International Commission and Credit Card Fraud: Take Proactive Action

All around the world, credit card numbers are stolen. In direct sales companies, fraud occurs when a person uses a stolen credit card to obtain product (for resale on ebay) or for commissions paid on the sale of the product or both product and commission. When fraud happens, you often do not learn about the fraud until a chargeback occurs which can be up to six weeks later. The fraudsters can take a half a million dollars before you realize you have been hit. Proactive action needs to be taken at the time of signup and when orders are taken.

Typically, the scam looks like this. If possible, the fraudster goes onto a website and signs up under that website’s listed distributor. One way that companies have tried to limit fraud is by requiring all new recruits to have an upline ID. The problem is that requiring just an ID is easy to get around. The fraudster writes a software program to randomly generate numbers until it hits on a valid number.

Obviously, one way to reduce fraud is at the signup stage. Measures can be put in place so that upline distributors are more involved in signing up new distributors. Use strong passwords for backoffice—not set by the sponsor.

Once the fraudster obtains a distributor ID, they use a stolen credit card number to sign up as distributor and purchase product which allows them to get commission and resell the product. The product is shipped to vacant addresses and then picked up later. Another strategy to obtain the product is to use dating sites to attract an accomplice. The target is then told that the fraudster needs to make money in order to marry the person. The target is told to accept the product and then the fraudster will have it picked up.

If getting the product is too difficult, the fraudster will have the product listed as will call and then never picks up the product. In order to counter this issue, do not pay commissions unless the product is picked up. If you pay weekly commissions, it is difficult to catch commission fraud. You may want to create a lag in commission payment.

Another way to be proactive is at the order process. Prior to the order, set out limits on the amount of the first order. If the account is fraudulent, then you have not lost much money.

Next in the order process is to implement solutions as part of the gateway (authorize and settle at the same time). One of the norms in Asia is when an order is placed, the gateway notifies the bank which sends a text to actual credit card owner and the credit card owner then contacts the gateway to approve the purchase.

In the order process, you can also set up triggers to investigate potential problem areas. This means you have to set up a delay in the order process. Several behaviors should trigger further inquiry. First, if the order has multiple shipping addresses, that is a concern. Of course a legitimate distributor may ship to multiple addresses. However, a quick phone call to that distributor should verify that it is correct. You can also check shipping addresses to known fraudulent, vacant, or duplicate shipping addresses.

A second order process trigger is that the country where the credit card was issued is not the country where the product is shipped. You can identify where the card was issued by looking at the bin code which is the first six numbers of the credit card. You can have your gateway or ordering software do an automatic check for the country discrepancies.

The next method is to implement device identification. Each computer has a unique machine id. If the same device is used twice for transactions, then you may want to trigger an alert. In addition, device reputation companies will alert you if a device is reported as fraudulent with any of their other clients.

As you seek to take your direct sales company international, be certain to engage in proactive practices to avoid fraudulent practices.