Travel agents on the front line of fraud prevention

Travelmole’s Ray Montgomery takes a close look at fraud prevention at the Airlines Reporting Corp.
 

In all major segments, when commerce makes the transition to EMV, a spike in card not present (CNP) fraud inevitably follows. Following the adoption of the EMV standard and the liability shift in the UK in 2005, fraudulent transactions spiked by 79% within just three years for card not present transactions through traditional mail order, call center and online channels.

Of course CNP fraud is not a new phenomenon. The bad guys have always followed the path of least resistance where it is so much easier to pick up a phone or click a mouse. In the US, the liability shift day of judgment is October 2015 when supposedly all merchants should have implemented the EMV chip and PIN technology into their point of sale (PoS) hardware. With a conservative estimate of about 800 million cards needing to be reissued with chip technology this is clearly wishful thinking – best estimates point to about half of all cardholders will be in possession of EMV compliant cards by the end of 2015. In-person PoS fraud will undoubtedly continue but as the pool for ‘swipe and signature’ shrinks, the tricksters simply move on.

Travel agents work in a business where margins are tight and they can ill afford a loss due to fraud. Every new client poses a potential risk to some degree and mitigating that risk can be a fine balancing act – nobody wants to turn down new business. Independents rarely have the time or resources for dedicated fraud prevention policies so judgment calls are being made on a daily basis. The fraudsters continue to ‘innovate,’ with more sophisticated, creative scheming. As one avenue to ill-gotten riches closes a new one seemingly opens up almost immediately.

Trends quickly start to appear especially in the card not present arena, which has been the catalyst for the launch of a dedicated fraud prevention site by Airlines Reporting Corp. (ARC). Launched in October of last year, the site lets agents register for fraud alerts to glean the latest tactics being used by fraudsters.

"One of the best ways to fight fraud in the travel agency distribution channel is through collaboration and education," says Jennifer Watkins, director of credit card services and fraud prevention at ARC.

A variety of fraud and phishing scams continue to catch people out, and the sheer volume of the card not present transaction market has the potential to do most damage. In a high volume market such as this, it is easy to get complacent. ARC details various ways to identify potential red flags starting with the basic task of confirming a customer’s true identity.

How to identify and foil fraudulent transactions at the source? ARC highlights the following plan of action:
 
•    In a card-not-present environment, collect as much information as possible about the cardholder and the transaction to evaluate the risk of fraud.  Sign up for ARC fraud alerts and obtain ARC’s list of card-not-present red flags.

•    When possible, request that  unknown local customers come to the agency in person and:
o    Verify the cardholder’s identity (original driver’s license, ID card, etc.)
o    Verify the card has not been visibly altered
o    Validate the card expiration date and effective date
o    Obtain a manual credit card imprint and original cardholder signature, ensuring that the cardholder’s signature on the charge form is reasonably similar to the signature on the card

•    If any of these checks fail or look suspicious, call the ARC Fraud Prevention Team for guidance.

•    Check local addresses and telephone numbers by using internet research (such as reverse address or telephone searches) Immediately call the phone number(s) given (concerns should be raised if calls go unanswered or the phone is disconnected)

ARC emphasizes an abundance of caution and an inquiring mind on occasions where face time is impractical. Last minute travel to a designated ‘high risk’ city from a client giving an out of state address sets off multiple alarm bells but oftentimes the fraudsters are not quite so obvious.

A variety of social engineering techniques are used to reel in unsuspecting victims in the travel trade.  Armed with information gathered on the Internet, fraudsters are able to build relationships and establish trust, which is used to manipulate their victims into booking tickets using fraudulent credit cards.   

ARC lists these and more tried and trusted scamming strategies with effective ways to combat them, and when agents accept fraudulent transactions, how to limit the damage. At the end of the day, agents need to validate the identity of their customers. And once all of the data is collected at the point of sale make an informed decision whether or not to accept payment with a particular card or ask for another form of payment. No one wants to turn away business, but agents must weigh the risk of fraud knowing that at the point of sale they alone are in the position to prevent fraud.

Earlier this month the ARC-sponsored Credit Card Working Group (CCWG) met to discuss payment and fraud prevention topics including virtual card processing, chargeback reduction and tokenization. The CCWG currently comprises airlines, global distribution systems, payment processors, and credit card companies tasked with improving risk management and lowering payment-processing costs without compromising the customer experience.  This is the type of collaborative approach that is needed to stay on top in the fight against fraud.
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