CHARGEBACK FRAUD INTRODUCTION
For many years, taxi fleets and executive chauffeur firms have used traditional office-based card payment terminals to accept card payments over the phone for advance bookings. This might be picking up from a local restaurant, or collecting business passengers from the airport. This method of card acceptance is known as cardholder not present (CNP).
Although fairly common within the taxi sector, many fleet operators don’t realise how risky this type of transaction is. The biggest misconception is that taking a card payment in this way guarantees that they will receive payment for the upcoming taxi journey.
Unfortunately, fraudsters know that taking cards in this way allows them to make a financial killing on your account. They just need to convince you that they are genuine at the time of booking. After the journey has been completed, they can chargeback the transaction and keep the money - or in the case of a stolen card, simply wait for the real card- holder to do so.
The smartest taxi fleets have countered this costly problem simply by offering contactless payment terminals in all vehicles, eliminating the risk of CNP fraud altogether.
Paying for taxi journeys on a face to face basis, with the customer alongside you, is probably the safest and most reliable way to take card payments, since telephone CNP and even many in-app payments offer few protection mechanisms for the fleet operator.
HOW DOES CNP FRAUD WORK?
The fraudster uses a stolen card to make one or more payments for taxi journeys that he books with you. Often this will be for a single high value payment. Although fraudsters operate this scam for various reasons, a common scenario for taxi fleets involves the movement of cash or drugs between locations by criminal gangs, for example as part of sophisticated “county lines” operations.
With the journey(s) completed, the fraudster walks away. Some time later (sometimes several months after the transaction), the genuine cardholder issues a chargeback request to their bank or credit card company, claiming they do not recognise the charge or charges shown on their card statement. In the case of a CNP transaction, with no cardholder verification carried out at the time of the transaction, the chargeback is very hard to contest. The money is refunded, with additional financial penalties applied to the fleet operator.
24 WHAT IS A CHARGEBACK?
If the genuine cardholder has had their card compromised and it has been used by your fraudster to pay for his taxi journeys, then they can reasonably say their card or card details have been stolen and used to pay you. The trans- action is simply reversed and charged back against your merchant account. In other words, the money you thought you had received will be taken back out of your account.
In some cases, card details have not actually been stolen, but rather a card was used without permission. This is considered a good enough reason to request a chargeback. For example, mum’s card was used (without her knowledge) by her son, to pay for him and his mates to get back from the airport late at night after a delayed flight. Mum finds out later and issues a chargeback.
Other times, a cardholder may simply be acting disingenu- ously and never had any intention of paying you, manipulating the system to their advantage.
WHAT MIGHT AN ATTEMPTED FRAUD AGAINST THE FLEET LOOK LIKE?
Usually, an individual calls to book a journey or a number of journeys either for movement of people or to collect goods from point A and on to point B, usually putting a few hun- dred miles between A and B. The caller provides a set of card details (the PAN or long card number, expiry date and CVV or security code) over the phone to pay for the journey(s). Before the fleet dispatches a driver to carry out the job, office staff input the card information into their terminal and await a response back that the transaction has been auth- orised. They dispatch a happy driver to go and do the big job. In many cases, a fleet’s booking app can be used in the same way, with no further cardholder verification required.
In the background, it is likely the fraudster has carried out a similar process with an innocent supplier of high value goods (who will later find that he won’t be getting paid either, since he’ll receive a similar chargeback). It is this supplier that is at point A and the unsuspecting fleet driver has collected the goods and moved them to point B.
Some of the goods you might be asked to collect are items which are easily sold on for profit, such as tyres, car parts and electronics or computer equipment.
HOW DOES THE FRAUDSTER GET HOLD OF STOLEN CARD DETAILS?
In the circumstances explained above, the fraudster only needs basic card information, they don’t need to have the
FEBRUARY 2022
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