The Top 3 Causes of CNP Fraud and How to Protect Your Business

Card-not-present fraud occurs when a person uses stolen credit card details to make a purchase online or over the phone. It’s one of the most common forms of credit card fraud and costs merchants millions annually.

However, CNP fraud isn’t always easy to detect. Fraudsters often use several techniques to execute CNP fraud and rely on various flaws and technology gaps to evade detection systems.

Lack of Internal Controls

Internal controls are procedures that help keep fraud away from your company. They prevent and detect fraud and can also improve the reliability of your business’s financial data.

Internal controls are a vital part of any business. They protect your company from fraudulent acts such as 1st party fraud. It can also be beneficial in helping you comply with regulations and laws.

However, internal controls have some limitations that can make them less effective than they should be. One of the most common issues is that control activities can take significant time, reducing a company’s overall efficiency.

Another problem is that personnel can cut corners to achieve operational efficiency, making it challenging to find and stop fraudulent practices. In addition, some employees may work together to conceal the fraud.

To be effective, internal control systems must be thoroughly assessed and monitored. Management must regularly identify the most significant risk areas and implement additional focus and control. It must also ensure that these systems remain viable over time.

Fraudulent Vendors

Card-not-present (CNP) fraud is a common cyber fraud where criminals steal cardholder information to make fraudulent purchases. These purchases can be made by phone, online, or in person.

The most popular form of CNP fraud is online shopping. This is because it requires less effort and is relatively easy for fraudsters to achieve.

Another major cause of CNP fraud is fraudulent vendors. These scams are often perpetrated by employees working in companies’ purchasing and accounting departments.

These employees are sometimes encouraged to commit fraud by bribes or other financial incentives. These incentives can be kickbacks or payment for their services from a vendor that gets the procurement contract.

To prevent chargeback cnp fraud, companies should implement a policy requiring purchasing employees to qualify and approve vendors before hiring them. Additionally, they should ensure that their purchasing policies include strict receiving procedures and separate accounts payable duties.

Vendors should also be reviewed periodically to ensure their billing volume is accurate and consistent with their previous payments. This way, irregularities can be identified, and corrective action can be taken immediately.

Misconceptions About CNP Fraud

In this fast-paced digital age, businesses must remain vigilant and follow anti-fraud best practices. Cybercriminals are on the prowl, leveraging phishing and skimming methods to steal sensitive information from online stores.

For many eCommerce merchants, card-not-present fraud is a massive threat to their businesses and bottom line. CNP fraud costs billions of dollars annually in the U.S. and can lead to hefty chargeback fees and increased customer friction.

Detecting suspicious activity is a merchant’s first line of defense against actual CNP fraud. This includes identifying fraudulent customers who have made multiple failed attempts to purchase using different card numbers.

To protect against these fraudsters, you should implement an advanced payment fraud solution that can help increase legitimate transaction approvals and eliminate the risk of CNP fraud. This will save you money on fraud, reduce online chargebacks and improve your brand reputation.

Another critical step to prevent CNP fraud is to encrypt data efficiently. This includes personal information like credit cards, addresses and social security numbers. By ensuring that this information is encrypted, merchants are protecting themselves from fraud and helping to protect their consumers’ privacy.


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