How Banks Conduct Transaction Fraud Investigations

On Behalf of | May 24, 2022 | blog, Fraud

The process of a fraud investigation is an internal matter at a bank that can also involve merchants, payment processors, customers, and other parties. These investigations tend to be specific to different banks as well as the relationships between each bank and the credit card providers they work with.

Fraud investigations

For businesses as well as customers, fraud incidents and disputes can play a major role in their finances. However, banks often use terminology that is unfamiliar to consumers, and the investigations mostly stay internal, so for something so important, the parties involved don’t have much insight into the process.

During a fraud filing, a customer complains to the bank, and then the bank gathers information from the customer and the merchant to determine what really happened. Banks are required by law to provide a decision within ten days. They can take up to 45 more days after that as long as they give their customer a credit for the lost money in the meantime. Stolen cards, cards used by kids in the household, forgotten trials of subscriptions, bad products, missing services, and other incidents can all lead to fraud claims. Typically, the merchant bears the burden of proof in these instances, and they are out the money until and unless they can show that the fault does not lie with them. This can take time and be costly, and there is no guarantee that they will win in the end.

A fraud investigation can cause a lot of damage to a business and often the business does not know much about what the bank is doing, why, and when.