Fraud management

What is fraud and what are the types of fraud?

Fraud occurs when material falsehoods are used to gain an advantage, be it financial or otherwise. Fraud comes in many different guises in the card industry. As such, it will appear on fraud reporting under a particular category. These are as follows:

  • 0 – Card Reported Lost
  • 1 – Card Reported as Stolen
  • 2 – Not Received As Issued
  • 3 – Card Issued Cased on Fraudulent Application
  • 4 – Issuer Reported Counterfeit
  • 5 – Miscellaneous /Account Takeover
  • 6/7/8 – Fraudulent use of Account Number
  • 9 – Acquirer Reported Counterfeit
  • 51 – Bust-Out/Collusive Merchant
What can I, as a merchant, do to reduce the risk of fraud?

There are a number of checks that can be implemented, each offering their own benefits, including 3D Secure, CVV Checks and Address Verification Service (AVS).

Data Blocking is another option, blocking countries where certain transactions may not be legal, names that constantly appear on fraud reporting and addresses to which goods were previously been sent where fraud has occurred.

How is a transaction flagged as fraudulent?

Reports are provided on a daily basis by the card schemes. Visa sends us details via the TC40 report and MasterCard via SAFE (System to Avoid Fraud Effectively). These are transactions that have been flagged as fraud via the card issuers and will also provide the reason for the fraud such as the card was counterfeit, lost/stolen or not recognised.

We have seen a transaction reported as fraud but not received a chargeback. Why?

Not all fraud will result in a chargeback. It may be outside of chargeback timescales, the amount may not justify the cost of a chargeback or the issuer may wish to gather further details before issuing a chargeback.