Mark Pestronk
Q: In your Oct. 14 Legal Briefs column ("How a host agency can prevent IC fraud"), you mentioned that a future column will deal with IC fraud on suppliers. Our agency is looking to expand our hosting program, and we want to make sure that we minimize the risk of fraud on suppliers. After all, it is our agency that will be responsible to suppliers in all cases of IC fraud. What kinds of fraud have you encountered? What preventive steps do you recommend?
A: IC fraud on suppliers is all too common. It ranges from the simple, such as using a credit card without the cardholder's authorization, to the complex, such as setting up a corporate frequent flyer program in the name of a shell company controlled by the IC or a friend and then using the account number on all reservations for all of the IC's clients.
The most typical scenario works like this: A nonlocal, new or largely unknown IC makes an airline reservation and charges the ticket to a phony, unauthorized, expired or over-limit credit card. The IC's friend or co-conspirator uses the ticket. The credit card company charges back to the airline. Your IC does the same thing 25 more times before you receive the first debit memo of $25,000 or more.
To prevent such a nightmare, begin by screening prospective ICs carefully. Get the prospect's work history and check immediate past references. If the IC has no industry references, give serious consideration to refraining from retaining the IC, unless the IC is new to the industry.
Other preventive steps include criminal and credit checks, for which you don't need the IC's consent because retaining an IC is a business-to-business transaction. Although most criminals deserve a second chance and most low-credit scorers may have suffered only temporary financial problems, you can't afford to take chances with travel suppliers that you depend on.
If the IC recently owned his or her own agency but gave it up, you need to investigate why the IC did so and watch out for red flags. The IC may have defaulted to ARC, or suppliers may have cut them off.
Once you bring the IC onboard, refrain from letting the IC issue any tickets without your prior review of the reservation to see if there are any red flags or obvious mistakes. Check the reservations for suspicious patterns such as weekend spikes, manual approval codes and manual fares.
Of course, most ICs today don't make airline reservations or issue tickets, so you can't monitor cruise and tour sales to the extent that you can with air. For that reason, it is essential that the IC follow your credit card acceptance rules.
Such rules should be set forth in your standard IC agreement. For example, require the client's signature on a card charge form and compare it to the signature on the card. One new, good idea is to require the IC to get a client selfie holding his or her driver's license.