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If you run an affiliate program, be alert! There’s a new scam around that could cost you not only lost revenue, but also your merchant account.
Let me start from the beginning of this sad and sorry tale …
I’ve had an affiliate program for the past two years to sell my writing courses. It’s been puttering along quite nicely with more than 100 affiliates. And while only a few are making significant sales, that’s the way most programs work, isn’t it? Twenty percent of your affiliates bring in 80% of your sales.
Recently, one of my newer affiliates started putting through regular sales; at first two or three a week, then four or five, then one every day. I was delighted!
Wow! I thought, if I could find out how to encourage all my other affiliates to make these sales, the sky’s the limit! And off I went into a little fantasy world where I multiplied the number of affiliates by the number of sales a day and the profit I was making and after a year I’d have … Well, I’m sure you’ve indulged in the same daydreams, haven’t you?
Fast forward to the Friday before Christmas, when the postie arrived and left two letters from my bank … Muttering to myself about the waste and why couldn’t they put both letters into one envelope, I opened the first expecting to find a bank statement, only to discover to my horror, one of those “please explain” letters.
It appeared that one of my credit card transactions had been queried. I’ve had my merchant account since 1998 and in all that time, have had only two previous letters like this (and both were resolved when we found that the queries were the result of buyers not being aware of my business name).
Feeling somewhat less than Christmassy, I opened the second letter to find that it was yet another “please explain.” Two in one day after two in seven years was a real shock!
Some quick investigating unearthed the culprit: my active new affiliate was running a scam using stolen credit card numbers! He’d put an order through using his affiliate link and the stolen credit card. My automatic program sent out the download instructions to the email address he entered, and I received notification of another sale by an affiliate. There was no reason to be suspicious or concerned, so I paid him his commission at the end of the first month.
And I not only lost that money, I now also risk losing my merchant account.
I’ve had a number of conversations with my bank, and it seems that if 5% of any month’s transactions are queried for any merchant, alarm bells go off for the credit card companies and they make life difficult for the banks. And we poor merchants are at the bottom of this food chain.
Be Suspicious If:
1. The order is placed through an affiliate from any of these countries:
• Romania
• Indonesia
• Singapore
• Ghana
• Ukraine
• Uganda
• Nigeria
• Hungary
• Belarus
• Estonia
• Latvia
• Lithuania
• Slovak Republic
• Russia
• Yugoslavia
• Macedonia
• Phillipines
• Thailand
• Malaysia
2. The shipping address is different from the billing address
3. The email address is from a free account
4. Email to the “customer” bounces
5. You receive orders for multiple copies of one product (especially a digital product)
6. The shopper isn’t concerned about what it costs to ship the product or how long it will take to ship
STEPS TO AVOID PROBLEMS
1. Always send a confirmation email to the address given. A fraudulent account will either bounce, or you won’t get a response because the fraudster will know you’re on to the scam.
You can also use this reverse email tool to check that details given tally: http://www.freeality.com/finde.htm
2. If you do get a response, ask for additional details (perhaps the expiry date or bank name on the card). Honest customers won’t be concerned, but fraudsters will realise you suspect them and won’t respond. Tear up those orders!
3. If there’s a phone number on your order form, call the number to confirm the order.
4. Record the IP address of all orders placed and check them here: http://www.arin.net/whois/ Beware of any that are placed through the “Asia Pacific Network Information Center.”
5. Check the Bank Identification Number (BIN) to determine if the credit card holder and the issuing bank for the credit card are located in the same country: http://all-nettools.com/toolbox,financial Enter the first six digits on the card and you’ll see the bank name, card type and a 3-character code for the country.
LESSONS
This is what I’ve learnt from my experience:
1. Don’t trust anyone! I was naive in thinking that just because I’d spent seven years dealing with honest people on the Internet that everyone would be honest. They’re not. I know I’ve been incredibly lucky up to this point, and I mourn the loss of trust.
2. Make sure you get lots of personal details from your affiliates and don’t have a program that lets them sign up automatically. You can usually set your program to have affiliates pending until you’ve done a thorough check on them.
Beware of email addresses at free accounts. I don’t mean to cast aspersions on anyone here, but the ones I’ll be suspicious of in future are any netzero.net, netzero.com, walla.com or juno.com accounts. In fact, I think it would be sensible to require all affiliates to have their own domains.
3. Be prepared to have to convince your bank that you’ve done all these background checks on your affiliates. Apparently, the Big Boys at the pointy end of town have to spend hundreds of thousands of dollars a year to have accountants audit their merchant accounts for them, and the banks expect nothing less from their smaller customers.
4. Again, I don’t mean to generalise, but in your own interests, don’t accept any affiliates using an address from any of the countries in the list above without doing very thorough checks. According to my source in the bank, many current credit card scams and frauds are originating from these places.
Mine was an expensive lesson, but one I won’t forget!
Jennifer Stewart is a freelance editor and writer. Visit her site now and read why thousands of businesses closed their doors last year and how you can avoid becoming a statistic: http://www.write101.com/websiteresources.htm
