Jamie Biesiada
Fraud has long been a problem for travel agencies and in a number of forms, whether it's an external fraudster trying to gain access to systems or an independent contractor turned bad actor.
Both ASTA and the World Travel Agents Associations Alliance recently have issued warnings to travel agencies, encouraging them to stay vigilant -- especially if they book air, a common target of fraudsters.
Here are some cases from three host agencies.
Failure to verify
Today, Bill Coyle is KHM Travel Group's vice president of agent engagement. His first encounter with fraud happened in 1987, a year after his mother started a brick-and-mortar travel agency. Another agency owner physically stole her airline ticket validation plate and ticketed an entire group using it. Local police, and the FBI, got involved.
"That was our first introduction to ARC fraud back in the day," he said.
Now, 40 years later, the agency community has learned a lot. KHM has a compliance and resolution team that handles issues related to fraud.
Most recently, Coyle saw a case where an advisor didn't verify the identity of clients, who ended up being fraudsters.
The advisor booked around $8,000 worth of tickets through an air consolidator. The clients had used a stolen credit card, which eventually generated a chargeback, but in the meantime took the tickets and got a refund back from the airline via another form of payment. The advisor was on the hook for the cost of the tickets.
Fortunately, Coyle said, KHM's errors-and-omissions insurance covered the loss minus a $500 deductible.
In this case, verifying the identity of the clients would have helped the situation. When red flags come up, KHM's compliance team can help advisors verify who they're doing business with.
Coyle outlined another situation he saw recently. A client took a $22,000 cruise, then denied the charges with their credit card company, which did not want to dig deep on whether the person was actually on the cruise. The agent was left on the hook with the cruise line.
"There's just certain times where it's impossible for us to beat the system when they're already beating the system," Coyle said. "We just teach our agents to try not to book with unknown clients."
KHM warns advisors against any instances of unknown clients looking for last-minute air tickets.
He encouraged advisors to remain vigilant and take advantage of educational opportunities to learn about fraud.
'Fighting Fraud Fridays'
Jackie Friedman, president of Nexion Travel Group, said fraudsters are increasingly using travel advisors' profiles online, whether it's posted by their host agency, their consortium or industry groups like ASTA.
"If I'm a fraudster, I can go on, I can see that they're a member of Travel Leaders or a member of Virtuoso or a member of ASTA, so I know that," she said. "I can see their reviews, so I know the names of some of their clients, so I contact these advisors and I tell them that I got their name from insert the name of the client."
It sounds innocent enough, Friedman said, and many advisors will take the next step with that prospective client.
Then comes the fraud.
One scheme she's seen is a fraudster sending a link to an online meeting, like Teams or Zoom, but the link compromises the advisor's computer.
Fraudsters have also sent an advisor bookings, which they paid with stolen cards.
Nexion hosts a series of webinars, "Fighting Fraud Fridays," to educate advisors.
Friedman encouraged advisors to check with clients who purportedly made a referral and avoid booking last-minute travel for new clients.
"By the time they know about the fraud, it's too late," she said.
While it is important to be cautious, Friedman encouraged advisors not to shy away from taking business from those they don't know.
"Most people are not fraudulent," she said. "But just be very careful. Check them out."
On the flip side, Friedman encouraged suppliers who have self-registrations for logins to ensure they have some sort of agency-level validation for advisors to keep out bad actors.
An IC's card scam
Montecito Village Travel is currently dealing with a situation with an IC who committed a crime of opportunity with a supplier allowing net payments.
The advisor fraudulently used multiple client credit cards for unauthorized purchases of net-rate products, and multiple chargebacks were generated.
"It escalated and escalated until it was brought to our attention, and then we dove in and looked at it," said COO Shane LeFeber.
The FBI is investigating because of the amount of money involved.
LeFeber said Montecito gets monthly reports from suppliers but concentrates more on whether the agency's volume is up or down; individual advisor information was included but was not the focus of the report.
"If we would have seen that and then compared it to what was in our system, we'd have raised the red flag of the net payment, and then we could have said, 'What's going on here?'" he said.
The lesson learned, LeFeber said, is to ensure that hosts have strong relationships with suppliers and closely monitor the information they provide. Montecito has spoken with its consortium and ASTA to raise awareness.
In this instance, the advisor had been with Montecito for multiple years, said Connie Miller, chief relationship officer. Montecito does obtain background checks when advisors come on board.
"It looked good until it didn't," she said. "We don't know if there was a mitigating circumstance where they saw a loophole and started doing it, then it got easier. You can speculate all you want. At the end of the day, it's fraud."