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Can you Recognize Fraud?
By Kym Price

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One of my clients called me with this scenario and asked for advice:

"This morning, we received an application and a $10,000 opening order. The customer offered to pay by credit card. I ordered a credit report. No luck. I ordered a trade clearance report, and was able to find a company with a similar name but a different address from the one listed on the application. The resale certificate that accompanied the credit application listed a third address' .all for a company in business for less than one year! I went on line and did a reverse address look up. I found the applicants 'business address' was one of those franchised mailbox service centers. What should we do about the order pending?"

I congratulated my client on her efforts up to that point. 1 suggested that on the basis of the information gathered that the most appropriate terms of sale would be wire transfer in advance. She asked if COD Cashiers Check would not also be a viable option. I reminded her that basically all that is needed to generate a forged [but authentic looking] Cashiers Check is a scanner and a color copier. She was already aware that credit card fraud is rampant, and that even if the card belonged to the applicant that the charge could be disputed - at which point the credit card company would debit my client's account for the $10,000.

My client called her salesperson and gave him the news. A few minutes later, she received a call from the applicant complaining about the decision to require wire transfer payment terms. The applicant demanded to know why the seller would not accept a credit card. Fortunately, this was a potential complication she and I had discussed. She responded that her company had experienced problems in the past with large opening orders on credit card terms from newly formed companies, and as a result their policy was to accept wire transfers until the account qualified for different terms of sale.

The applicant then complained about having to pay $25 in wire transfer fees, and my client offered to discount the price of the product by $25. The applicant said he would consider her proposal. To no one's surprise, she never heard back from the applicant.

You might ask: Is there any way to know for sure that this was fraud, and I believe that the answer is no. Nevertheless, the role of every credit department is to manage risk and I believe that the decisions made and actions taken in this situation are consistent with the credit department's mandate to protect their company's assets.

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