What is a Funds Transfer Scam and how can your business recognize one?

[Lexi]

 Imagine the following Square Seller scenarios:

A salon is booked to do hair for an entire bridal party.  The customer says the party wants to arrive in a limousine, but the limo driver can’t accept credit cards.  So the customer asks the salon owner to add $2,000 to the booking charge on their credit card and for her to wire that $2,000 to the limo driver as payment.  The customer says it would be a small and easy favor for such a large customer, and they will even leave an extra tip on the credit card receipt.

A contractor is hired for a roofing job.  As he discusses the terms of the contract and prepares to accept a down payment, the customer mentions that they are getting some electrical work done as well, and requests that the roofer pay the electrician for them.  All the roofer needs to do, they say, is process an additional $5,000 on top of the down payment and deposit it into the electrician’s bank account, which the customer gives him.

An artist posts a painting online, and soon gets contacted by a buyer who lives outside the US.  The buyer says he prefers to use a specific shipping company and gives the artist contact info to reach out for a quote, which comes out to $1,000. The buyer tells the artist to add the shipping cost onto the credit card charge and pay the shipping company via wire transfer once the funds clear.  He claims the shipping company will come pick up the art and deliver it to him.

What do all of these scenarios have in common?

Each customer in these scenarios makes a special request for the merchant to charge an additional amount via credit card and to wire or deposit that amount to a third party.  

What is a Funds Transfer Scam?

A Funds Transfer Scam aims to use a business to convert stolen credit into cash.  The scammer approaches you with one or more stolen credit cards, they convince you to charge an amount higher than the normal cost of goods or services, and they have you transfer those additional funds to some third party who is working with them.  The customer story, amount, and third party can all vary, but the general formula for this scam is consistent.

What to do if a scammer targets your business:

Cease contact with the scammer and report them to local law enforcement.  Do not accept payment from this person and, if you are able, refund any payments you have already taken. If you have already wired funds, shipped goods, or are otherwise unable to issue a refund, Square’s Disputes team will reach out to you if/when further action is needed.  

Common Scams:

There are several Funds Transfer Scams that tend to target specific business types.  Review these common pairings to protect your business

Business Type	Special Request/Third Party
Beauty/Barber, Personal Trainer	Driver, transportation
Contractors, Builders	Previous Homeowner, Real Estate Agent, Subcontractor
Event Planner, Caterer, Photographer	Event Planner, Caterer, Photographer
Retail, Art	Shipping Company, Courier Service
Web Development	Content Provider

Flow of Funds:

[katieand · Accepted solution]

Thanks for sharing this useful information @Lexi! We want to make sure all sellers are kept safe as we approach the holiday season. 

[pessosices]

This is amazing, thank you @Lexi!

In my youth I came close to falling for this scam, and know plenty who have - thanks for drawing attention to it and helping to make sure others don't!

[Yess]

Gosh thank you . How important are these forums, I was very close to falling! I was contacted for an event of 80 people, when I requested the payment of the deposit She asked me to add the salary of 3,000 her videographer, all through the phone, when I sent the invoice, she wanted them to be separated in 2 amounts (now I understand why, the cards with which the payment was going to be possibly made , are stolen), I looked to find more information , is a well-planned way to defraud, I do cancel the invoices and I told her , my brother in law,  who works in the police(a lie by the way ) does not recommend adding money from third parties in my Invoices and well as you can already imagined  . She did not want the service anymore.