Section V: Preventative Measures

3. What are some examples of fraud?

As with misuse, fraud can occur in a number of different ways. There are three broad categories of fraud with the Purchase Charge Card: cardholder fraud, non-cardholder fraud and merchant fraud.

Cardholder fraud occurs when the cardholder engages in fraudulent activity. Here are some examples:

• Kickbacks. The cardholder receives a sum of money from a merchant each time the cardholder makes a transaction with the merchant. The kickback can be either for supplies or services actually needed and received by the Government or for supplies or services that the Government either did not need or receive.
• Falsified transactions. The cardholder either acts alone or conspires with others to create transactions for supplies and/or services that are not required by or not received by the agency/organization. The cardholder receives some or all of the amount of the false transaction.
• False statements. The cardholder makes false statements about his or her use of the Purchase Charge Card.

Non-cardholder fraud involves the use of the Purchase Charge Card or cardholder data by an unauthorized person. Here are some of the most common examples:

• Purchase Charge Card never received. A new or replacement Purchase Charge Card has been mailed to the cardholder but was never received by the cardholder. Instead, it was intercepted and used by a third party without the cardholder's knowledge or consent.
• Lost or stolen Purchase Charge Card. The cardholder's Purchase Charge Card was lost or stolen and used by a third party without the cardholder's knowledge or consent.
• Counterfeit Purchase Charge Card. A third party obtains account information and uses that information to make purchases with a counterfeit Purchase Charge Card.
• Account takeover. This is also known as identity theft. In this case the cardholder's identity has been compromised, and a third party requested a new Purchase Charge Card by providing confidential information about the cardholder.

Merchant fraud involves fraud committed by merchants either with or without the knowledge or consent of the cardholder, such as:

• False charges/transactions. The merchant charges for supplies/services never provided.
• Mischarges. The merchant charges a different amount than the actual transaction. For instance, if a cardholder makes a transaction for $20.00 but the merchant processes the transaction for the amount of $200.00, that is a mischarge.
• Bribes and gratuities. The merchant offers bribes or gratuities to the cardholder to engage in fraudulent activity.