Recognizing and Combating COVID-19 Chargeback Fraud
In recent weeks, the Coronavirus pandemic has forced to adapt to sudden and drastic changes to how we socialize, shop, and spend our days. Directives to stay at home, practice social distancing, and avoid unnecessary excursions help to prevent the spread of the dangerous COVID-19 virus, but whenever normalcy is suspended, opportunistic fraudsters move in to take advantage of the confusion and desperation. Numerous new online fraud schemes have been launched to prey on shoppers in Coronavirus-stricken countries. How can merchants recognize these schemes and help stop them?
Quarantines and lockdowns don’t stop people from needing the basic necessities of life—or to find ways to keep their minds occupied while they’re stuck sheltering at home. With in-person shopping so strongly discouraged, many consumers are leaning harder on ecommerce than ever to supply them with the things they need on a day to day basis. They’re also practicing new shopping habits as they seek out protective gear and cleaning supplies, stock their homes for an extended lockdown, and try out new and unfamiliar delivery services.
The fraudsters know that a lot of people are moving into what are, for them, uncharted ecommerce waters, and they’re pulling out all the stops to trick and deceive them. We’ll leave it to others to judge what kind of person would be scamming frightened people and stealing their money in the midst of a deadly global pandemic—let’s focus on the types of schemes law enforcement has been seeing, and what sorts of education or preventive measures can be levied against them.
What Kinds of COVID-19 Fraud Are We Seeing?
The UK’s national fraud reporting agency has received more than 100 report of Coronavirus-related fraud, most of it in the latter half of March—which means the fraudsters are likely just getting revved up. Most of the incidents represent very basic forms of ecommerce fraud, such as purporting to sell hand sanitizer or face masks, taking payments from customers, and never shipping the product.
More prevalent, however, are the phishing emails that have been reported, many of which involve Coronavirus-specific angles of attack. Some phishing emails claim to be from the World Health Organization or some other respected public health agency, asking recipients to click a link to see (for example) information about COVID-19 infections in their area. In reality, the link is a malware download.
Fraudsters are also sending phishing emails asking people to donate to nonexistent charity and relief organizations, directing people to fake websites where they can supposedly apply for economic stimulus checks (thereby capturing their social security number and other sensitive personal data), and filing fraudulent Medicare claims using stolen credentials.
Protect yourself from COVID-19 Chargebacks
Regardless of your industry, make absolutely certain that your customers receive a copy of your return policy and your terms & conditions at the time of transaction.
For merchants who strive to build consumer confidence in ecommerce by being trustworthy and providing quality products and excellent customer service, it can be frustrating to see cybercriminals undermine all that work and sow distrust in online shopping by running scams like these—especially when that damaged trust leads to things like “friendly fraud” chargebacks. Many consumers, once burned by a scammer, are a lot less likely to give legitimate merchants the benefit of the doubt when dealing with a mistake or misunderstanding.
Merchants who sell highly sought-after goods right now, such as protective masks, gloves, hand sanitizer, and toilet paper, must be truthful and transparent with their customers when it comes to stock availability, delivery times, possible delays, and other issues that could lead to a dispute. It’s better to miss out on a sale than to overpromise, fail to deliver, and end up with a chargeback on your hands. Plus, the more customers get used to seeing merchants practice transparency and disclosure, the easier it is to draw a contrast with the shady fraudulent merchants and recognize their false promises for what they are.
If you’re getting new customers or seeing increased business as a result of the pandemic, this is a good time to update and publicize your terms and conditions, make sure your merchant descriptor is clear and accurate, and to be lenient and generous with your return and refund policy.
Merchants can also help to educate their customers about known fraud schemes they are likely to encounter, and remind them that no reputable business will ask their customers for passwords or personal information over email. But of course, merchants aren’t really in the position to serve as the first line of defense against online fraud—so what about the institutions that are?
Since the COVID-19 outbreak and its attendant forms of fraud are very much a new and developing situation, there hasn’t been much in the way of specific, official responses from the banks and card networks. We will update the information in this post as it is released.
Nobody can say for certain at this point how long our lives will be shaped by the need to avoid COVID-19 or what the ultimate social and economic impact will be. In the meantime, we must all do what we can to protect ourselves, our loved ones, and the communities we live in.
That means being vigilant about fraud, educating others on how to avoid it, and making our best effort to support both the small businesses and the everyday consumers all around us. Crime and fraud don’t pause themselves for pandemics and other global catastrophes—quite the opposite, in fact. It’s still as important as ever to fight fraud and illegitimate chargebacks so that consumers have financially healthy merchants and a thriving ecommerce ecosystem to look forward to when all this is over.