Persistent scammers use rapport to bait Kiwi businesses

Ned Owen is a familiar name to ASB’s credit card fraud team. He runs a scam that has targeted businesses of all sizes across New Zealand.

The scam begins when he makes email contact with someone selling products to other businesses. He then spends a few weeks building a rapport with a person in the target company.

Michaela Johnson, one of ASB’s Card & Merchant Disputes specialists deals with scammers like “Owen” everyday: “The conversation starts when the scammer expresses an interest in the business’s products. The message might say: ‘I’ve been looking at your website and I’m interested in buying this or that’. After a series of back-and-forth emails, they’ll suddenly turn up the heat and say words to the effect of ‘You know what, I’m keen. Let’s do it. Can you give me a quote on these products?’”

At this stage the scammer makes an order. Then, when they get the invoice, they’ll come back to the seller and say: “There is this shipping company that I work with. I’ve asked them to prepare a quote and will attach it to this email. They don’t accept credit cards, can you charge me for my goods and add the shipping amount to my invoice.”

The scammer is nearly always based overseas, so the shipping cost is relatively high compared with the purchase.

If, say, the order is for $10,000 of goods, the shipping cost might be $5,000. They will ask the business to charge the $15,000 to their credit card, which they provide in an email to be processed manually via their EFTPOS terminal or using an online “Virtual Terminal” service. If the transaction doesn’t work, they will come back with another card. They may offer three different credit cards explaining that the credit limit on each card isn’t high, so it will be $5,000 from each as an example.

The scammer then continues to contact the business, pressing them to know if the card has been charged. Once the transaction goes through and the cards have been charged, the scammer then requests the business to pay the shipping cost to the fake shipping company by international money transfer. This money is not going to a shipping company but in fact the scammers pocket.

Before long, the business discovers the goods and shipping were paid for using stolen credit cards and the payments are soon cancelled. This is often because the legitimate cardholder will raise a dispute with their bank. By the time this happens it is too late to recall the international money transfer. The money has gone, the business is out of pocket for the disputed transaction, shipping costs and loss of product and the scammer is nowhere to be seen.

Sometimes they can cancel and refund payments before goods are shipped. In other cases, we have seen businesses ship the goods before they discover the scam.

Johnson says there are a series of warning signs throughout this process that you should watch out for to make sure you don’t fall victim to a scam like this. “First, the emails come from a generic Gmail address. That’s a red flag”.

It’s not that every Gmail user is a scammer, but scammers love to use generic email accounts. The moment you see one turn up in relation to a sales enquiry worth more than your usual customer’s transactions or buying patterns, you need to tread carefully.

She says almost everything about the way the scammer uses credit cards tells you something is wrong: “They use multiple credit cards and it can be a mixture of card brands. Then they pressure the business to let them know when the cards are charged. There’s constant pressure for the information.

“If you or I had $15,000 going out on a credit card transaction, we’d watch the account to know when the transaction goes through. The fact that they don’t, is another telltale sign something is awry. They ask for confirmation because they don’t have any visibility of the account, and the cards are likely stolen.

Another giveaway is asking for the shipping money to be paid for by an international money transfer. Johnson says: “Nine times out of ten the business will come to ASB to arrange the transfer. Our staff know about these scams. As a safety check they always ask the businesses if they verified the person the money is being sent to.”

This is where the scammer’s rapport building preparation comes into play. Because of the earlier friendly communications, they feel that they know the person getting the money transfer and tell that to the bank. Johnson says that this is the part where businesses need to do extra checks before going ahead, but not everyone does.

Johnsons’ advice to merchants: If you need to refund a card transaction, don’t refund to a bank account or another card, always refund back to the card that you originally charged. That way, if the transaction was fraudulent, the genuine card owner gets their money back.

She says you should be wary of customers who seem unwilling to meet in person or discuss business on the phone: “If you’re not sure, take a few extra steps to double check. Be careful if they try to use multiple cards or are pushy with you, these are warning signs.”

Businesses of all sizes are increasingly targeted by scammers. It’s important to stay vigilant of scams like this and others like invoice scams, email scams and cyber threats. To learn more about business scams and how you can guard against them, head over to ASB Scam Hub.