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What Should I Do With The Money?
fraud order

 12:16 pm on Nov 10, 2007 (gmt 0)


I received some fraudulent orders. From persons who used other people's credit cards. The money is in my merchant account. Unfortunately I did ship some of these orders. What should I do with the money that is already in my account? Thanks.




 6:15 pm on Nov 10, 2007 (gmt 0)

Go to PubCon?! :o)...KF


 6:25 pm on Nov 10, 2007 (gmt 0)

How do you know the money didn't belong to the buyer?


 7:04 pm on Nov 10, 2007 (gmt 0)

There is a possibility the money belongs the the buyer. The billing Address is in Europe, the shipping address is in Ghana. He does not return our emails to him. When I contact the person at the billing address, I find the wrong person. The order originates from Ghana. So, I do not feel good about it, yet I do not know for sure.


 7:14 pm on Nov 10, 2007 (gmt 0)

You just wait until its disputed, if it is, and defend yourself using standard procedures.

What else is there to do, withdrawl the money before this happens? This would be fraudulent on your part. Refund the money before you know for sure, this would be stupid.

What country are you based in?


 8:14 pm on Nov 10, 2007 (gmt 0)

Wow Titani, between your two recent threads you're getting a costly lesson in international commerce.

Newbie inexperience further emboldens and enriches scammers. Understand that MANY large retailers -- Wal-Mart, for example-- don't sell beyond their own national borders. Greedy newbie merchants are a big part of the problem.

Yep, sounds like fraud, almost 100% sure.

If the amount is tiny the card owner may not notice the charge on his statement and you may get to keep it. Not morally right, but I don't see a practical option especially if you tried to reach the cardholder. Keep the money in your account; it will probably be reversed soon.


So what DO you do? Drop all ship-to's from your cart except USA, Canada, Western Europe and Korea and Japan. Be alert that some scammers operate out of those places, as well. As you gain experience - develop a nose for the odor of fraud -- slowly add more countries.


 8:40 pm on Nov 10, 2007 (gmt 0)

Thanks, very valuable information indeed. I am based in the United States.


 3:53 am on Nov 11, 2007 (gmt 0)

Your next step would be to remove Ghana (and the other 160 countries you don't want to ship to) from your Ship-To countries list.

If that list has more than 30 countries in it, it's too long. Seriously, any country with the word "Islands", or any country starting with the letter "E", simply do not ship to. That's a good start to solving your fraudulent orders problem.


 3:48 pm on Nov 11, 2007 (gmt 0)

country starting with the letter "E", - E? Like that bastion of civility, good taste, democracy, understanding, tolerance, warm beer, speed cameras, chavs, over priced houses, highly taxed England for example.


 7:25 pm on Nov 11, 2007 (gmt 0)

No, not Great Britain or the UK. Perhaps "B" would have been a better letter to have fun with.


 7:39 pm on Nov 11, 2007 (gmt 0)

We have shipped to Ghana and Nigeria without any problems. Our main requirement is that the billing address of the credit card is in the same country. On a few occasions, we will make an allowance if the order is from a UN agency, NGO, or from the American military.


 7:51 pm on Nov 11, 2007 (gmt 0)

Your next step would be to remove Ghana (and the other 160 countries you don't want to ship to) from your Ship-To countries list.

That depends on how small you want to keep your business. If you want to let your business grow, you solve the potential problems, you just don't burn the entire house to kill a few mice.


 10:07 pm on Nov 11, 2007 (gmt 0)

That depends on how small you want to keep your business.

Wal-Mart.com does fine and they didn't even ship to Canada the last I looked.

Derek, what % of the orders you get from W. Africa are good? No doubt a rare one might be valid but we're not going to sift thru 100 bad ones to find it.

There was an African poster on here a few years ago who said ordinary Nigerians don't use credit cards in their own country.


 2:13 am on Nov 12, 2007 (gmt 0)

1. We restrict the countries that have the most fraud.

2. We only ship to the billing address of the credit card holder.

3. For everyone else who can not meet those requirements, we require a bank wire transfer(we have a seperate bank account we keep change in just for this purpose, we x-fer the funds out to our main account as soon as they are put in). We also take a couple other methods of payment, but we are pretty strict, and we have stopped the flood of fraud that was occuring.

We actually had much more fraud attempts in the U.S. before we restricted to shipping to billing address only. IMHO Normally a thief will not steal card info, and then have product shipped to the cardholder's address.

I'm sure that there are many that would argue that we are way too restrictive, but we have not lost the many thousands a year we were losing before we make these policy decisions.

Most of our customers that complain about the inability to have product shipped somewhere other than the billing address, we explain the reasons, and that they are safer because of it, and we get the sale anyway.

If you sell by credit card, and do not ship to the billing address, and you get a chargeback of "they did not order it", you will lose the chargeback battle, losing the money, the product, and incur the chargeback fee.

If you only ship to the billing address of the cardholder & require delivery comfirmation, and or signiture, you can demonstrate that the product was recieved, at the cardholders billing address, and the CC Processor will not believe that the cardholder did not order it. You win, you still suffer the chargeback fee, but you do not loose the money & the product.



 2:39 am on Nov 12, 2007 (gmt 0)

Except those from South Africa, most African orders are not valid. But the vast majority are easy to detect: they used hacked credit cards from US and European banks.

Since credit cards are rarely used in Nigeria, the order is likely to be valid if someone uses a genuine Nigerian credit card. By all means, insist on T/T or escrow if you do not feel comfortable about an order.

The only time we took action against a particular country was Vietnam when we blocked a lot of their ip addresses. Fraudsters there were using our store to test out their hacked cards everyday, even though they know that we weren't going to ship. Things came to a head when they made an order for shipment to the genuine address of the credit card holder. This was probably in revenge for turning down their orders. It was then that we felt that we have had enough.

If the products you sell can be obtained much cheaper in other countries, then you are probably wasting your time by shipping there. However, if your products are much cheaper than in other countires, especially given the depreciating US dollar, then you could be missing out a lot. In our case, we had no choice: US used to account for more than 80% of our orders but it is now less than 20%.


 4:41 am on Nov 12, 2007 (gmt 0)

I thank all the experienced people who contributed to this thread.


 1:24 pm on Nov 12, 2007 (gmt 0)

If you have received money from the fraudulent orders and are not shipping them. Refund the card back. Otherwise you will have to pay fees durning the chargeback process. It does not cost you a dime to refund before the chargeback.


 3:22 pm on Nov 12, 2007 (gmt 0)

Looks like you are learning the hard way.
You have 2 options and really only two.

Based on what you have said the orders are fraud and you have been had. Lesson learned don't repeat the same mistake check the owner's information if you don't you will lose your merchant account. The processor will consider you a libality and pull your aaccount if you have a high percentage of fraud orders or chargebacks.

Here are your options.

1-Make sure the orders are fraud if you don't know how your in the wrong business. If they are

REFUND THE MONEY NOW. If you don't and wait for a charge back they will charge you 35 dollars per charge back and could pull your merchant account.

2- Dont make the same rush to ship mistake again.

That's it.

ALWAYS ALWAYS check the card. We are finding out fraud in much
smaller amounts so now ALL orders are checked unless they are a return order.

trinorthlighting that is incorrect it does cost you a percentage to refund the order usually 1% more than the charge puls a fee to process per transaction of .25 per or .50.

The only time it doesn't cost you a percentage of the charge is if you catch it before the batch has been processed then it only cost you the per transaction fee ususlly .25 per.

Based on US account.. but I'm pretty sure they are almost the same in other countries.

[edited by: bwnbwn at 3:30 pm (utc) on Nov. 12, 2007]


 3:27 pm on Nov 12, 2007 (gmt 0)

So what DO you do? Drop all ship-to's from your cart except USA, Canada, Western Europe and Korea and Japan.

What about Australia? Or New Zealand?


 4:32 pm on Nov 12, 2007 (gmt 0)

Sorry about leaving them out. Should mention also Scandinavia as "Generally Recognized As Safe" (GRAS).

Don't want to slight honest people. There are maybe only 10 "Never Ship" countries and many "probably ok" ones.

There are also some riskier areas in the U.S. and Canada. I worry about transshippers boxes in port cities, often Miami, that re-ship for customers in Latin America. While we don't export, we have shipped **small orders** to those with no problem if things smell right.

We DO ship separate ship/bill customers all the time and have ZERO problems inside the U.S. I want to emphasize that most of our products are very low risk.


 5:49 am on Nov 13, 2007 (gmt 0)

This is a bit long, so please bear with me...

There is no "one-size-fits-all" solution here - the right balance between security (for you) and convenience (for your customers) depends on several things:

1.) What is the high-low-average price spread of your items?
2.) Do you market locally, nationally, or worldwide?
3.) How sophisticated is your clientele?
4.) What payment and shipping options are available to you?
5.) How exclusive is your product, and how badly do your clients want/need it?

There are several things that can be done to reduce fraud. I'm speaking from personal experience here - our company has been in business over 10 years, selling widgets in the price range of $1,195 to $ 3,450 (approximately). We have had thousands of orders, and NEVER GOT BURNED, by sticking to our security policies. Possible lost sales? Sure. But 95% of orders with address issues get resolved the same day, and most clients (after whining & moaning) come to their senses, realize they're dealing with a serious company, and call back within 24 hours. Once again, this depends on Factor #5.

A.) If your products are high-priced, and the clientele is intelligent enough to make an additional phone call, here's an almost-bullet-proof method of preventing CC fraud issues:

For orders over a certain amount (make this decision based on CC company guidelines for E-commerce/phone orders, as well as what you feel comfortable with) - Ship ONLY to an address that is on file with the credit card.

Not only does this deter scammers, it also ensures that you're protected by the CC company in case something goes wrong. Shipping to an unconfirmed address leaves you without any protection.

How this works:

i.) Customer wants to place an order & have it shipped to an address other than the billing.

ii.) You explain to them that, due to credit card company rules regarding online/phone orders, the shipping address must be on file. Note that stating that it's the "CC company rules" makes THEM the bad guy - not you. Also, this has a side benefit of showing that you're a.) legit, b.) serious about security, and c.) know what you're doing.

iii.) Customer calls their issuing bank, and asks them to add the "alternative shipping address" to their file.

iv.) Customer calls you back, and tells you they've done it.

v.) You call their issuing bank, and confirm. Do NOT trust a customer to say they've done it - we get at least one "false positive" a day.

vi.) Now knowing that a.) the person placing the order has passed the bank's verification procedures, and b.) the shipping address is on file, therefore you're protected, you process the order & sleep soundly at night.

Reason this works: an attempted fraudster with a stolen CC will need additional info to try & fool the bank into adding a new address (some examples I've heard of were: mother's maiden name, last 4 digits of Social Security number, 4-digit date of birth, city you were born in, and a combination of them.)

Another thing to try:

If the vast majority of your sales comes from a few countries - post a notice on your site, that you will only ship to these countries. Any exceptions require a phone call (which a lot of scammers will avoid), and complete verification of both billing & shipping addresses (extra deterrent).

Once again, this works for us, and "your mileage may vary". But it's a good place to start. Find out everything you can from your payment processor, the credit card companies themselves, learn the rules, and you'll be on a level 99% above most Internet dealers out there, in terms of security.

Bjorn Iceland

 7:59 am on Nov 13, 2007 (gmt 0)

jsinger wrote:
So what DO you do? Drop all ship-to's from your cart except USA, Canada, Western Europe and Korea and Japan. Be alert that some scammers operate out of those places, as well. As you gain experience - develop a nose for the odor of fraud -- slowly add more countries.

To backup what jsinger says from the direction of knocking out the 'worst' locations for fraud...

The high risk countries from which more than a super majority of orders are fraudulent (in alphabetical order) based on information from a leading anti-fraud network:

Egypt, Ghana, Indonesia, Lebanon, Macedonia, Montenegro, Morocco, Nigeria, Pakistan, Romania, Serbia, Serbia and Montenegro (Historical),Ukraine, Viet Nam.

Identifiable risk factors (i.e. we got a chargeback and looked at the attributes of the fraudulent order):

- Was from a high risk country (as above) - 32%
- Placed from an open proxy Internet IP address - 26%
- Country different from card country/billing address country - 21%
- Placed from commercial anonymous proxy services - 6%
- From Satellite Internet Addresses - 4%

And for the remaining 11% of fraudulent orders there was no-identifiable pattern (sophisticated carders).

Also read this thread [webmasterworld.com].


 9:57 am on Nov 13, 2007 (gmt 0)

by the way, titani, welcome to WebmasterWorld [webmasterworld.com]!


 2:23 pm on Nov 13, 2007 (gmt 0)

- Was from a high risk country (as above) - 32%
- Placed from an open proxy Internet IP address - 26%
- Country different from card country/billing address country - 21%
- Placed from commercial anonymous proxy services - 6%
- From Satellite Internet Addresses - 4%

Bjorn, I'm sure you forgot to add that your fraudulent orders tend to be far larger than average. Right?

There are other indicia of fraud that are easier to spot, such as selecting air express shipping or immediately emailing to see if the order went out. Asking shipper to use a specific carrier. TNT seems to be the current favorite.

There are others, easier for scammers to change, that I don't care to annunciate publicly. Most of us know them well.


 7:33 pm on Nov 16, 2007 (gmt 0)

My father had a simple and effective rule which I have followed for many years with complete satisfaction.

"Never, ever, do any kind of business with any country which has green in its flag".

You may miss a little pleasure, but you will avoid an enormous amount of pain. Follow the rule and sleep easy in your bed. I think better than avoid countries beginning with "E" - in fact we have shipped quite a lot to Ecuador with no problems. Eire begins with "E" and has green in its flag ... doubly unattractive!


 8:00 pm on Nov 16, 2007 (gmt 0)

"Never, ever, do any kind of business with any country which has green in its flag".

Avoid Ireland, Italy, and Wales?

[edited by: LifeinAsia at 8:01 pm (utc) on Nov. 16, 2007]


 8:38 am on Nov 17, 2007 (gmt 0)

Country different from card country/billing address country - 21%
- Was from a high risk country (as above) - 32%

I would think there is a high degree of overlap between the two.

We have shipped genuine orders to all the high risk countries you stated. But as I said earlier, we will usually ship to a high risk country provided that the credit card is issued in that country, since genuine credit cards are usually rare.


 9:32 am on Nov 17, 2007 (gmt 0)

About 6 months ago we received a large fraudulent order totalling about about 4000. We're in the software business so the order was fulfilled automatically when the order went through. Suspecting strongly that it was fraud, we put the money aside and waited for the inevitable chargeback/refund. This never happened. Because we had fulfilled the order, and implemented Verified by Visa, we were entitled to keep the money. Liability for the fraud was passed up the chain (I'm not sure who picked it up ultimately).

I don't know if this is a general policy for Verified by Visa or specific to our merchant account, but Verified by Visa (and MasterCard SecureCode) definitely seem worthwhile as fraud protection.

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