How to Stop Holiday Scammers

The holidays should be a joyous time. But fraudsters won’t be nice during that time. You shouldn’t make it easy for them either.

What scams are most common during the holidays?

Criminals are always looking for ways to steal. But during the holidays, when online shopping increases, they are particularly naughty. Between Thanksgiving and Cyber Monday, digital fraud rose 127% in 2022.1 Some scams are more popular than others during the holidays. For example, failure to deliver goods and non-payment increases. But the most common tactics of holiday scammers are promotion abuse and account takeover.2

Promotion abuse cheats businesses out of millions in revenue each year. Its most basic forms are:

• When a customer sets up multiple accounts to receive more sign-up and referral bonuses, discounts, and/or deliveries than the retailer intended.
• Organized criminals create synthetic IDs and new IP addresses to launch large-scale attacks – most often called “promo fraud.”

Account takeover involves gaining unauthorized access to a user’s account for the purpose of committing fraud. Schemes might include:

• Hacking to uncover passwords and other login details.
• Email phishing to trick users into revealing sensitive information.
• Researching social media, open databases and other web-based access points to help with credentials theft. This is also known as social engineering.
• Credentials stuffing which attempts to match fraudulently obtained or leaked sensitive data against multiple websites.
• Botnet attacks that use common passwords to access a large volume of accounts.

Generally, holiday scammers count on increased shopping activity, employees’ reduced attention to detail, and short staffing during time off.

Chargeback fraud is another holiday problem.

Sometimes purchases go wrong, resulting in chargebacks when customers successfully dispute transactions. A chargeback, or reversal of the payment, may occur on debit or credit cards and the associated bank account. They may be granted to cardholders for a variety of reasons, including goods or services that are not received or fraud.

It is estimated that businesses will pay more than $100 billion in chargebacks in 2023.3 Unfortunately, many of these charges will be fraudulent – as they are growing 1.5% per year.4 “Friendly fraud” occurs when customers dispute transactions for goods and services that they actually received and intend to keep.

Chargebacks cost businesses millions in lost revenue and increased expenses. They also compromise the customer experience and the businesses’ reputations.

You don't have to be a victim of holiday fraud.

Your business is likely practicing fraud prevention throughout the year. But the holidays will require extra vigilance. Here’s how to mitigate risk during this joyous but hectic time.

1. Immediately report suspicious activity.
   If you experience application pop-ups, error messages, unfamiliar login screens, suspicious emails, or other unusual activity, report them to your security team right away. Do not click on suspicious links. The FBI hosts a comprehensive cybercrime site, where you’ll find tips to protect your business, news, and instructions for reporting a claim if you believe you’ve been a victim.

2. Audit fraud prevention practices.

   A fraud prevention plan must include documented procedures, roles, and responsibilities and cover the system, network, applications and devices, and transaction levels. It should also detail both tactics to mitigate fraud, as well as steps to take if fraud occurs. Revisit this plan frequently. Conduct an assessment to ensure that your fraud prevention tools are working and to identify any gaps. For example, your business may be susceptible to package rerouting or account takeover based on outdated customer service or ordering protocols. Look for improvements to strengthen fraud prevention measures. It’s a good idea to outline specific practices to heighten security during busy seasons.

3. Know your benchmarks.

   Analyze your historical holiday transaction data so that you are aware of your “normal” holiday numbers for chargebacks and decline rates. Also assess both fraud that was prevented and successful by channel, product, payment, and transaction type.

4. Maintain tight internal controls.

   The holidays are no time to lighten up on internal accounting controls such as segregation of duties, audits and management review of expenses, bank statements and collections. While most employees are honest, some are not — and holiday financial pressures may tempt unethical employees. Set thresholds and limits for customer and employee purchases, with oversight for above-limit purchase and too-frequent return attempts. Examine commission policies to ensure that employees are not rewarded for selling to friends, family or fraudsters who will return merchandise in the post-holiday period.


5. Be consistent.
   Consistency reveals abnormalities and weaknesses. Good training drives home standardized practices, despite holiday chaos. If your team follows the same processes with every transaction, then unexpected, non-standard actions stand out.

6. Use multiple layers of fraud prevention tools.

   Because there are so many diverse channels and criminal tactics, businesses should adopt a layered approach to fraud prevention. IBM recommends a comprehensive digital security plan that addresses the system, network, application, and transmission levels individually. Then document how the levels will integrate with each other. Use the latest technologies, including machine learning to recognize data associated with fraud patterns, to keep fraudsters away.

7. Staff up store locations, call centers and IT.

   Increase staffing with properly trained employees who can identify, escalate, and prevent fraud. Make sure your team is rested so they are ready to catch fraudsters in your store, online, on the phone or any channel you use.

8. Proactively manage returns.

   You can expect customers will want to return purchases or many have concerns about service and other charges. But given the potential for chargeback losses, establish a clear return policy and communicate with customers upfront. Also ask customers for feedback when they are making returns. Train your staff to identify and monitor suspicious transactions like frequent returns and threats to file chargebacks. You’ll need details when disputing chargebacks.

9. Purchase business insurance.

   Fraudsters are innovative. Insurance companies are responding with a range of products to protect not only your physical assets and inventory from theft, but they can also safeguard your business from cyberattacks.

Interested in learning how to defend your business against holiday scams? Synovus Commerce Suite features comprehensive security with real-time authentication, account takeover prevention, payment fraud detection, customer screening and PCI DSS compliance. Complete a short form and a Synovus Merchant Services Consultant will be in touch to assist you. You can also stop by one of our local branches.