Consumer fraud is a well-known practice that typically results in financial losses for companies. There are different types of fraudulent practices committed by consumers that can have a devastating effect on your business. Here’s a summary of some of the most common consumer scams that may be aimed at your business and what you need to do to minimise your business risk.
Businesses of any size are at risk from common fraud schemes committed by consumers. There are many frequently used schemes implemented by fraudsters in an attempt to get money or products from your business. The common scams are:
- Writing bad cheques
- Passing counterfeit bills
- Using stolen credits cards
- Returning items/products not purchased from your business
Avoid becoming a victim of these fraud scams by implementing a series of preventative measures and educating your employees.
Stolen credit card sales
‘Chip and PIN’ is one of the most effective ways to prevent credit card fraud in your business. Accept the secure ‘chip and PIN’ method whenever possible and be aware of how many times a customer attempts to re-enter their PIN.
Online or over the phone scams
A lot of these scams revolve around customer behaviour. The more you understand and watch the patterns, the better prepared you are against consumer fraud.
- Take notice of purchases that include high-priced items or large quantities of the same item
- Be wary of customers who request express, next-day delivery
- Always watch for customers who make purchases using multiple credit cards
Use CCTV cameras to keep an eye on customers who appear nervous or those who are making unusual purchases from your business. Watch their behaviour when they approach to pay. Fumbling their wallet, waiting for a distraction, expecting an error, and getting defensive, are all signs of nervousness around the point of purchase.
If customers have a chip and PIN on their card, be aware of the number of times they are attempting to enter their PIN or re-inserting their card to try again. If they do not have a chip and PIN on their card, be sure to validate the details on their card. All too often staff members don’t do this, therefore it is advisable to have good credit card acceptance procedures in place.
For manual transactions, always take an imprint of the card. Consider moving away from manual swipe machines, as it is really easy to take advantage of them.
If your business still accepts cheques, you can reduce your risk of fraud by implementing the following policies:
- Specify a maximum payment amount to limit the total amount of purchase
- Ensure the name and address are verified with valid identification
- Implement a returned cheque fee to cover any costs incurred and also deter customers from writing a bad cheque
- Accept only first-party cheques as third-party cheques are more unreliable and can be difficult to collect
- Accept cheques from local customers only
Your business should always develop a policy about how you handle cash. Make sure that you check the size of the bills, the transaction size, profile of the person, etc. You can educate your staff on how to identify counterfeit bills and how to deal with situations where possible counterfeit bills are presented.
Return process fraud
Purchasing merchandise from one branch and returning it to another, or even returning used merchandise for a full refund, are both types of commonly used fraud schemes that can have an impact on your bottom line. ‘Free renting’ or ‘wardrobing’ are common terms associated with return process fraud, since customers may purchase products with no intention of keeping them.
Protect your business from this type of fraud by creating and implementing a return policy that is both fair and transparent. Your return policy should indicate the period of time you will accept returns as well as your policy on returns without a receipt. You can also install a point of sale program to help track sales and returns, alleviating staff accountability for returns and helping to streamline the returns process.
Know who you are dealing with
As a business owner, it is your job to make sure that you not only monitor your business accounts but also the consumers you do business with. Consumer fraud should be part of your overall security concern and these tips can help you reduce it.
However, in order to fully grasp the people and consumers your business comes into contact with, you can get a verification report that will allow you to prevent massive losses, by ensuring that you know your customers. MarisIT can assist you in identifying and assessing fraud, detecting and responding to fraud attempts, and verifying identities – all of which work together to reduce exposure to risk and loss.