Purchase Return Fraud

Purchase return fraud is a sophisticated type of fraud where a fraudster illicitly acquires or clones an active Point-of-Sale (POS) terminal. This terminal is then used to process unauthorized purchase returns, typically crediting the refunds to prepaid cards, which are notoriously difficult to trace. This scheme allows the fraudster to convert stolen or counterfeit POS equipment into liquid assets discreetly and rapidly.

The process generally involves several steps:

This form of fraud not only results in direct financial losses due to the fraudulent transactions but also poses severe reputational risks to businesses. It undermines customer trust and can lead to increased scrutiny from payment processors and financial institutions, potentially resulting in higher transaction fees or stricter processing requirements.

To combat purchase return fraud, businesses need to implement stringent security measures, including:

By addressing the security of POS terminals and monitoring transaction behaviors, businesses can significantly reduce the risk of purchase return fraud and protect their operations from financial and reputational harm.