What is loyalty fraud and how many different types of fraud are there?
Loyalty Fraud can be defined as:
Where deception is used intentionally to deceive and/or secure unfair gains from Loyalty Programs. And/or where deception is involved with the intention of resulting in unfair/unearned financial, personal or third party gain.
Loyalty fraud can take many forms but these are the three main types:
Account Take Over (ATO): for example where the account holders may have been subjects of a data breach and these accounts then have fraudulent redemptions made upon them.
Policy Abuse – Earning of Points where the account holder is not entitled to something within the rules of the program. For example, double dipping in two airline programs for the same flight.
Policy Abuse – Redeeming of Points in a manner through which the account holder is not entitled, for example selling or bartering (called “Brokering”) miles that may have been properly earned, but redemption is not within the program’s Terms & Conditions.