Dear World Floor Covering Association Member,
With all the disruption of business as a result of the coronavirus, companies are vulnerable to fraud. Matters can simply slip through the cracks as a flooring retailer or contractor is dealing with urgent issues on cash flow, employees, state orders on what can and cannot be opened, and simply staying healthy. It is important, however, to ensure your business does not become a victim of fraud.
There are many types of fraud that affect businesses, but two schemes that are likely to occur during the current crisis are ACH and credit card fraud. Below are a couple of suggestions to protect your business.
ACH Fraud: One of the biggest concerns is Automated Clearing House (“ACH”) fraud. ACH is a system that enables the exchange of funds between businesses and individuals through the use of checks, wire transfers, and direct deposits. Criminals need only two pieces of information to commit ACH fraud: your business checking account number and your bank routing number. This means that anyone who has a check from your business may have all the information needed to steal money from your account through an ACH transfer, either by phone or online. Criminals are increasingly targeting small and mid-sized companies, because they often have less-sophisticated security systems than larger companies.
Many business owners assume the same rules of personal banking apply to commercial business accounts, but this is not the case. The law protecting electronic transfers apply only to personal bank accounts, not business accounts. For a personal account, the individual may have up to 60 days to report any fraud. In contrast, a commercial business has much less time to report cases of fraud. Many commercial claims must be reported within 24 hours. The burden is on the business owner to notify the bank immediately if there is a disputed transaction.
There are a number of precautions a business can take to minimize the risk of being a victim of ACH fraud. The upcoming issue of Premier Flooring Retailer includes an article on ACH fraud that lays out many of these safeguards. The bottom line, and best single precaution, is that every business should check its account every day to ensure there are no suspicious activities.
Credit Card Fraud: As a flooring retailer and contractors, you handle credit card transactions every day. With the current issue on limiting business because of the coronavirus, you may be handling more telephone and online transactions. If a customer orders flooring online or calls in a credit card, you will not be able to use the chip and EMV terminal to protect against fraud. You can, however, avoid liability in these types of transactions by changing the way you handle phone and online orders.
The credit card companies recognize that the convenience of a credit card is important when buying online or over the telephone. Accordingly, the credit card issuers publish rules on how to handle “card not present” transactions. These rules are usually in the agreements you sign with the credit card issuer. The rules will require you to enter the card verification code (CVC) that is on the back of the credit card. The rules may also require you to verify other information, such as addresses and zip codes. You need to strictly follow the card issuer’s transaction authorization procedures. Any variation could leave you responsible if the transaction is fraudulent. It is recommended that you follow the requirements for all the credit cards you accept and train your employees on how to follow them to the letter. Complying with these rules will reduce the chances of you being responsible in case of fraud.
Notice: The information contained in this blog is abridged from legislation, court decisions, and administrative rulings and should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.