Fraud Risks

• Card Skimming
  • Devices installed on pumps to steal card information.
• Card-Present Fraud
  • Use of stolen or cloned cards at fuel dispensers.
• Account Takeover
  • Unauthorized use of fleet cards or mobile payment accounts.
• Transaction Laundering
  • Unauthorized businesses processing payments through fuel station accounts.
• EMV Non-Compliance
  • Liability for fraudulent transactions if not using chip-enabled terminals.

Regulatory Challenges

• PCI DSS Compliance
  • Adherence to data security standards for payment processing.
• EMV Liability Shift
  • Responsibility for fraud if not compliant with EMV standards.
• Environmental Regulations
  • Compliance with laws governing fuel storage and dispensing.
• Weights and Measures Compliance
  • Ensuring fuel dispensers accurately measure quantities sold.
• Age-Restricted Sales
  • Compliance when selling tobacco or alcohol in convenience stores.

Chargeback Triggers

• Unauthorized Transactions
  • Charges not recognized by the cardholder.
• Billing Errors
  • Incorrect charges due to pre-authorization holds not adjusted properly.
• Fraudulent Transactions
  • Charges resulting from stolen card information.
• Quality Issues
  • Complaints about fuel quality affecting vehicle performance.
• Service Disputes
  • Dissatisfaction with car wash or maintenance services.

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Multiple Transactions in Quick Succession

• Several small charges made rapidly, potentially testing card validity.

High Fuel Volume Purchases

• Fuel amounts exceeding typical vehicle tank capacities.

Transactions at Odd Hours

• Unusual activity during low-traffic times, such as late at night.

Declined Transactions Followed by Approvals

• Several declined attempts before a successful charge.

Non-EMV Transactions

• Swiped transactions at pumps not upgraded to EMV, increasing fraud risk.

Unusual Location Patterns

• Purchases made far from the cardholder's usual area.

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Business Verification

• Confirm valid business licenses and environmental permits.
• Verify physical location and ensure it matches business records.
• Check for compliance with industry regulations and standards.

Financial Assessment

• Review financial statements to evaluate revenue stability and profitability.
• Analyze average transaction amounts and daily processing volumes.
• Assess the impact of fuel price fluctuations on cash flow.

Risk Evaluation

• Examine historical chargeback ratios and reasons.
• Assess fraud prevention measures and security protocols.
• Review procedures for handling pre-authorizations and transaction adjustments.

Policy Review

• Ensure clear policies for refunds, disputes, and chargebacks are in place.
• Verify that terms are prominently displayed and communicated to customers.
• Evaluate compliance with PCI DSS and EMV requirements.

Technology Assessment

• Confirm the use of secure, up-to-date payment terminals.
• Ensure fuel dispensers are equipped with EMV-compliant hardware.
• Verify implementation of encryption and tokenization for data protection.

Reputation Analysis

• Check for any history of regulatory violations or legal issues.
• Assess customer feedback regarding service quality and transaction experiences.
• Investigate any incidents of fraud or security breaches.

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Example Scenarios and Red Flags

• Skimming Devices Detected
  • Discovery of skimming equipment on fuel pumps leading to multiple fraudulent transactions traced back to the location.
• High Chargeback Ratios
  • A fuel station experiences an unusual spike in chargebacks due to unauthorized transactions, indicating potential security issues.
• Non-Compliance with EMV Standards
  • Failure to upgrade to EMV-compliant terminals results in increased liability for fraudulent transactions.
• Sudden Increase in Transaction Volume
  • An unexpected surge in fuel sales without a corresponding increase in foot traffic may suggest transaction laundering.
• Multiple High-Value Fuel Purchases
  • Repeated large fuel transactions that exceed typical vehicle capacities, potentially indicating misuse of fleet cards.

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Common Underwriting Questions

1. Business Operations
   • How many fuel stations do you operate, and where are they located?
   • Do you offer additional services like a convenience store, car wash, or maintenance?
   • What is the typical transaction volume and average ticket size?
2. Payment Processing Methods
   • Are your fuel dispensers equipped with EMV-compliant payment terminals?
   • What percentage of transactions are pay-at-the-pump versus inside the store?
   • Do you accept fleet cards or other specialized payment methods?
3. Fraud Prevention Measures
   • What security measures are in place to protect against skimming and other fraud?
   • How often do you inspect and maintain payment terminals and fuel dispensers?
   • Do you use encryption and tokenization technologies for data security?
4. Compliance and Regulations
   • Are you compliant with PCI DSS and EMV requirements?
   • How do you ensure adherence to environmental and safety regulations?
   • Do you have protocols for handling age-restricted product sales?
5. Chargeback and Dispute Handling
   • What is your historical chargeback ratio, and what reasons are most common?
   • How do you address customer disputes and billing errors?
   • Do you have a dedicated team or resources for managing chargebacks?
6. Technology and Infrastructure
   • Are your systems regularly updated with the latest security patches?
   • Do you conduct regular audits of your payment processing equipment?
   • How do you handle pre-authorization holds and transaction adjustments?

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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 for excessive pre-authorization holds not matching finalized charges.

Compliance Checks

• Ensure continuous adherence to PCI DSS and EMV requirements.
• Stay updated on changes in regulatory standards and implement necessary adjustments.
• Conduct regular inspections of fuel dispensers for tampering or skimming devices.

Security Updates

• Keep payment systems and software up to date with security patches.
• Upgrade equipment promptly to comply with evolving security standards.
• Utilize advanced security features like encryption and tokenization.

Merchant Communication

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

Risk Assessment Adjustments

• Reevaluate risk parameters based on changes in transaction volumes or patterns.
• Update underwriting policies as necessary to reflect current risks.
• Monitor chargeback ratios and implement corrective measures when needed.

Customer Feedback Analysis

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

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