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Fraud Prevention and Risk: Protecting Your Procurement Card Program. Presented By Patricia Larkin Green, VP, Relationship Manager J.P.Morgan, Wholesale Card & Procurement Services. Overview. Patricia Larkin Green, VP J.P.Morgan Evolving History and Trends

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Fraud Prevention and Risk:

Protecting Your Procurement Card Program

Presented By

Patricia Larkin Green, VP, Relationship Manager

J.P.Morgan, Wholesale Card & Procurement Services



  • Patricia Larkin Green, VP J.P.Morgan
    • Evolving History and Trends
    • Steps J.P.Morgan is taking to Combat Fraud
  • Addendum
  • Questions, Concerns

Types of Fraud

  • Lost: Recovery varies
  • Stolen: Recovery varies
  • Non-receipt: NRI - Non-receipt of card
  • Internet: Card Not Present/MOTO/Internet: Recovery is good
  • Counterfeit/skimming: Card present - Recovery unlikely thru chargeback process
  • Stolen/compromised number: Recovery varies
  • Account takeover: True name fraud

Fraud by Type 4Q06 – 3Q07

Counterfeit and Card Not Present Fraud are the fastest growing fraud type today







Acct Takeover



Consumer Credit and Commercial Card

fraud types change and continue to evolve
5Fraud types change and continue to evolve

Fraud Trends

  • Increase in Counterfeit Cases–

1Q09 trending higher than FY08.

  • Test Merchants–

Method in which fraudsters test the status of the card.

  • Gift Cards–

Counterfeit card used to purchase gift cards from a retail merchant.

  • Day to Day Living Expenses–

Not easily detected in the tools.

  • Gas Pumps–

Focused on states with fewer controls.

industry landscape
Industry Landscape

Fraud activity - Dynamic and nimble.

“Carder” Sites - Well organized with business like structures.

Wireless Technology - One of the leading drivers in hacking events.

Skimming - Continues to challenge the industry.

association alerts
Association Alerts

Four step process is followed to validate a compromise occurred.

Issued after confirmation that account data has been accessed by an intruder.

JPM Commercial Card handles about twelve alerts per week.

Not a breach involving JPM systems.

Assessment is done by JPM to determine level of risk and strategy.

JPM cannot reveal the name of the merchant or company involved in the breach.


Fraud Strategy and Case Analytics

  • Review of fraud cases to identify fraud trends and patterns of test (probe) merchants.
  • Adjust fraud tools and strategies to target the most recent trends or test merchants.
  • Review false positive fraud ratios weekly and revise strategies if needed to reduce fraud exposure without impacting spend
  • Participate in regular meetings with processors, Associations and other issuers to validate industry trending.
  • Identify Common Points of Purchase(CPP) in relation to confirmed fraud cases. We turn this over to the Associations for forensic investigation.
  • Work with law enforcement on large fraud cases that involve suspected fraud rings.
  • Suggest and implement enhancements to further refine fraud detection tools.
what is jpmc doing
What is JPMC Doing?

Analyze accounts queued in the Fraud Detection Systems or via Association Alerts to detect fraud, misuse or credit related risks (i.e. NSF Payments).

Contact Cardholders to validate transactional activity.

Work with the Program Administrators in reaching card members.

Block accounts, flag fraud transaction(s), fraud report confirmed fraud to Associations.

Process replacement card requests.

Initiate recommendations on strategic opportunities related to trends and test merchants.

Handle Inbound calls to verify transaction activity.

Partner with Program Coordinators on potential misuse in escalation to the Program Administrators.

1 unique designed credit card
101. Unique designed credit card

What is J.P.Morgan Doing to Prevent Fraud?

  • Hologram
  • Tamper-evident signature panel
  • Unique Magnetic strip encoding
2 partner with visa and mastercard
112. Partner with Visa and MasterCard

What is J.P.Morgan Doing to Prevent Fraud?

  • E-mail alerts are generated from Visa/MasterCard notifying of account number compromise
  • J.P.Morgan security representatives review accounts and make proper contact with cardholders or administrators based on information obtained from Visa and MC alerts
  • J.P.Morgan security representatives contacts appropriate agency – FBI, Secret Service, or other law enforcement agencies with pertinent fraud information based on requirements within the Visa or MC alert

What is J.P.Morgan Doing to Prevent Fraud?

3. Cardholder and client awareness

  • J.P.Morgan works with program administrators to develop proper card control to reduce risk i.e:
    • MCC codes
    • credit limits
    • purchase velocity limits
  • Participate at conferences and forums to educate cardholders and clients on current trends and fraud prevention

What is J.P.Morgan Doing to Prevent Fraud?

4. Fraud detection systems

  • FlexibleFraud detection systems are used that provide the ability to target both general fraud trends as well as specific trends
  • Criteria/rules dynamically defined based on analysis of current fraud trends
    • Fraud patterns
    • Specific MCC
    • Dollar amounts
    • Geographic location
    • Specific merchants

What is J.P.Morgan Doing to Prevent Fraud?

4. Fraud detection systems (cont)

  • When authorizations meet these pre-defined criteria, the account is sent to queue
  • J.P.Morgan security representatives analyze account and determine if contact with cardholder and/or program administrator is needed
  • Merchant referral status put on account if appropriate
fraud investigations and recovery
15Fraud Investigations and Recovery

Fraud Department Structure

  • Partner with Program Coordinators on potential misuse in escalation to Program Administrators.
  • Initiate recommendations to Clients on strategic opportunities related to improved authorization controls.
  • Open Fraud Cases
    • Fraud Report to the Associations
    • Send Affidavit
    • Request and initiate chargeback for recoveries via Association regulations
    • Investigate High Risk Merchant Category Codes to identify potential suspect
    • Analyze for account history for potential point of compromise
    • Work with various law enforcement agencies


Fraud Chargeback Process

  • J.P.Morgan puts temporary credit on account
  • Orders copy of sales draft-30 days
  • Affidavit sent and customer to return within 30 days
  • Customer calls to report fraud
  • If merchant contests, case in arbitration with Visa-30 days
  • Representment of charge to merchant
  • Merchant can dispute-45 days
  • Settlement of decision by Visa
  • Second representment of charge to merchant-30 days
fraud investigations and recovery17
17Fraud Investigations and Recovery

Fraud Department Structure

  • Recovery Investigations
    • Upon receipt of the signed affidavit the Recovery Investigator will initiate request to the merchant(s) to obtain documentation on the fraud transaction(s) (This process takes approximately 45-90 days)
    • If JPMorgan Chase recovers the loss via the Association Regulations the Recovery Investigator will issue credit(s) for the fraud dollars to the old (lost/stolen) account to offset the initial debit that was placed on the old account when the case was initially opened.
minimize risk your role
Minimize Risk – Your Role

Use card controls available:

Restrict MCCs when possible, especially high risk MCCs.

Set daily velocity and dollar limits on MCCs.

Review the credit limits and determine based on usage.

Set limits for the expected usage.

Cash access should only be granted as needed.

Flag can be set to restrict all foreign transactions in some cases.

minimize risk your role19
Minimize Risk – Your Role

Program Monitoring:

Review transactions for exceptions and declines.

Educate your cardholders to:

review their transactions and statements.

go into a bank to get cash or use a bank owned ATM.

Use account blocking for temporary leaves or infrequent travelers.

case study
Case Study

Company A Fraud Losses

2006 $88,000

2007 $86,000

2008(YTD) $18,448

Increase in fraud loss trend detected.

MCC changes implemented May, 2007.

Over $50,000 in fraud losses avoided in two months.

Common point of compromise identified and reported to Association.

Investigation resulted in confirmation of a merchant breach.


Watch for Red Flags

Excessive Declines

Unusual Merchants

Cardholder Awareness

Small $ Purchases

Pay Attention to Notifications of Charges

Phishing Emails



Guarding the Data

Use Encryption Program (Some are free!)

Don’t Keep Card #s or Personal Information on the Desktop

Work with IT to Make Sure Systems are PCI Compliant



Patricia Green, VP Product Specialist

JPMorgan to report scams


Top Merchant Category Codes – Fraud Losses

5310 Discount Stores

5411 Grocery Stores and Supermarkets

5200 Home Supply Warehouse

5941 Sporting Goods

5311 Department Stores

5541 Service Station

5542 Automated Gas Pump

5912 Drug Store and Pharmacy (Gift Cards)

Other High Risk Merchant Category Codes

5732 Electronic

5944 Jewelry Watch and Clocks

5945 Hobby Toy and Game Store

5948 Luggage and Leather Goods

5722 Household Appliances

5300 Wholesale Clubs

5734 Computer Software

4812 Telecommunication Equipment Including Telephone Sales


High Risk MCCs

Block or Data-Mine

These MCCs


Why are my passwords so complex?

Did you know how long it tacks a hacker to crack a password?



Where can I go for more information?

We can all play a significant part in thwarting Fraudulent activity by practicing strong computer security habits such as updating anti-virus software, using strong passwords and employing good email and web security practices.