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Building an Internal Negative File


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Even the best fraud-prevention procedures are likely to be breached every now and then allowing a fraudulent transaction to sneak its way through. You can, however, fully protect yourself against repeated offenders. Setting up and maintaining an internal negative file is an invaluable tool that online merchants have at their disposal for fighting fraudulent transactions. It will ensure that you will not fall victim multiple times to the same fraudulent account. When building and maintaining an internal negative file, merchant should make certain to implement procedures to ensure that only details from fraudulent transactions are stored and recorded. Information that relates to customer disputes or chargebacks should be left out of the negative file. The following suggestions will help you build and manage the file.

Establishing and maintaining of an internal negative file - The process of building an internal negative file should begin with a review of your own history of fraudulent transactions. Collect and record the details of the fraudulently used accounts to protect your organization from possible future fraud committed by the same person. Consider following these steps:

  • Record all key elements of fraudulent transactions. Your negative file should include the names, email addresses, shipping and billing addresses, customer identification numbers, passwords, phone numbers and card account numbers. Remember that it is not allowed to store the 3- or 4-digit card security codes.
  • Establish a process to remove from the negative file information about legitimate customers whose card accounts have been compromised. Their information may have been used by criminals.
  • Using the internal negative file to screen fraudulent transactions. If a transaction data matches data stored in your negative file, you should decline the transaction or, at the very least, initiate a thorough review.

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Online Merchant Services


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