New Web site helps e-tailers combat online fraud

[February 7th 2001]

The Worldwide E-Commerce Fraud Prevention Network has announced the launch of its fraud prevention Web site. Located at www.merchantfraudsquad.com, the site provides expert advice about how to combat online fraud, a growing merchant concern. Internet fraud involves the unauthorized use of credit card numbers and other payment vehicles to purchase goods and services.

Currently, the Web site provides advice and information intended to keep stolen credit card numbers out of circulation and prevent their use on merchants' sites. Sample articles include:

• Five essential tools for preventing the use of stolen credit cards online
• Tips on secure Web hosting
• How to effectively report online crime
• Future use of e-signatures for fraud prevention
• Consumer tips for shopping safely online, which merchants can place on their Web sites

"Combating online fraud represents a huge challenge since merchants can be vulnerable to a wide range of criminal tactics, even if their own Web sites are secure. The Network seeks to identify these vulnerabilities and provide smart solutions for fighting back," said Jennifer Bennett, Vice President for Customer Service Strategy, American Express and Network co-chair.

Merchantfraudsquad.com is the first initiative of The Worldwide E-Commerce Fraud Prevention Network, a not-for-profit organization formed last fall by American Express and its coalition partners: Amazon.com, buy.com, ClearCommerce, Expedia.com, First Data Corp. and Starwood Hotels & Resorts Worldwide.

The Network seeks to educate merchants about fraud prevention techniques and to encourage online enterprises to adopt best practices and anti-fraud technology. Since the coalition's launch, more than 375 businesses and organizations have signed on as charter members, including many recognized e-commerce leaders.

"The number of companies that have joined the Network over the last three months indicates there is a broad interest in learning more about combating online fraud. As more merchants use our site to get educated and adopt fraud prevention practices that fit their businesses, we hope they will see a meaningful reduction in fraud losses," said Travis Fagan, Vice President for Customer Support, buy.com and Network co-chair.

Five Tools for Safeguarding Your E-Commerce Site

In an article for www.merchantfraudsqaud.com, Julie Fergerson, Co-founder of ClearCommerce and a founding member of the Network, offers these recommendations for preventing the unauthorized use of credit cards online.

1. Obtain real time authorization from a credit card company. This ensures that the credit card has not been lost or stolen and is a valid credit card number. However, this process does not tell a merchant if the person is authorized to use the card. Therefore, other tools may be needed to help verify that the transaction is a good one.

2. Employ address verification systems, but understand the limits. Address verification systems match the billing address provided by the customer with the billing address on file with the card company. If these do not match, this may be a red flag that the person making the transaction is not authorized to use the card. However, these systems are not foolproof. A merchant may receive a large number of unmatched addresses and only a very small percent of these transactions may actually be fraudulent. And, fraud still occurs in cases where addresses are matched.

3. Use credit card verifications codes. Merchants should ask for the non- embossed code that American Express and other credit card companies put on their cards. These codes do not get printed on any receipts and are therefore harder for fraudsters to accurately reproduce.

4. Purchase rule-based detection. Using detection software, merchants can screen each transaction to see whether it meets certain pre-defined criteria. If it does, the merchant might decide to manually review the transaction or to deny it. Criteria might include billing addresses that don't match, very high dollar transactions, an order for an unusually high number of one item or names and credit card numbers that have been linked to fraud in the past.

5. Purchase predictive statistical models. This software culls data from large, historical databases to create a profile of what typical fraudulent transactions look like. Based on this knowledge, mathematical formulas are developed that can be used to predict the likelihood that an incoming transaction is fraudulent. Again, these models concentrate on patterns such as high volume orders of certain merchandize and addresses that don't match.

Links
Worldwide E-Commerce Fraud Prevention Network		http://www.merchantfraudsquad.com