10 things you may have wondered about fraud

It starts with a phone call to a travel agency. John Smith wants to book a flight for tomorrow, from Toronto to Fort McMurray, and he wants the earliest slot. The agent takes all his information and processes the booking. The transaction goes through, Smith boards his flight, and business – as well as months – go by as usual.

Then, the travel agency gets a call. It’s WestJet. They’ve received a chargeback from a credit card company; Smith has disputed the flight on his credit card statement. He claims he never booked a flight, and WestJet, after reviewing the details of the chargeback, has determined that Smith is correct; he didn’t book a flight – the person who stole his credit card did. So, John Smith needs his $500 back. And because the travel agency processed the booking, it’s up to them to pay.

If this is the first time you’ve heard a story like this, you’re not alone; although it’s no secret that the travel industry has a fraud problem, the details concerning the issue – the who, what, where and why – are complex and, according to Alexis Gunderson, team leader for fraud investigation at WestJet, never the same.

 “The trends and the tactics of how fraud takes place are changing all the time,” Gunderson told PAX in a one-on-one interview to clear up some questions regarding a common problem known to WestJet: flight bookings made with credit cards.

Gunderson’s investigation team, made up of three analysts and herself, was established in 2007, and although their tools and strategies for battling fraud are always developing, one of their biggest challenges – promoting agency awareness and understanding – is a constant struggle.

Below are 10 questions that are often asked during Gunderson’s presentations:

1. How do people benefit from making fraudulent bookings?

A criminal looking for transportation (typically for drug or human trafficking purposes), typically does so by purchasing a credit card number from the black market and using it to book a free flight;

• OR -

A criminal can make a profit by purchasing a flight ticket (using a stolen credit card) and, posing as an independent travel agent, sells the ticket for less than market value to an unsuspecting traveller.

2. Aren’t fraudsters worried they’re being watched?

According to Gunderson, because the people making fraudulent bookings understand that there are screening systems in place, they’ll often purchase an airline ticket within 48 hours of the flight – sometimes even calling an agency from the airport – to lessen the chances of getting caught.

3. Why do small agencies tend to be targeted?

When it comes to using a stolen credit card, Gunderson explains, booking with a travel agency instead of directly with WestJet is “the path of least resistance,” because the airline tends to have stronger systems in place for identifying and preventing fraud.

Larger agencies typically have consistent procedures or third party companies screening for fraud on their behalf, Gunderson explains, while smaller to mid-size agencies don’t always have the means to allow the same. Indeed, she has found that WestJet’s recent developments in prevention within their own systems has resulted in a rise of such bookings being made with agencies.

“Fraudsters are really clever, and they know when the easy opportunities are,” Gunderson warns. “And since we’re watching for them minute by minute on our end, I would expect travel agents are being targeted daily.”

4. Can anything be done once an illegally-purchased ticket has been used?

Although a number of things can be done to prevent such a thing from happening, once a criminal has taken the flight they purchased with a stolen credit card, the only thing left to do is recover the money that has been lost on behalf of the victim whose card was stolen.

“It doesn’t matter what anyone has done to vet a transaction,” Gunderson says, going on to say that while many travel agencies do have prevention policies in place to ensure that a cardholder is who they say they are, once fraud occurs, there’s no more room for arguments. “At that point, we’ve lost and the agency has lost. The cardholder deserves their money back.”

5. So how does the cardholder get their money back?

“The timing of the chargeback process is quite lengthy,” Gunderson admits, explaining that once a criminal has purchased and taken a flight using a stolen credit card, it’s often several weeks before the true cardholder notices the charge – and WestJet’s name as the merchant of record – on their statement.

From there, it can take anywhere from 30-90 days for them to dispute the charge, and even longer before WestJet receives a chargeback from the credit card company and proceeds to investigate the claim.

If the fraud investigation team finds that the claim is legitimate (which can take another several weeks to determine), they will issue a debit memo to the agency that approved the transaction, and notify them – months after the fact – that the booking was paid for using illegal means. From there, the agency may be required to pay back the disputed amount.

6. Why is an agency liable if the credit card companies are giving WestJet the chargeback?

“Being the first point of contact, it’s the agency’s responsibility to ensure validity,” Gunderson says.

As with any airline, WestJet has a standard ADM policy in place, and in the event that due diligence with regards to verifying client information has not taken place, the policy holds agents responsible as the first point of contact for the transaction. The policy also outlines agency screening requirements, and what is expected of them when taking a credit card as payment.

7. WestJet is a big company. Why do they care about a few fraudulent charges?

“The expectation for some is that if there is a case of fraud, we can cover the cost,” Gunderson says, pointing out that up until recent years, the company didn’t hold agencies accountable for illegally-paid for bookings, but the volume of such transactions has grown to the point where continuing such a practice is now impossible.

According to Gunderson, WestJet issues out hundreds of thousands of dollars in debit memos to travel agencies, yearly.

“We’re not talking about a drop in the bucket,” she confirms. “If we let go of every ticket that has been booked and disputed due to fraud, we’re looking at losing millions of dollars."

Although amounts may vary, given the average price of a WestJet plane ticket, an agency could be looking at anywhere between $300-500 a ticket, depending on the destination, but in rare cases, the amount can reach into the thousands.

8. Can’t we just call the police if this happens?

“Agencies cannot rely on the police to bring a fraudster to justice,” Gunderson warns, admitting that this fact may be surprising to some.

Although WestJet encourages agents to notify the authorities if they have anything to report, it’s also worth noting that unless the dollar amount in question is very significant – $5,000 or more – recourse is unlikely.

“Historically speaking, fraud takes a low priority,” Gunderson explains, referring to the other forms of crime police typically deal with. “Plus, when filing a report, law enforcement needs to know personal details regarding who made the purchase – and because the personal details criminals give an agency when they make the booking are fake, they often hit a dead end.”

9. So what can be done?

Since nothing can be done to reclaim lost revenue once a chargeback process has begun, the only way to avoid becoming a victim is with awareness and prevention.

“Whether it is hiring a third party to assist you, or simply putting policies in place for screening, there is benefit to starting a fraud prevention programme in your business,” Gunderson says. “The key is to get in front of it before it can even happen to you.”

She also encourages agents to call WestJet’s fraud investigation team if they have questions or doubts.

“We often times have access to validation services that small to mid-size agencies may not have, and we can assist them in that regard,” Gunderson says, going on to explain that if agents contact them with suspicious cardholder data before the booking is made, they can sometimes assist them in validating the information – something that is much more difficult once the transaction has gone through.

To reach the WestJet fraud investigation team, agents can call WestJet and asked to be directed to the fraud investigation department, or email fraud@westjet.com.

10. What are other resources available for support?

The Canadian Anti-Fraud Centre is a good place to start. Part of their strategy is to develop the CAFC to be focal point for Canadian merchants to report incidents of CNP fraud, and recently informed Gunderson’s team that they have verification services available for travel industry merchants.

The CAFC can also be reached at 1-888-495-8501 or email info@antifraudcentre.ca.

For more information on WestJet’s fraud investigation prevention, visit ACTA’s website, here.