There is a new breed of sophisticated criminals preying on small businesses. It seems that it’s a full-time job these days to try to stay ahead of them or create policies to prevent fraud. As our industry grows and changes with the times, embracing digital technology and doing business with people we may never see in our showrooms, we are seeing more emboldened ways for criminals to steal and cheat. Back in 2019, I wrote an article about the fraudulent transactions we experienced and the steps we have taken to prevent fraud. Basic security measures such as ensuring the billing and shipping address information match the credit card, phone, email addresses, etc., are all set in place. While it has probably thwarted some of the potential fraud, For wood flooring retailers, it seems it’s a full-time job these days to try to stay ahead of them or create policies to prevent fraud. The latest scenario demands an even more vigilant approach.
The scheme
I recently got a text message from a flooring brand representative warning of an increasingly common scheme: “A lot of fraud is happening in the flooring industry. The persons are ordering ceramic tile, 24x48, and vinyl planking. They are giving a credit card over the phone. They are not coming in person. They are sending a hired driver who knows nothing about the scheme to pick up the product. The driver picks up at a distributorship or a retailer’s warehouse. … The scammers have hit a total of four dealers that I know of.” Make that five dealers! Our business may have been one of the first hits with multiple transactions earlier this year.
How it impacted us
Our business already had red flag alerts set in place when the person wants to pick up at a different location, but these latest fraudulent transactions happened with the pickups at our location! We have the signature, the video and the license plate of the person picking up the flooring. But none of this matters, because the person picking up is not related to this transaction; rather, it was a day laborer who was paid to pick up and drop off the material.
Three weeks after the pickup happened, we received a chargeback letter from our credit card processor. We gathered the evidence, video surveillance, signatures on the document and submitted our case to the police department. The vehicle and the person who picked up the flooring order was found at the address listed on the vehicle registration, but he spoke very limited English and didn’t have any information about who hired him for the day.
From seeing an increase of such cases, the police officer said that most likely these scammers are involved in construction, and they use someone’s card and then instruct them to file a chargeback a few weeks later.
In hindsight, we can see there were red flags in all the fraudulent transactions because:
- There was no caller ID name listed
- The email address did not contain the customer’s name
- The transactions moved too quickly
- Someone other than the customer was picking up.
Needless to say, there was no way to trace, track or stake out these fraudsters. Our company took a loss. It feels so violating to have someone steal from a hardworking small business.
How we’re fighting back
In addition to the security measures we already had in place, we’ve added a third-party ID verification system. Just as we verify ID with the card when the person is paying at the store, we now verify the ID, matching it to the credit card and the addresses on record. It’s not a perfect system, as the ID address is not always the billing address on the card. In such cases, additional steps are taken to verify their identity by calling the issuing bank’s security department and verifying the information on record. We run internet searches and look at the caller ID name. We search the delivery address to see if the property is vacant and for sale or if the name belongs with the address on record. A lot of work? Yes, it is! But there is a certain peace of mind knowing that the information was verified to the best of our knowledge with multiple measures.
We are hoping that the additional security measures and our detective work, including internet searches, credit card verifications, and third-party ID verification, will be a deterrent for those sinister criminals who want an easy transaction without having the red flags raised.
Has your store been a victim? What have you done about it? No one is immune to this potential violation, but I hope that by talking about it, we may help prevent someone else from becoming a victim.
