Fraud Risks

• Card-Not-Present Fraud
  • Higher risk due to the absence of physical card verification
• Identity Theft
  • Use of stolen personal information to make purchases
• Chargeback Fraud
  • Customers disputing legitimate charges to avoid payment
• Friendly Fraud
  • Claims of non-receipt or dissatisfaction despite receiving the product
• Account Takeover
  • Unauthorized access to customer accounts for fraudulent purchases

Regulatory Challenges

• PCI DSS Compliance
  • Ensuring secure handling of payment card data
• Consumer Protection Laws
  • Adherence to regulations on shipping times, disclosures, and return policies
• Distance Selling Regulations
  • Compliance with laws governing remote transactions, especially internationally
• Data Protection Laws
  • Adherence to GDPR, CCPA, and other privacy regulations
• Tax Compliance
  • Accurate collection and remittance of sales taxes, including for cross-border sales

Chargeback Triggers

• Non-Delivery of Goods
  • Claims that products were not received
• Product Not as Described
  • Complaints about misrepresented items
• Unauthorized Transactions
  • Charges not recognized by the cardholder
• Billing Errors
  • Incorrect charges or duplicate transactions
• Customer Service Issues
  • Dissatisfaction with support leading to disputes

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High-Value Orders from New Customers

• Significant purchases without prior transaction history

Mismatch in Shipping and Billing Addresses

• Discrepancies suggesting potential fraud

Multiple Orders Using Same Payment Details

• Repeated purchases across different accounts or addresses

Rush Shipping Requests

• Urgent delivery to high-risk locations

Repeated Declined Transactions

• Several failed attempts before a successful charge

Unusual Order Patterns

• Bulk orders of easily resellable items

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Business Verification

• Confirm valid business registrations and operating licenses
• Verify contact information and physical mailing address
• Check compliance with direct marketing and consumer protection regulations

Financial Assessment

• Review financial statements for revenue stability and profitability
• Analyze average transaction amounts and processing volumes
• Assess the impact of seasonal promotions on cash flow

Risk Evaluation

• Examine historical chargeback ratios and reasons
• Assess fraud prevention measures and security protocols
• Review policies for handling returns, refunds, and customer disputes

Policy Review

• Ensure clear return and refund policies are in place
• Verify that terms are prominently displayed in catalogs and online
• Evaluate data protection and privacy policies for compliance

Technology Assessment

• Confirm secure, up-to-date payment processing systems
• Ensure compliance with PCI DSS and other security standards
• Verify implementation of encryption and tokenization for data protection

Reputation Analysis

• Check customer reviews and ratings on platforms like the Better Business Bureau
• Investigate any history of regulatory violations or legal issues
• Assess customer satisfaction and complaint resolution effectiveness

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Spike in Chargebacks After Major Catalog Release

• Increased disputes following a new catalog launch, possibly due to misrepresentation or delayed shipments

Large Orders Shipped to Freight Forwarders

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

Unusually High Return Rates

• Frequent returns may suggest quality issues or misleading product descriptions

Multiple Orders from the Same IP Address

• Numerous purchases using different payment methods from one location

Complaints About Non-Delivery

• Patterns of customers reporting non-receipt, pointing to shipping issues or fraud

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Business Operations

• What types of products do you sell through your catalogs?
• How do customers place orders (mail, phone, online)?
• Do you operate domestically, internationally, or both?

Payment Processing Methods

• What payment options do you offer?
• What percentage of transactions are card-not-present?
• How do you handle recurring payments or subscriptions?

Fraud Prevention Measures

• What security protocols are in place to prevent card-not-present fraud?
• Do you utilize any fraud detection tools or services?
• How do you verify customer identities and shipping addresses?

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 consumer protection laws for distance selling?
• Do you have data protection policies in place?

Logistics and Fulfillment

• How do you manage inventory and shipping?
• What are your typical delivery times?
• Do you work with third-party logistics providers?

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Transaction Monitoring

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

Chargeback Management

• Analyze chargeback trends and implement corrective measures
• Maintain documentation to dispute illegitimate chargebacks effectively
• Communicate clearly with customers to reduce disputes

Compliance Checks

• Ensure continuous adherence to PCI DSS and data protection regulations
• Stay updated on changes in consumer protection laws
• Conduct periodic audits of marketing materials for compliance

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 ordering platforms for vulnerabilities

Merchant Communication

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

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