Scam Alert

Monday, April 1, 2013


Last week we talked about why businesses have to be approved to obtain a merchant account.  Shortly after our Blog was published, a friend of mine (Thank you Rosemary!!) sent me the following article.  Credit card fraud costs everyone a ton of money each year and it is important to understand the various ways that fraud can be perpetrated so we can protect ourselves!

Recommendations for Avoiding Application Fraud

AP, Canada, CEMEA, LAC, U.S. | Acquirers, Issuers

Visa is reminding clients to be vigilant of new and complex fraud schemes. In February, FBI announced that 18 people were charged in connection with a U.S.-based credit card fraud ring that used false identities and fake businesses to steal at least US $200 million from financial institutions.

According to the FBI, this extensive, sophisticated network created at least 7,000 false identities, which were used to set up more than 1,800 mailing addresses, including apartments, houses and P.O. boxes. The addresses helped the false identities obtain more than 25,000 credit cards. Favorable credit scores were established to boost credit worthiness, allowing the false identities to get loans and credit lines.

In addition, at least 80 fake businesses secured acquiring relationships, enabling them to process transactions involving the cards issued to the false identities. These fake businesses were also used to enhance the false identities’ credit scores, increasing credit lines and the amount of money borrowed.

Visa is providing the following recommendations to help clients identify application fraud.


Recommendations for Acquirers

When evaluating a merchant, an acquirer should:

• Identify the level of risk the acquirer is prepared to accept. 

• Adhere to policies that specify acceptable merchant categories; minimum financial and credit requirements;
  and minimum length of time in business.

• Verify that the merchant’s projected sales are commensurate with its product lines and inventories.

• Confirm that the merchant’s transactions do not violate applicable laws or Visa Operating Regulations.

• Validate that the application includes key Know Your Customer information, which should be compared with
   government records. Any discrepancies should be documented and resolved before the merchant is
   boarded or allowed to process credit cards.

• Enforce any cash reserve or “reserve account” policies in place for new merchants.

• Ensure that all third party agents involved in merchant solicitation comply with the acquirer’s policies and

Preventing credit card fraud begins with awareness and articles like this allow us to see the various sides of fraud.  When processors are asking additional questions about your business, inquiring about your transaction activity and trying to ascertain the normal patterns for your card acceptance; it is for a good reason!  Portions of this article were omitted.  If you would like the full text of the article and the detailed article related to the 18 people arrested, please send Cheri Perry and emailed request by clicking HERE.


Cheri Perry 4/1/2013

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