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How to fight credit card fraud

10 December 2004 Angelo Coppola

The questions and answers below compiled for the Absa Fraud Awareness Week address the problem of credit card fraud and how it can be successfully reduced.

Question 1:

How important is the signature on a credit card for preventing credit card fraud?

Answer:

The signature on a credit card is used as a verification method to identify the person presenting the credit card for payment as the cardholder.

The merchant must verify that the signature on the credit card sales voucher corresponds with the signature on the back of the credit card.

Merchants failing to do so might be held liable under certain circumstances for the full transaction amount if it is proven that the two signatures differ significantly.

Question 2:

(a) What is the most common type of credit card fraud?
(b) How often is it the result of forged signatures?

Answer:

2 (a)

Fraud can be classified in five major categories:

·lost or stolen card fraud
·false applications;
·cards not received;
·counterfeit and
·card number misuse.

Although lost and stolen card fraud are the most common types of credit card fraud, counterfeit credit card fraud is the prevailing concern.

2 (b)

Fraudsters will always attempt to forge the cardholder’s signature to prevent the merchant from being suspicious and will avoid merchants where proof of identification (ID) is required.

Question 3

Is it correct that the signature on sales vouchers of items allegedly purchased with stolen credit cards must be checked by Absa?

Answer:

No, merchants are required to verify the signatures on the sales voucher in terms of the merchant agreement.

Question 4:

What advice does Absa have for (a) merchants and (b) Absa credit card holders?

Answer:

4 (a)
Absa’s advice to merchants is:

· Always verify the signature on the sales voucher with the one on the back of the credit card
· A simple test is always to check the name on the front of the credit card. For example MRS Smith, but a man presents the card
· If you are not enrolled as a mail order/telephone order merchant, do not accept copies of cards or requests for delivery on fax messages
· Phone your authorisation department and request a “code 10” when a transaction looks suspicious
· Be wary of customers who…

§ Take the card from a pocket instead of a wallet
§ Purchase an unusual amount of expensive items
§ Make random purchases, selecting items with little regard to size, quality or value
§ Make several small purchases to stay under the floor limit, or ask what the floor limit is
§ Sign the sales voucher slowly and awkwardly
§ Cannot provide identification when asked
§ Hurry you at closing time
§ Purchase a large item and insists on taking it away immediately
§ Provide you with an authorisation code that they allege to have obtained from the bank

Absa Bank offers a reward of R300,00 to a merchant that retains a credit card that is fraudulently presented and another R300,00 if a successful arrest is made.

4 b)
Absa’s advice to cardholders is:

· Always sign your new credit card immediately when collected at the Post Office or your branch
· Always keep your credit card in a safe place. Don’t leave your card in places like your motor vehicle, office desk and never let your card out of your sight when presented for payment at a merchant
· Report your credit card as lost or stolen immediately when you become aware of the loss
· Even if you don’t use your credit card often, check your wallet regularly to ensure that you are still in possession of your card and verify all transactions on your credit card statement on a monthly basis
· When using an ATM, you as a cardholder must be aware of signs of abnormalities or tampering, for example unidentified devices on the ATM, and report incidents immediately to your branch
· Always cover the PIN pad when you enter your PIN number

The golden rule applies in all instances. If a cardholder was negligent by not signing his/her credit card, or fail to report the loss/theft of the card, he/she will be held liable for all fraudulent transactions committed up to the time the loss was reported to your bank. The conditions of use for an Absa credit card may be viewed at http://www.absa.co.za/

Question 5:

What safeguards does Absa have in place to reduce the incidence of stolen credit card transactions?

Answer:

In the fight against fraud, Absa makes use of a Neural Network to identify possible fraudulent transactions.

The system compares and searches for patterns of fraud against this known database of fraudulent activity. Cardholders are then contacted proactively to confirm suspicious transactions.

This Neural Network, together with the efficient staff at Absa Card Fraud Department, is the main reason why Absa is the leader in fraud prevention in South Africa.

Absa has the lowest percentage of credit card fraud as a percentage of turnover in South Africa and is a benchmark for the world.

This was confirmed by MasterCard and Visa International.

Question 6:

Where are the majority of purchases with stolen cards made? (online, supermarkets, electronics outlets)

Answer:

On stolen credit cards the majority of purchases are made at liquor stores, supermarkets, house furnishing shops, family clothing stores and restaurants.

Question 7:

Who shoulders the cost of these illegal transactions?

(Absa,shop,client,insurance).

Answer:

The majority of fraud losses are paid by the cardholder’s bank. These losses are mainly covered by lost-card protection. In certain circumstances where the cardholder does not comply with the conditions of use, the cardholder may be held liable.

Merchants can also be held liable if not adhering to their merchant contract.

Absa will be issuing chip cards in the near future. Chip cards are PIN-driven which means that the cardholder has to enter his PIN number with every purchase as an additional verification method.

The influence on fraud will be significant as fraud on lost, stolen and counterfeit cards will decrease.

Quick Polls

QUESTION

Each year ordinary consumers and their financial and wealth advisers flock to dozens of asset manager ‘outlook’ presentations to find out about economic and investment trends, and the next ‘hot’ company. What do you want asset managers to share during these events?

ANSWER

Asset allocation strategies
Big picture investment themes and how to position portfolios for them
Investment methodologies and historic fund yields
Share tips by the score
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