Fraud to Sale Ratio

The fraud to sale (F2S) ratio is the ratio of transactions that were declared fraudulent by the issuing banks in relation to the merchant’s total sales for that month. This regulation is distinct from the chargeback ratio regulations. The issuer’s fraud-to-sale report does not necessarily contain chargebacks, but does contain transactions that have been detected and marked as fraudulent by their issuing banks.

In most cases, Nuvei receives these notifications after a long delay between the original transaction date and the date the cardholder was reported as fraudulent. For this reason, these transactions cannot be voided. When the authenticity of the transaction reported as fraudulent by the bank cannot be proven and the cardholder has not yet initiated a chargeback, Nuvei advises you to block the respective users from further deposits.

The credit card companies (Visa, Mastercard, and Amex) have several parameters by which they detect fraudulent or unauthorized activity with a card, such as:

• Card reported lost or stolen
• Card not received when mailed
• Card issued on the basis of a fraudulent application
• Issuer or acquirer reported counterfeit
• Fraudulent use of an account number

Visa, Mastercard, and Amex have created several programs to reduce high fraud-to-sale ratios.

The tables below describe the different fraud-to-sale programs provided by Visa, Mastercard, and Amex, including the thresholds that must be exceeded to be placed in a program.

Visa Program

The Visa Fraud Monitoring Program (VFMP) compares the amount of the transactions reported as fraud in the current month over the amount of the sales transactions processed in the same month.

Program Thresholds

Threshold	Fraud amount	Ratio
Early warning threshold	$ 50,000	0.65%
Standard threshold	$ 75,000	0.9%
Excessive threshold	$ 250,000	1.8%

VFMP has several program timelines – ‘Early Warning’, ‘Standard’, ‘’High Risk, and ‘Excessive’.

The ‘Early Warning’ period applies when a merchant does not have a breach of the VFMP ‘Standard’ thresholds, but has exceeded the ‘Early Warning’ thresholds. The merchant has the opportunity to reduce the fraud levels before they are identified under VFMP. The notifications to merchants do not count towards the program timeline or have any non-compliance assessments.

The ‘Standard’ program timeline applies when a merchant is assigned a non-High Risk Merchant Category Code (MCC) and meets or exceeds the ‘Standard’ fraud program thresholds.

A merchant is moved from the ‘Standard’ timeline to the ‘High Risk’ timeline if:

• It is categorized by a ‘High Risk’ MCC as defined in the Visa Rules.
• Visa determines that it causes harm to the goodwill of the Visa Payment System.

If at any point a ‘High Risk’ MCC merchant breaches the VFMP thresholds, they immediately enter the program and are not afforded a workout period.

The following table describes how the Visa High-Risk MCCs are applied:

MCC	Description
5962	(Direct Marketing — Travel-Related Arrangement Services)
5966	Direct Marketing – Outbound Telemarketing Merchants
5967	Direct Marketing – Inbound Telemarketing Merchants
7273	Dating and Escort Services
7995	Betting, including lottery tickets, casino gaming chips, off-track betting, wagers at race tracks, and games of chance to win prizes of monetary value.
5122	Drugs, Drug Proprietaries, Druggist Sundries
5912	Drug Stores, Pharmacies
5993	Cigar Stores and Stands
Upon Visa’s determination, the following MCCs may be considered as ‘High Risk’:
6051	Non-Financial Institutions – Foreign Currency, Liquid and Cryptocurrency Assets (for example: Cryptocurrency, Money Orders [Not Money Transfer], Travelers Cheques, and Debt Repayment)
4816	Computer Network/Information Services
5816	Digital Goods Games

The ‘Excessive’ program timeline applies when a merchant meets or exceeds the ‘Excessive’ fraud program thresholds. Once a merchant falls into the ‘Excessive’ timeline, it remains in the timeline until it fully remediates out of the program. The merchant is not moved to the ‘Standard’ timeline even if its performance drops below the monthly ‘Excessive’ fraud program thresholds.

Standard Program Timelines and Fines

Program Timelines

Program Month	Program Status	Actions
1	Notification	Review the fraudulent transactions, define fraud prevention measures.
2 to 4	Workout Period	After entering the program, the merchant should provide a plan to reduce the fraud levels submitted to Visa.
5 to 12	Enforcement Period	The merchant must continue to provide updates with information about the results of the implemented plan. The merchant may be liable for chargebacks related to fraudulent transactions submitted under dispute condition 10.5. The merchant could be closed for Visa processing.

Fines

Month	Fee
1 to 4	No fee
5 to 6	$25,000
7 to 9	$50,000
10 to 12	$75,000

High Risk and Excessive Program Timelines and Fines

Program Timelines

Program Month	Program Status	Actions
1 to 11	Enforcement Period	The merchant should provide a plan to reduce the fraud levels. The merchant may be liable for chargebacks under dispute condition 10.5.
12	Enforcement Period	The merchant must continue to provide updates with information about the results of the implemented plan. The merchant may be liable for chargebacks under dispute condition 10.5. The merchant could be closed for Visa processing.

Fines

Month	Fine
1 to 3	$10,000
4 to 6	$25,000
7 to 9	$50,000
10 to 12	$75,000

Exit Parameters

The merchant can exit VFMP once it is below at least one of the program fraud thresholds for three consecutive months. If the merchant is below the program threshold for less than the required three consecutive months, its program status continues to be counted from the previous identification month.

Mastercard Excessive Fraud Merchant Program

The goal of the Mastercard Excessive Fraud Merchant (EFM) Program is to reduce fraud on electronic commerce (e-commerce) transactions, create a more secure ecosystem, and provide a better experience for cardholders.

The EFM program measures compliance at the merchant ID (MID) level and sends notifications and potential financial assessments through the acquirer.

Merchants registered in the following countries are excluded from the EFM Program:

Aland Islands	Falkland Islands (Malvinas)	India	Mayotte	San Marino
Albania	Faroe Islands	Kosovo	Moldova	Serbia
Andorra	Finland	Latvia	Monaco	Slovakia
Antarctica	France	Ireland	Montenegro	Slovenia
Austria	French Guiana	Isle of Man	Netherlands (the)	South Georgia and the South Sandwich Islands
Belgium	Gibraltar	Italy	Norway	Spain
Bosnia and Herzegovina	Germany	Jersey	Poland	Svalbard and Jan Mayen
Bulgaria	Greece	Liechtenstein	Portugal	Sweden
Croatia	Greenland	Lithuania	Réunion	Switzerland
Cyprus	Guadeloupe	Luxembourg	Romania	Ukraine
Czech Republic	Guernsey	Macedonia	Saint Barthélemy	United Kingdom
Denmark	Hungary	Malta	Saint Martin (French part)	Vatican City
Estonia	Iceland	Martinique

Program Thresholds

The EFM program monitors the total amount of fraud-related chargebacks occurring at a given e-commerce merchant, as well as the number of transactions authenticated through 3D-Secure.

Merchants are considered non-compliant when all of the following conditions are met in a given month:

• Total volume from chargebacks with fraud reason of 50,000 USD or above for the reported month
• Fraud chargeback ratio – 0.50% or above (0.20% for Australia)
• Number of monthly cleared transactions – 1,000 or above
• 3D Usage – Less than 10% for non-regulated countries OR less than 50% for regulated countries

Program	Min. Number of Transactions	Fraud Chargebacks	Fraud Count Ratio	3D Utilization
EFM	1,000	50,000 USD	0.50%	Less than 10% non-regulated or less than 50% regulated

The tables list the countries identified as regulated or non-regulated.

Regulated Countries

• Bangladesh
• Malaysia
• Singapore
• Nigeria

Non-regulated Countries

All non-EU countries except for Bangladesh, Malaysia, Singapore, and Nigeria.

Fines

Mastercard applies assessments for appearing on the EFM program at increasing increments depending on how long a Merchant ID appears on the program.

Number of Months above EFM Thresholds	Violation Assessment
1	0
2	EUR/USD 500
3	EUR/USD 1,000
4 to 6	EUR/USD 5,000
7 to 11	EUR/USD 25,000
12 to 18	EUR/USD 50,000
19+	EUR/USD 100,000

Exit Parameters

When the merchant is below the program thresholds for three consecutive months.

Amex Fraud Program

Under the Amex Fraud Program, Merchants’ F2S performance thresholds fall into either a Low Tier or High Tier calculation. This calculation excludes Fraudulent Applications and SafeKey/3D Transaction Attempts.

The following table describes the two tiers within the Performance criteria:

Program Thresholds

Threshold	Fraud Amount	Ratio
Low Tier	$25,000	0.90%
High Tier	$50,000	1.80%

In the “Low Tier” period, the merchants have the opportunity to reduce the fraud levels before being added to the High-Risk List. If the Merchant does not remain below the program thresholds for three consecutive months, they are subject to Fraud Full Recourse Chargebacks and can no longer qualify for liability shift with Safekey/3D.

If the merchant reaches the “High Tier”, they are subject to Fraud Full Recourse Chargebacks and can no longer qualify for liability shift with Safekey/3D.  The merchant remains on the High-Risk list until their F2S ratio falls below 0.9% or $25,000 for three (3) consecutive months.

While being in this program, the Merchant is subject to the following penalties:

Non-compliance	Fee
1st violation	$1,000
2nd violation	$5,000
3rd violation	$10,000
4th violation	$25,000
5th violation	The fee will be at discretion of Amex.
6th violation or more	Additional fees will be equal to all penalty fees levied for a 12-month period. The 12-month period begins upon the 1st violation.

Visa and Mastercard Programs for Mitigation of Card Testing and Enumeration / BIN Attacks

An enumeration attack is a scheme in which criminals systematically submit card-not-present transactions with enumerated values such as card number, CVV, expiration date, and postal code to derive legitimate payment account details. The fraudsters use the authentication response to identify valid payment accounts.

Account testing occurs by initiating transactions of $1 to $2 to verify if an account is active in order to use it for fraudulent purchases or to sell it over the dark web. Typically, these attacks focus on a single Bank Identification Number (BIN) range and use the same name, email address, and/or billing address for multiple transactions.

Merchant account takeover – Fraudsters may also gain access to the payment system by obtaining a merchant’s login credentials, and subsequently taking over their payment gateway to conduct illicit transactions. These credentials can be obtained when a merchant falls victim to phishing schemes.

The following activities may indicate an enumeration attack or account testing:

• A high number of transaction attempts sent within a few hours or one day, possibly from one IP address, or for a specific BIN / account range.
• An increased number of rejected or timed-out authentication attempts that receive a challenge request.

Mastercard defines a third-party fraud attack as a BIN attack when the following conditions are met:

• At least 100 authorization requests or authentication requests are sent within one hour for the BIN or BIN Account range from one or more Merchants.
• The Issuer, its Service Provider, or Mastercard (using a network fraud detection tool) declined fifty percent (50%) or more of the authorization requests or authentication requests within one hour.

Visa monitors for Card-Absent authorization attempts concentrating on a single BIN or multiple BINs while iterating through various combinations of payment values. These payment values generally include the Primary Account Number (PAN), expiration date, Card Verification Value 2 (CVV2), and postal code. Issuers decline the authorization attempts until the right combination of payment values returns an approval response. An approved authorization response (and often a subsequent sale) is an indicator to the fraudsters that they have obtained a combination of valid payment values. This scheme is also known as a brute force attack. Visa identifies situations where the Merchant or the acquirer meets or exceeds the monthly enumeration thresholds.

Enumeration Monitoring Program Thresholds

• Early Warning Timeline Thresholds

Enumeration Risk Operation Center (ROC) Block Count>=1,000 and <=5,000; AND Enumeration ROC Block Rate >= 10%
OR
Enumeration ROC Block Count >= 50,000; AND Enumeration ROC Block Rate >= 1% and <= 5%
* The ROC Block Rate is calculated by the number of ROC blocked transactions divided by the total card-absent transaction count.

• Standard Timeline Thresholds

Enumeration Risk Operation Center (ROC) Block Count >= 5,000; AND Enumeration ROC Block Rate >= 5%

• Excessive Timeline Thresholds

Enumeration ROC Block Count >= 50,000; AND Enumeration ROC Block Rate >= 10%

Flagging in this Visa program may incur additional per-authorization fees to the Merchant whose systems are not well protected and are attacked by the fraudsters.

In its fraud prevention systems, Nuvei has implemented internal controls to mitigate such attacks as much as possible.