JSA: Protect Yourself From Credit Card Fraud and Bad Checks

It’s important for retail jewelers to offer their customers a range of payment options as a matter of service and convenience, but options like credit cards, personal checks, and money orders have potential for fraud if a jeweler isn’t careful.

John Kennedy, president of Jewelers’ Security Alliance, spoke with JCK about some of the risks jewelers face when accepting credit cards, personal checks, and money orders—and he offered advice on how to spot payment scams and how to avoid them.

Credit card scams One of the riskiest types of transactions for jewelers is a credit card purchase called in or e-mailed from an unknown customer requesting shipping to a remote location. Kennedy called this a “fraud waiting to happen,” and noted that it’s a favorite scam for criminals with stolen credit cards or purloined credit card numbers, because they don’t have to make the transaction in person and risk exposing themselves.

There are many variations to the scam, but in a common scenario described by Kennedy, the criminal calls and claims to be a doctor or some other professional that inspires trust. He has a story explaining why he needs the product in a hurry, and he puts pressure on the jeweler to make the transaction immediately and ship the goods for next-day delivery. Typically, he will call back asking for the tracking information, so he can contact the shipping company and divert the delivery from the real cardholder’s address to a new location. If the criminal is successful the first time, he often goes right back to the same jeweler to try it again.

“You have to ask yourself why a person in a distant city is buying jewelry from you when he can buy it from a dozen places locally,” Kennedy warns. “It only makes sense if you have a relationship with that customer. And if someone is telling you they have to have it tomorrow or the deal is off, it should make you very wary.”

Adding to the jeweler’s vulnerability to remote credit card fraud is the mistaken belief of many retailers that if they get an authorization from the credit card company once they punch in the number and confirm the shipping address, they are protected. “If you don’t get an imprint of the credit card and the customer’s signature, you are at risk,” Kennedy says. “You will get the charge back and be forced to eat it. And your insurance probably won’t cover it, either.”

Kennedy notes that it may be weeks or even months before a fraudulent credit card transaction is discovered, because the real cardholder must first receive the bill and challenge it.

While a jeweler also may get scammed with a stolen credit card in the store, the credit card company generally will cover the jeweler provided that they obtained authorization, got an imprint and the customer’s signature, and followed proper card procedures.

Check fraud Accepting personal checks from customers also can be risky business for jewelers. Checks can be forged or stolen. Even if a jeweler calls the bank and confirms the check holder’s identity and verifies that there is money available to cover the purchase, that’s no guarantee it isn’t a scam. The person can have a confederate at the bank that takes the money out immediately. The only surefire solution is for the jeweler to wait until the money is transferred into his account before giving the customer the merchandise.

Some of the warning signs of check fraud, according to Kennedy, include:

  • The check doesn’t look legitimate, for any number of reasons.

  • The person presents an out-of-state personal check. “If a person comes in and says they live in a nearby town, and they give you a check from another state, you have to ask yourself why,” Kennedy says.

  • The check doesn’t have a return address that was printed by the bank.

  • The check has a very low number, which could indicate a new account that was opened for fraudulent purposes.

Money orders Kennedy says his office has seen money orders that were forged, altered, or had their original amount changed. He also notes that money orders can be stolen. Even calling the bank is no guarantee that a money order is legitimate.

“If I was a jeweler, I would have to wonder why someone comes in using a check or money order, instead of a credit or debit card,” Kennedy says. “Some of the fake money orders in particular look very real. If you let that person paying with a money order walk out of your store, you are putting yourself at serious risk.”

One strategy that some jewelers have adopted to deter check fraud is to require the customer to submit to “inkless” fingerprinting. The customer presses a thumb on an inkless pad and makes an impression right on the written check. If the person tries to pass a bad check, the jeweler can provide authorities with the criminal’s fingerprint.

“Someone attempting check fraud doesn’t want to give their fingerprint; they’ll walk right out without buying,” Kennedy says. “One medium-size chain we know requires inkless fingerprinting for transactions over a certain amount, and they haven’t had a check-fraud loss in years.”

For jewelers, the bottom line is that a lot of potential credit card, check, and money order fraud can be eliminated through commonsense business practices. Preventive strategy is key, because it’s difficult for law enforcement agencies to get involved in these kinds of cases after the fact.

“Credit card and check fraud is massive,” Kennedy observes. “It’s also difficult for law enforcement, because the cases often involve shipping to remote locations and across different jurisdictions. Unless they fit the pattern of a known gang or involve bigger issues like money laundering, they are very difficult cases to solve.”