Keep your nonprofit safe from fraudulent activity

Credit card fraud detracts from the positive contributions nonprofits make to their communities. In addition, your organization can lose a great deal of money through fraudulent activity. Ensure that your organization is able to funnel the appropriate funds into the causes that are most important to you by educating yourself on credit card fraud.

How are charities at risk?
Unique types of credit card fraud are more prevalent among nonprofits, including internal and external risks. Card tumbling, online auction fraud, creation of clone charities and processing of donations intended for money laundering are various types of fraud many nonprofits may experience, according to the white​ paper we recently published,"Credit Card Fraud Prevention in Nonprofits."

Because many charities do not require three-digit security codes when processing credit and debit cards, card tumbling occurs frequently. Often fraudsters will test card numbers on nonprofit websites and if the rightful owner of a stolen credit card wants a refund, your nonprofit must reimburse the individual. This is referred to as a chargeback fee, and your nonprofit may have to dip into your funds to adhere to this policy. 

According to Merchant Connect, a rightful cardholder can dispute a payment within 120 or 180 days, depending on where the purchase was made.

An additional risk that may result in a chargeback fee is online auction frauds. Charities may lose items that were sold during an online auction.

Also, clone charities can be created in the image of legitimate organizations. When individuals who make donations discover their money is not going to a specific cause or mission they intended to give to, they may lose trust in the true organization.

Some fraud attempts may also intend to make an unusually large donation that actually involves your organization in money laundering without realizing it. Be extra cautious of anonymous donors who are particularly picky about how a payment is made or how a refund is processed. Do not move your nonprofit's funds to another account to accept a suspicious donation. Require additional security measures for larger donations and ensure that staff is aware of your protocol for accepting substantial monetary gifts. 

Fraud's impact on nonprofits and donors 
When fraudulent activity occurs, both your organization and benefactors suffer financial consequences. Due to nonprofits' dependence on donations, having them taken away due to fraud will have a detrimental effect. Internal operations may also feel a negative effect. Fraud may lower the morale of your employees, and they may not be able to contribute the high-quality work they had provided in the past. 

Donors also experience a great inconvenience, even if funds are given back to them. Your benefactors may wind up victims of fraud and possibly identity theft. In addition, some donors may not fully trust an organization if it has experienced fraudulent activity in the past. 

Keep your staff aware of possible risks that expose particular vulnerabilities. Educate all your current employees on the various ways that fraudsters may try to take advantage of your organization. Making sure that you and your employees are aware and tuned in to possible fraudulent activity will help keep your nonprofit running smoothly with fewer risks. 

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