What is refund fraud?
Refund fraud involves the use of a terminal to issue an invalid refund with no corresponding spend. It is often committed by employees crediting refunds to their own account or that of their family/friends. To avoid detection they may also use a stolen credit card to process a large purchase and then refund the same amount to a different account or card.
To protect your business from fraudulent refund activity, you must always process a refund to the same card that was used for the original sale. This is a clause within the CommBank Merchant Agreement.
We also recommend these steps:
- Closely monitor all refunds to ensure they have a legitimate corresponding sale
- Establish processes for only a small group of staff to process high value refunds
- Be alert to changes in staff behaviour or a sudden increase in their spending habits or wealth
- Never refund a card transaction if:
The customer asks you to refund the transaction in cash, to a bank account, through Western Union or different card. Credit cards can accept refunds even if the card is reported as lost or stolen
If a customer asks you to do any of the above or if you’re suspicious of a refund request, call us immediately on 1800 230 177 for Australian based support 24/7.
Fraud in practice: A real-life example
Ricky owns a fish and chip shop and serves a customer who is purchasing dinner for his family. Ricky hands the customer the terminal and asks the customer to complete the transaction worth $30. The customer quickly clears the $30 and then completes a new MOTO transaction for $3,000. The customer passes the terminal back to Ricky before complaining that he has been incorrectly charged $3,000. Ricky assumes he is responsible for the mistake and apologies. Ricky also agrees to refund the customer to a different card.
A couple of weeks later, Ricky receives a chargeback for the $3,000 transaction and is also liable for a chargeback fee. Ricky also has no way to recover the $3,000 he refunded to the different card.