- The impersonation game
Refund fraud oﬅen begins with a phone call or email. The fraudster contacts a business, impersonating a customer, another employee from headquarters or a bank representative. Their aim is to gain access to the card machine and have someone process a refund on their behalf to a card that was never used to make a purchase.
- Distraction tactics
A group of fraudsters may also attempt to access a card terminal by distracting the salesperson. While one customer attempts to buy something, others will distract the salesperson, giving the fraudster enough time alone with the card machine to issue a fraudulent refund.
- The internal player
This internal type of refund fraud involves an employee manipulating the refund process from within the company. They may issue fraudulent refunds to their personal accounts or help external fraudsters access refunds in exchange for a share of the money.
- The prodigal product
A common tactic used by fraudsters is taking advantage of the product delivery process. The fraudster will falsely report to the company or the card merchant that the product did not arrive and request a refund while keeping the product.
When it comes to return fraud, “wardrobing” is a growing problem for retailers. In this form of return fraud, a customer will buy a high-value item, like a television or dress, for a specific event. The customer will keep the tags and packaging and return the item a few days or weeks later in second-hand condition, resulting in a loss for the company.
- The swap
In another form of return fraud, fraudsters use a simple trick where they purchase a product and then return a similar but older or broken item in the new product’s packaging. The business, not noticing the switch, unwittingly refunds the purchase, and the fraudster gets a new product for free.
- Whose receipt is this?
As the key transaction record, receipt manipulation is central to return fraud tactics. Fraudsters may forge receipts, pick up discarded receipts or use previous receipts to enable their fraud. They will then enter a store and pick up one of the items on the receipt before heading straight to the counter to request a refund for the item that has not been sold.