Card-not-present (CNP) fraud is defined as the unauthorized and/or fraudulent gathering, trade and use of payment data (card numbers, expiry dates and passwords). For CNP to occur, this data must be used in instances where the card and cardholder are not present (via phone, email, fax, or website).
First, a fraudster places an order for a product or service via a merchant's Card-Not-Present channel. The merchant processes the payment on the stolen payment card(s) and provides or delivers the product(s) or service(s). Yet the payment information provided is stolen. Eventually the real cardholder will identify and dispute the unauthorized charge. As a result, the merchant receives a chargeback and must put back the amount charged on the stolen card. It's important to remember that any merchant who accepts CNP orders can become a victim. Fraudsters also like to revisit merchants where the scam has been successful.
One variation of the scam sees the fraudster ask the merchant to overcharge the stolen card. Then, they will ask the merchant to forward funds to a third party. By doing so, scammers are essentially turning stolen credit cards into cash.
Warning signs - Common red flags
- Orders made from one IP address, but using different names, addresses, and payments
- Email addresses from free email service
- Many card numbers provided for one order (cards keep getting declined)
- Purchaser name and cardholder name are different
Product / order flags
- Larger than normal orders
- Many orders for the same product; especially "big ticket" items
- Orders from repeat customers that differ from their regular spending patterns
- Orders using the same customer or payment information, but many IP addresses
- Customer requests "rush" or "overnight" delivery
- Single payment information used for many shipping addresses
- Billing address different than shipping address
- Request that extra funds be sent to a third party
How to protect yourself
- Know the Red Flags and verify every order request received
- Before shipping merchandise, verify the information provided by the customer (telephone number, email address, shipping address etc.)
- Be aware of request for priority shipments for fraud-prone merchandise
- Verify priority shipping requests when the shipping address and the billing address do not match
- For suspicious orders, contact your processor. Verify the security measures to prevent victimization and reduce unwanted chargebacks.
- Never accept overpayments to forward funds to a third party
Merchants who accept CNP orders can lower their risk of fraud by using the automated verification tools supported by their payment processors.
If you think you or someone you know has been a victim of fraud, please contact the Canadian Anti-Fraud Centre at 1-888-495-8501 or report online.
Canadian Anti-Fraud Centre
Competition Bureau of Canada
Ontario Provincial Police
Financial Consumer Agency of Canada
Better Business Bureau
(BBB Locator Tool)
Fraud: Recognize, report and stop it!
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