Fraud Ring in Australia a Warning to Retailers in U.S.

Just in time for the busy travel season, a new report out of Australia warns about new sophisticated consumer scams. According to the Brisbane Times, fraudsters used stolen credit card numbers to obtain airline tickets, which they then sold on specially-made travel-search websites like www.onlycheapflights.net and www.cheapflightsonly.net for a fraction of the value. In one case, for example, a Queensland traveller got a $15,000 first-class ticket to UK for only $2,000.

What makes scams like these so insidious is the widespread damage they cause, and difficulty with which they can be unraveled. Naturally, buyers might be a bit weary of deeply discounted travel tickets, but the website's offer to take payment only after the traveller receives the ticket, combined with the easily confirmable itinerary – just call the airline and ask, makes the bargain hard to resist.

Presumably it doesn't take long for the victim to notice an unauthorized $15,000 charge on their credit card. The ticket is cancelled and their money refunded – but the buyer may not be so lucky. There are few provisions for purchasers of stolen or fraudulently obtained goods. If the buyer is fortunate enough to use their ticket before its cancellation – and manages to convince police they did not know it was a scam – they may escape unharmed. If, on the other hand, the booking is frozen before they board the plane, their money is most likely lost. In both cases, the airline loses: in the former case by essentially flying a passenger for free, and in the latter case by suffering no small amount of customer antipathy in refusing to honor a legitimately-bought ticket.

That this fraud scheme was perpetrated online is irrelevant. Similar schemes can be adapted to almost any industry in any country, for example via in-store purchase of high-ticket items, such as jewelry or electronics. One can easily imagine a well-coordinated group of fraudsters visiting local electronics shops to stock up on high-price items using stolen credit cards. By the time the victims whose cards were charged figure out what's going on, the TVs and laptops bought in their name would already be gone. Then begins the process of making the victims whole, while trying to track down the stolen items. …

In the final tally, it will be merchants who get stuck with the bill for the stolen goods. The fraudsters quickly fold up shop and disappear, and the purchasers get their money back from the credit card companies, which in turn issue chargebacks – plus fees, plus interest – to the merchant. Even in the case some of the items are found, Visa, MasterCard and AmericanExpress all have “purchase protection” policies allowing users to keep items bought in good faith.

With something like a billion dollars in retail shopping projected to take place before the end of the year, the conditions are ripe for just such a fraud. Merchants need to be more vigilant than ever in verifying customer identities and credit cards, because they stand to lose more than ever to increasingly sophisticated fraud rings.