,” Romesh said. And with a price tag between $2000 and $5000 per saddle, the merchant was expecting a good profit from the business. “The victim was absolutely sure it was a legitimate transaction, until I explained the reason for my suspicions,” Romesh said.

If the transaction would have gone ahead, the merchant would have had to reimburse the legitimate Canadian cardholder, who was completely unaware of his international transactions. Thanks to the fraud team’s inquiry the loss was prevented, but there are many criminals out there who try to exploit weaknesses in the system.

Credit card fraud has become a global business with illegal agents in call centres that combine credible stories with stolen credit card numbers to make a quick dollar.

For more information on the warning signs for potentially fraudulent transactions, see our fraud prevention checklist.

If you suspect fraud, call Tyro’s Fraud Analysis Team on (02) 8907 1610.

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