"How Can I Protect Myself From Fraud?" | Biz To Biz Podcast

Yo, what's up everybody? It's Justin live from B2B Vault, the biz to biz podcast sponsored by Nationwide Payment Systems, hosted by this guy, the Pat Riley of payment processing himself, Allen Kopelman. And we'll be providing you educational information about fintech, small business payment processing, and the technology businesses are using in the world today. And in today's podcast, we'll be discussing one of Allen's most favorite topics in the world, and fraud is that. It's that, if you didn't know. Fraud. Ding ding ding ding ding ding. Um, and typically fraud during the holiday season. Um, yeah, it's a lot of that going on. Not even just because of holiday season, but you're gonna see a lot more of it now. How you doing, man?

I'm doing good. A little You know, my mom's having an operation today, so getting her pacemaker replaced right now. So hopefully that goes well.

Yeah, I hope that— hope everything goes well.

Yeah, my brother's here, so he got to take her to the hospital instead of me this time.

There you go. So good for him.

How are you doing?

Been better, man. I'm dealing with some tooth stuff. I don't know. Whatever. My shoulder is killing me. Yeah, hopefully everything works out so I can see this doctor on Monday. Not really sure if that's in the pipeline for my finances, but whatever. We'll see. That's some, you know, whatever. Other than that, life is lifing. Kids are all right. My daughter's doing one of my, my, uh, 17-year-old, man, she's really doing really good in school, so I'm really proud of her.

That's awesome.

Yeah, other than that, man, yeah, I got, uh, you know, no one's— I, I can't complain, you know, no one listens to it anyway, so it doesn't matter.

All right, I'll shout out to Aaron Gerhard, my daughter's, uh, fiancé. It's his birthday today, although this won't air till after his birthday. He's getting a shout out on the podcast.

Happy birthday, dude.

Happy birthday to Aaron. So fraud, just— I hate fraud. I hate to see when merchants get hit with fraud. Yeah, I hate getting the telephone calls about fraud. Some of it is just, you know, there's people out there that they just want to get one over on your business. And, you know, this morning I was listening to this, to a, uh, video from a show, and they were in— they actually put this guy from Visa on the hot seat. And when they came up about the EMV, like, you know, the EMV liability shift was discussed, it's like, oh, EMV, that's protecting merchants. I literally, I want to do a, uh I want to do a reaction video to that.

What's the EMV?

Well, they switched from swiping with the mag stripe because there was so much fraud to the chip. And then when they put the chip in and people would put the chip in the machine, literally chargebacks came to a streaking— like a screeching halt, you know, in retail and restaurants and nightclubs and everything. The card issuers were just not going down the chargeback rabbit hole.

Really?

But all of a sudden, like the last year or so, they're going, you know, you see these people run up, you know, have a bill in a restaurant, have a bill in a retail location. The chip is used and they act like they were never there. Oh, I wasn't there. Oh, I didn't agree to that. I got double charged, you know, and it's frequent, like nightclubs because of EMV stopped running tabs. Right. So, you know, like running tabs in clubs and stuff, they stopped doing that. So they just make people pay as you go. So of course, if you're in a nightclub and you're partying all night, you're going to have 2, 3, 4, 5, 6, 7, 8 credit card charges if you're partying hard, right? I saw one this morning. I was like, are you kidding me?

The guy had like 10 charges in the bar and he's trying to charge them back.

Sure. Yeah. One of them's listed for chargeback. But they want documentation on all 10 charges, and it's over a 2-day period. So he went there twice.

Sounds like he had a great time.

Yeah, I mean, he must have had a good time the first time to go back a second time, right?

Definitely.

But fraud comes in all kinds of cases.

Like, well, that's not— I mean, that's a—

that's friendly fraud.

That's just like some guy trying to recoup some cash because he had too much of a good time on the weekend. But What we're talking about is like—

yeah, so I'll give you some fraud examples. So here's one fraud example. Somebody call— a lot of it takes place over the phone or on the internet, but you do get them in person. So let's talk about an in-person fraud. In-person fraud, someone walks into your business, you take their chip, you put it in the machine, and it's not working immediately. You should not be— you should just ask the person for another credit card. Okay, don't swipe it, because if the person tells you, oh, swipe it real fast, like 3 times, you know, then it'll go through, you're going to end up with a chargeback because most likely that's a fake credit card. And because of the EMV liability shift, that's it, you're done. There's no fighting it. And the person walks out the store with your merchandise and you lose your money. Okay, so that happens a lot during the holidays because stores have extra help that usually doesn't work there, you know, and then people get tricked. Or the other trick is, oh, my card's declined. No, there's money on my card. Immediately they go to their phone, they look like they're logging into their bank. They're probably just pulling up a picture and they show you the balance in their account. Then they make a phone call and they say, oh, I'm calling my credit card. And they hand you the phone and they say, oh, they're going to give you an authorization number. No, don't take that authorization number. Wow.

I've never seen that before.

Oh, yeah, that's a big one. And happens a lot. I've seen that happen. We'll see it happen before the end of the year. That'll happen at least once.

Really?

Yeah, because an inexperienced person will fall for that. The phone fraud is ones I don't like. And some of that is, you know, I put on the business owner for not thinking.

So, yeah, man, I wouldn't— people who take the payments over the phone thing is just insane to me. Like, I would— the fact that they're like eagerly ready to pay you over the phone is a little bit—

well, they're usually the one initiating the whole thing.

Like, as a business owner, it's like, so I got approached the other day I get a text message and it's like, hey, you still building websites? And I've been down this road before. You know, it's like a random phone number, but, you know, I never know. I need the money right now. So it's like I said, yeah, who is this? And it's like, he says, it's Lieutenant Craig. And, you know, I may know a Lieutenant Craig. My—

at least it wasn't Lieutenant Dan.

That's the first thing I thought of, right? So, uh, I, uh, you know, I play along. You know, it's just suspect, you know, right? It's, it's worded really well. It's not, it's not like—

well, they're professional—

from the, you know, from a different country who, you know, who's struggling to type this in English, or like the, the the translation app, you know, right?

The grammar.

I can tell. And so there was a few like real, just simple grammar mistakes. And I'm like, okay, this sounds like a real person, maybe, you know, and then he's like, well, what's your email? I'll send you, you know, a, you know, you will send me a quote for the project, you know, whatever. And he lists out the work that he wants to be done. And I've literally been down this road before. So I'm like, all right, let me text him and say, hey, you got time for a call? I haven't heard from him.

Oh, yeah. Fake.

So yeah, it's obviously not a real person. I say, hey, you got time for a call? I have a few questions about the project. You know, I want to quote it out properly. You know, I'm setting him up like he's setting me up.

Right.

And what ends up happening is they're going to— you're going to send this proposal and then they're going to ask if you could get paid by credit card.

Right.

And then you're going to say yes and you're going to not like what's going to happen after that. Yeah.

They usually get you to do the work first and then—

I've never had to do the work.

Oh, okay. But you'll get a charge back.

I mean, that's exactly what's going to happen. I knew what was going to happen. Like, I'm not an idiot. I don't know. It's like I see the scam. I can see this. I see this.

You see it developing. Yeah.

It's like, bro, like, you're not about to, you know, you know, one of my OGs always used to say, you can't scam a scammer. You can't hustle a hustler. You can't con a con man. You know what I mean? It's just like You can't— I'm not saying I'm any of those things, but well, after you've been hustled and conned before, then you know not to get hustled. Yeah. Or if you're the one hustling and conning, you know.

No. So one of the things that, Chris, that happens frequently is— so we just had this happen to a customer recently. They got a phone call. Someone wanted to order 2 commercial stoves. They took the order over the phone while they key-entered it. Beyond me. The customer had to show up for the fact that the stove—

a stove— how much was the stove again?

Oh, these— this charge was like a $30,000 thing. This altogether was about $40,000.

Yeah, that they got.

They all together. So they ordered the two stoves, someone shows up to pick it up. I said to the customer, I go, after it all happened, and then we saw all the chargebacks come through because the guy hit them 1, 2, 3, 4, 5 times. 'Cause he got away with it once. I'm like, they didn't, the classic thing is the person placed the order over the phone. The AVS didn't work. The CVV2 was positive. The ZIP didn't work. So that would've been a red flag. They didn't check the address of the business. They didn't check to see, they didn't ask to see.

That's just ridiculous.

They didn't check the address. There was not, One of them was at a field where there was a food truck thing. Another one was in an empty warehouse. One was down the street from here in an empty building. I actually drove by it and took a picture. At some point there was a restaurant there several years ago. Um, another one was an empty warehouse. They didn't check anything. And I was like, the person came to your place, why wouldn't you ask them for a credit card and ID? No, they didn't think about it.

They came and picked the equipment up.

Yeah, in a truck. And then they went to their cameras.

I remember this now.

They went to the cameras and they're mad at me. They went to the cameras and there was a temporary license plate on the U-Haul truck. And you know how U-Haul trucks have numbers on them? You know, they have like numbers. They were covered up.

Well, they ain't never getting that merch.

No, it's gone, dude. It's gone. I mean, how are they mad at you? Oh, they got mad at me because they're like, oh, you didn't tell us. And I said, oh yeah, we had a big meet. We've had several meetings over the years because this happened once a really long time ago. Granted, there's new employees there. And I said to them, I go, you know, you guys are keying in— why are you keying in all these transactions? The people have to come there and pick the stuff up. And then I get another call yet the other day from somebody who's no longer a client of ours because they didn't like what I had to say to them about key-entering transactions. They got ripped off several months ago for about $30,000. They key-entered stuff.

Wah, wah, wah.

And they delivered it on their truck to us.

Oh my God.

To an empty field.

Right, would they just leave it there?

Just somebody was probably met them there. Somebody met them there, construction material. And now I heard from somebody that they got more chargebacks, and I told them, why are you guys doing this? It's not like these people are 100 miles away. They're within driving distance, you, you know, 10, 20, 30 minutes. Make them drive over with the credit card and put the credit card in the machine. Like, you're kidding me. Like, you can't be key entering, 'cause once you key enter one time— I mean, a $15,000 pro—

like, why the hell would you even do that? That's so risky.

Right, and one time, a long time ago, they got beat for like 40, 50 grand doing the same thing, and they stopped. And there was a woman that worked there, and she would just get on the phone with the people. Yeah, you can get your order, no problem. We don't, you know, you need to come in here with the credit card and pay for it, and then we'll deliver it. Yeah, with your ID. Yeah, and a business license, right? I mean, you know, you got to look these people up. If they're in the construction business, look them up. Get their driver's license.

I mean, times are hard too, man.

So like, well, all that stuff's getting resold somewhere, saying, dude, for half of whatever you— it was worth. So, or or a third of whatever it was worth. But the thing is, is that people just don't understand. Once you get—

That's stupid no more, bro.

Once you get hit once with that, that shit's going for market value, dude. Probably. But once you get hit on one of these, boom, that person goes and tells 5 more people.

Exactly.

And then those people try to get you, okay?

Yep.

And they will get you because they know how to fool you because they're professional scammers. I mean, we had a furniture store a long time ago. Wasn't my client, was a friend of mine's client. Some— somebody went into their store, bought a whole bunch of furniture, used like 3 different credit cards, had it delivered to this fork. We found out it was a— I helped them do the investigation. We found out the address was foreclosed. Mm-hmm. And the neighbors told my friend when he went to the house next door, they said, oh yeah, the trucks came. Put all the furniture in there. My friend said, you think it was odd? He goes, no, that house is foreclosed, it was for sale. Maybe somebody was staging the house, right, to sell it. And then the next day, moving trucks showed up, like 10 U-Haul trucks, and took all the stuff away.

As they're moving trucks beeping in the background.

That was right the next day.

That wasn't on purpose.

But stuff like— I had a guy call me once from a furniture store we had a long time ago, years ago, and he goes, oh, this guy's in here trying to pay. He's got 3 different credit cards with 3 different names on it. I was like, dude, what are you doing? Don't take that. You're, you're the guy— it's gonna be a chargeback. Oh, don't tell me how to run my business. You're making me lose money. So I'm not making you lose money. I said, you're about to lose your money and your products. And the guys outside, and the guy's a truck with them. I go, come on, man, you know, 3 different— smart, man, you know. And this kind of stuff happens. And then businesses, you know, now Economy is bad, right? You want to make sales, right? I remember 2008, 2009, we had a bad economy. I had this customer, um, they were getting hit with chargebacks left and right of people going to their website and ordering like 50 pairs of shoes. And I was telling them to stop doing it. And then they had a guy and he ordered like 3 pairs of shoes and the transaction went through. And then he ordered like 4 pairs of shoes and the transact— now he called, now he runs, he goes on their website and he orders like 200 100 pairs of shoes and it's going. We look, I said, what's the address? I look it up, it's a UPS store. I go, that's going to be a chargeback. Don't tell me how to run my business, the owner told me. He goes, you're being a— preventing me from making profit. And I'm like, do whatever you want. I said, do whatever you want. They did, they charged, they let the card go through, they packed up the shoes, they shipped them out the same day. Boom. 2 days later, chargeback.

Boom.

All the money's gone. Then the guy's like, oh, I don't want to hear I told you so. That's what he says to me. And I was like, what? I said, I'm trying to tell you, like, that's a known scam. These scammers, they will— like, I had this other guy, they got scammed for like $5,000. Somebody placed an order for $300 on their website. They usually require sales tax and a business license. And the person to register, but the person made up a bunch of, you know, story on the phone that they were busy. So he shipped it out, didn't check the address. Then the guy called back 2 weeks later, placed a bigger order for like 3, 4 grand. Then it came back, both of them came. The first one did not charge back right away. The second one charged back like the next day. Then I go look up the address, it was to a freight forwarder. Like freight forwarder, that's the biggest scam ever. I— we had somebody, we had a client, they left us.

The fact that these large companies are doing it is just mind-blowing.

Well, they have new salespeople. I—

it doesn't matter to me. Like, you know, they have these huge budgets. Like, I— you know, when I hear stories of like, you know, like, uh, somebody who's selling shirts or somebody like small you know, doing something and they get hit. And they're just literally just, you know, barely making it, trying to, you know, this is how they're sustaining their lives, whatever. And then they get hit with the fraud that hurts, you know what I mean? But like, these huge companies have zero excuse, man. And honestly, to the small time, you know, the small shops that are out there, there's really no excuse either. Like, you guys got to do your due diligence as well. Like, I mean, because people are going to— times are going to get harder and harder and harder in the next couple of years, man. You're going to have to really be on top with your website, your security, updating it, making sure that you're on top of these things, man. Because with the artificial intelligence, the criminals are going to get smarter and smarter.

And all the breaches that have happened too, like in Vegas, all that data got breached, everybody—

you're still talking large scale. And I'm talking to—

no, but I'm talking about those credit card numbers are on the dark web and those scammers get them.

Yeah, that's still large scale. I'm talking about, you know, the more small-time people, small merchant.

The guy was selling— he was a reseller of ink cartridges, right?

Yeah.

And a few times he would get, you know, he would call me on the phone. Oh, I got this big order. What's the address? Does it look legit? He goes, one of them was going to a business. I said, call the business up. And ask him if they ordered it. He called them, they ordered it, ships it out. He gets, he gets another order, you know, and the guys, it's like a side hustle for him to sell these ink cartridges. So he calls me up another time. It's going to a UPS store. It's probably a scam. So he, he voids the transaction in the gateway. Sure enough, the next day gets a phone call from the actual cardholder.

Really?

Yeah. That he charged. He's like, no, I voided the transaction. We saw it was going to a thing. But we've had, you know, small businesses.

That's him. That's him doing, you know, staying on top of his business, making sure that his business is running. You know, he's taken his— I think people as humans, we get comfortable when we, you know, it's like a set it and forget it type of thing. Like, you know, if you paid somebody to set up your e-commerce shop and it's flowing well, you know, and you decide, oh, I don't want to pay them anymore to manage it. It's a bad idea.

Right.

You know what I mean? Like, it's, you know, maybe, maybe you want to fall back on, you know, how much you're paying them every month. But, you know, like, you should still be making sure that someone's maintaining your online presence at all times, keeping that stuff up to date, you know, finding new ways to keep the, you know, customers happy and stuff like that, you know, but the fraud online is going to go crazy.

Yeah, it's been, it's been pretty bad. I mean, I've been hearing about Shopify stores getting hit with a ton of fraud, and then Shopify cutting people off from like international transactions. Stripe cutting people off because they put Stripe on their website, which enables international transactions, and then they stop the international transactions, especially for physical goods.

I mean, that's a logistic nightmare.

Yeah. And yeah, well, people don't understand that. They think, oh, some guy just ordered this from Germany. I'm just going to send it to him. But there's no— you have no protection from a chargeback standpoint. The person can just say, I never got it. And that's the end of that, whether he got it or not. You're in another country and Visa and MasterCard can say there's a worldwide economy on TV, on their commercials all they want. But that's not true when it comes to chargeback. It's all regionalized. But, you know, like we have another— we had another client, an e-commerce business. And, you know, one day I call him up, I go, dude, there's a lot of large orders like coming through your e-commerce store. You know, you just literally just put the store online, right? So this person had bought a business. He was an influencer in the cigar industry and bought a website and then started promoting it. Well, there was somebody— somebody had gone on there, ordered like 5 5, um, humidors. Somebody else ordered like 2 humidors. And I was like, you got to check these orders, man. You gotta, you gotta call these people on the phone and make sure they're legit. And sure enough, they were fake before the stuff even got shipped out. You know, there was already chargebacks coming in. So now they change, you know, they trained an employee and they look at their charges and they look—

I remember this guy.

Yeah, they look at the AVS I, I wrote a whole article on this. We gave the AVS codes out. You know, what do they mean? This code, that code. Sorry. It's important to review all of that. You know, what are the codes? What do they mean? You know, because if the address— they just check. They don't need the whole address. They need the street address. If your address is 2999 Northwest First Street, they don't need all that. They just need the house number, the zip code, and the security digits. If you get match, match, match, you're good to go. But somebody, let's say they're calling you on the phone, but then they're coming in, just say, oh, can I please see the credit card and your identification? Yeah. Now, if they don't have the credit card, forget it. Void the transaction and send them packing because you're about to just take a loss.

There's always a, you know, like I can remember times like when I was, you know, my dad was helping me out or something and, you know, like I'd have to, you know, they would say, yeah, you need to bring the credit card and the ID. You know, it would be such a pain in the neck, you know, for my father because that guy would, you know, he would stand on it. Like it was for, it was the mechanic. Like he would always, he wouldn't let, you know, he wasn't going falling for the okie-doke. He was gonna make you, he's like, dude, you gotta, no, you can't use. I would come in there with my dad's card or something. He's like, show me your ID. And it'd be my name. He's like, I'm not doing that, dude. Like, I've been robbed before. I've been scammed. Like, you know what I'm saying? He's like, you need to need your dad to come in here and pay for this if that's how it's going to work. But that's not, that's not how it's going to go.

Yeah. And that industry gets hit a lot too. E-commerce fraud. But there's a lot of fraud with like weird stuff, like restaurants taking an order over the phone instead of the person using the website. And then they give you the credit card number over the phone. We saw, we heard about, we had a client that got ripped off like that. Anytime someone's paying you over the phone and they got to show up, take the order, say, yeah, when you get here, we'll run the card.

The restaurant is the only place that I've ever felt somewhat comfortable with, like, you know, saying my credit card number over the phone. Right, but I never liked doing that.

We had a pizza guy, he got ripped off for like 20 grand from, from that, from taking orders over the phone. And what happened was, is one kid was—

he was in on a scam.

He, he told everybody, oh yeah, you could get your parents' credit card and blah blah blah, and then they were having pizzas delivered or Another hot thing is you're going to get ripped off if you're deli— uh, take a food order over the phone and then deliver to like a hotel or Airbnb locations and stuff like that. Like, um, we had a restaurant on Miami Beach, they lost thousands of dollars because somebody was, uh, ripping them off at a hotel. Somebody was like— how? They had fake credit card numbers.

I don't understand how they would What they were—

what were they doing with the food? Ordering food, eating it, selling it. They were eating it. For that, how, how long did that go? Oh, it was going on for months. And then all the chargebacks came in. They had stole somebody's credit card.

I mean, that's just petty. Jeez.

Stole— they stole a bunch of credit cards. They, they caught the person. So the guy— so it was— that's just slimeballs. They caught the person.

And I'm sorry, that's slimy.

The guy worked at a bar, and what he would do is he had a— he would take pictures of the front and back of the credit cards, of people's credit cards.

I've seen this. Yeah, there was just—

he would take pictures of it front and back, and then he would order, and then he was ordering food. It was the same guy.

They were doing it on at McDonald's. Yeah, it was just on the news.

They caught people doing it at bars. That's why I like a lot of bars and restaurants, they tell the employees no phones. They have lockers set up. I mean, I know other places where you have like, we have phone, we have a client as a huge phone room. Okay. So like at their phone room, all the employees, no one can take phones in there. There's no pens and there's no paper. Everybody has whiteboards and that's it. And they don't let anybody do anything. They handle credit cards, Social Security numbers, federal tax ID numbers, and they have it all on lockdown, 100% secure.

That's good.

And we've had the banks gone to their location before and seen like the location because it's a lot of trans— it's a lot of transaction, thousands and thousands a month.

Well, man, that's the pod for making sure you're on top of fraud during the holiday season.

I don't know, a quick recap: in-person fraud, watch your e-commerce store for large orders, check addresses that don't look right, make sure your AVS You know, review your AVS. If you're not sure about the settings, call the gateway company up, call whoever you work with up, call us up and ask us questions about it. But you got to check your settings and also check your velocity settings. Make sure you have velocity settings. There's a lot of roboting.

There's a whole list of stuff on nationwidepaintingsystems.com for you to indulge in as far as what he's talking about, the velocity. But yeah, man, update your website, make sure you log in, make sure everything's up to date, your notifications are turned on, update your security. If you don't have a SSL certificate, PCI compliance, if you don't have that, you're tripping. Yeah, man, like this episode for us, subscribe to the channel. Peace out.

Peace out. Carpe diem.