Fraud prevention system and method

Details Fraud prevention system and method Fraud prevention system and method

2000-01-07

2003-02-04

Nguyen, Duc (Department: 2643)

Telephonic communications

With check operated control

Fraud or interference prevention

C379S114010, C379S114140, C379S114150, C379S114160, C379S144010

Reexamination Certificate

active

06516056

ABSTRACT:

TECHNICAL FIELD
This invention relates generally to fraud, and more particularly to a fraud prevention system and method.
BACKGROUND OF THE INVENTION
Fraud affects nearly every business selling goods and services remotely to customers via communications devices such as the telephone, mail, and Internet. A typical transaction involves a customer calling a customer service representative (CSR), ordering goods or services, and giving the CSR a credit card number over the telephone to pay for the goods or services. Because the CSR has no opportunity to physically inspect the credit card or a form of personal identification such as a driver's license, this type of transaction is referred to as a “card-not-present” transaction.
In a face-to-face transaction, the CSR is able to confirm that the customer's appearance matches a form of photographic identification, and that the customer's signature on a sales receipt or charge draft matches the signature on the credit card. In addition, the physical appearance and physical mannerisms of the customer may also give the CSR important clues that the transaction is fraudulent. In a card-not-present transaction, however, the inability to physically inspect the customer and the customer's personal identification, credit card, and signature leads to a high incidence of fraud.
Prior fraud control efforts in card-not-present transactions have used such devices as ZIP code verification, wherein the customer is asked to provide the ZIP code of the billing address of the credit card. Thieves find these fraud control systems easy to defeat because credit card numbers are often stolen out of the mail boxes and trash cans of residential dwellings, and customer ZIP codes are easy to obtain from these sources, and are easy to determine based on the location of a dwelling.
It would be desirable to provide a system and method for inhibiting fraud in card-not-present transactions.
SUMMARY OF THE INVENTION
A system and method for inhibiting fraud are provided. The method typically includes identifying one or more fraud indicators and examining past transactions and/or the pending transaction associated with the account for the presence of the fraud indicators. The method also includes, by said examining, detecting at least one of the fraud indicators. The method also includes calculating a cumulative fraud risk level associated with the pending transaction based on the detected fraud indicators. The method may also include determining whether the cumulative fraud risk level meets or exceeds a predetermined threshold, and if the cumulative fraud risk level meets or exceeds the predetermined threshold, verifying the request for the transaction with an owner of the account. The method may further include assigning a weighted value to each of the fraud indicators. The account is typically a telephone calling account, such as a calling card account.
In another embodiment of the invention, the method includes identify a fraud indicator and periodically scanning past transactions related to the customer account for the fraud indicator. The method also includes detecting the fraud indicator in a detected past transaction related to the account and increasing a risk level for future transactions having a parameter in common with the detected past transaction. The future transactions having a parameter in common with the detected past transactions may be future transactions associated with the same customer account as the past transactions.
The system typically includes a computing device, and a database linked to the computing device. The database is configured to store information on past transactions associated with the customer account. The system also includes an order processing program executable on the computing device. The order processing program is configured to receive a customer order and assess a risk level for the customer order based on the past transactions related to the customer account stored in the database. The system further includes a fraud queue configured to receive the customer order if the risk level of the customer order exceeds a predetermined fraud risk threshold and hold the customer order pending verification of the order.


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