Opportunities for Fraudsters: Is Your Credit Card Safe?

How do fraudsters and dishonest employees steal monies from a merchant’s credit card processing system? Here are a few common ways:

  1. Stealing Cash and Substituting a Credit Card Charge

Usually an employee who handles cash has access to a credit card processing machine. The employee will misappropriate cash and run a false or stolen credit card number manually on a credit card processing machine. The daily deposit will reconcile:


If a merchant is not diligent in reconciling the credit cards recording in the bank account, the refund (chargeback) will not be noticed and will go undetected as employee theft.

  1. Issuing Refunds on Personal Credit Cards

Employees with access to the merchant credit card processing machine my issue refunds on personal credit cards. Three practices can mitigate this potential theft:

  • Credit card processor notified the merchant (not the dishonest employee) of the use of a credit card number for which there is no equivalent or greater valid credit card number charged and paid.
  • Reconciling the credit card statements that provide refunds and chargeback details, not net totals.
  • Employee sets up a personal merchant credit card account with a name similar to the merchant’s name, such as: Big Fortune SOO, Inc. and Big Fortune Co.

The employee will process the credit card payment on their personal merchant account. The customer’s credit card statement will indicate a similar name and the customer is not suspicious. Meanwhile, the merchant’s costs increase and sales decline. Reconciliation of costs and services to collected revenues will help mitigate theft.

Another example can occur when an employee is responsible for making purchases for inventory items based on customers’ purchase orders from vendors and Amazon. The employee may make purchases for personal items and use the company’s monies to pay for the personal purchases. To prevent theft, the merchant processor only allows a single approval URL and ISP location to approve charges.

Being aware of the need for reconciliation and the processes by which fraudsters steal is the first step. Performing the reconciliations on a consistent basis is the second step. In combination, these two practices can prevent or mitigate theft by credit card.

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About the Author

DM Studler

DM Studler, M.Acc., CPA, CFF is the founder of SDC CPAs, LLC. and has worked employee dishonesty claims in excess of $82,000,000, both domestic and internationally. She speaks across the country on a regular basis and is highly esteemed among her colleagues.