Business Fraud Protection

Credit Card Fraud

Many people use credit cards as their preferred method of payment. Unfortunately, the use of stolen or forged credit cards is also a popular tactic among crooks. You and your employees should follow the strict acceptance procedures set by each credit card company. Keep the following points in mind to further reduce your chances for loss:

• Post a procedural guide for credit card transactions next to the register.
• Install a telephone at the register; post authorization numbers nearby.
• Keep a copy of credit card agreements on file so they can be easily retrieved.
• Have employees initial credit transactions in the event of a discrepancy.
• Protect yourself and your customers by keeping credit card transactions confidential. Give charge slip carbons directly to the customer or have them destroyed immediately by personnel. Thieves can obtain names and numbers from the trash and use them for fraudulent mail or phone order scams.
• Charge-backs can occur if a cardholder disputes any charges, especially in mail or phone orders.

If uneasy about a transaction, it is best to call the credit card company and ask their security personnel for advice before completing the transaction. Have a plan in place for employees to follow if a stolen or fraudulent card is produced. Keep the suspect card behind the counter until instructed by the credit card company to return it.

Special precautionary guidelines are available from each credit card company. Stay on the alert for merchants, typically telemarketers, who ask you to deposit their sales drafts. When a licensed business owner or employee runs the sales drafts for another business, the process is known as factoring. Factoring is strictly prohibited in North Carolina. Chances are you will never be approached with such a proposition. If you are, contact your bank immediately. If you become involved in factoring, you will be held responsible for all financial losses, and if fraud is involved you will face criminal prosecution.
 
 

Counterfeit Bills

The three basic types of counterfeit bills are:

1. Low denomination bills altered to appear higher (corners of large bills glued to small bills)
2. Photocopies of authentic bills, and
3. Printed counterfeit bills.

To avoid accepting counterfeit bills as payment, be sure to inspect all bills, especially larger ones, for appropriate portraits. Compare these bills to known bills of the same denomination. Look for differences, not similarities. Counterfeits will be less detailed, have a flat appearance and appear washed out.

Authentic bills are always printed on safety paper with fine red and blue hair-like fibers imbedded in them. Do not be fooled by colored lines printed on paper.
 

Bad Checks

A check is a written, dated and signed form of payment that directs a bank to pay a specific sum of money to its bearer. A check is bad when it cannot be redeemed for cash.

Businesses should establish a firm check-cashing policy and post it where customers can easily see it. This policy should include the following information:

Amount of check - limit the amount for which a check may be written or limit it to the amount of purchase; require management approval for any check written in excess of a set dollar amount.

Identification - The primary identification for collection purposes is a driver's license or special identification card issued by the state. 

Local vs. out-of-state checks - Local check writers are easier to contact for collection. North Carolina courts cannot prosecute out-of-state check writers unless they can be contacted within North Carolina.

Other limits - Specify any other limits so they will be clearly understood by customers and employees.

Returned check fee - Collect a returned check processing fee of up to $20.00. All checks should accurately reflect the name, address (mailing & physical), driver's license or valid identification number, and home and work phone numbers of the check writer. If this information is not accurately recorded on the check, the employee should write it clearly on the check.

The following items should also be considered when accepting a check:

• be sure name, picture (or description), and signature match the check writer's identification;
• written and numerical amounts agree;
• correct date (not postdated);
• any erasures, alterations, or abnormalities;
• low check number (new accounts can be less reliable);
• local vs. out-of-state (use extra caution when accepting an out-of-state check. The writer should be a NC resident in case he needs to be contacted for collection).

Two-Party Checks - Two-party checks have a higher incidence of unreliability and can be more difficult to collect.