News

Exclusive: Mobile Fraud Prevention Strategies for the Holidays

BY Andreas Baumhof

Online and mobile fraud prevention needs to be part of every retailer’s brand’s holiday retail strategy. According to Cybersource’s 2011 survey of e-commerce fraud, $3.4 billion in online revenue was lost in 2011 as a result of fraud, and this number is only expected to increase. Although the holidays are just around the corner, there is still time to take action and reduce your exposure to fraudulent mobile channel activities.

1. Spoofing. Cybercriminals often leverage weaknesses in mobile mini-browsers to spoof their locations. Since spoofing is a red flag for fraud, you should pay close attention to users who interact with your system using spoofed mobile devices.

2. Jailbroken Devices. Jailbroken iOS devices don’t automatically indicate malicious intent. But cyber thugs frequently jail break iPhones and other iOS devices so they can download apps that aren’t screened and distributed via the App Store, turning Apple devices into optimized tools for fraudulent mobile transactions.

3. Android Mini-Browsers. In the same way that fraudsters jailbreak iPhones for fraudulent purposes, cybercriminals will sometimes download mini-browsers other than the browser that comes installed with their Android device. This allows them to achieve mobile access through proxy sites and disguise their true location. For example, while an online transaction may seem to originate in the U.S., it actual originate offshore – in global hotbeds for cybercriminal activity, such as Vietnam, Phillipines and Nigeria.

4. MitB Attacks. Man-in-the-Browser (MitB) attacks can be lethal because they lurk undetected in the background of authenticated mobile transactions. With MitB detection technology, retailers can create a more secure mobile channel by identifying these threats in real-time.

5. Risk Scoring. Mobile can’t be separated from your brand’s other online security measures. In addition to integrating mobile factors into risk scoring, mobile needs to be incorporated into a comprehensive fraud prevention strategy that tracks consumers on both apps and websites.

The demands of the holiday retail season cause many retailers to put new cybersecurity measures on hold until the first of the year or later. But that’s a mistake – especially if your brand is counting on mobile to deliver additional customers and revenue during the holidays.

The current state of mobile fraud prevention technologies enables retailers to implement or extend their capabilities with relatively little effort. Leveraging cloud-based delivery platforms, these technologies can be deployed rapidly, substantially improving security throughout your brand’s holiday retail sales program.

Andreas Baumhof is chief technology officer at ThreatMetrix.

keyboard_arrow_downCOMMENTS

Leave a Reply

D.Alcocer says:
Feb-05-2013 01:47 am

It's a part of malaysia fraud
It's a part of malaysia fraud to accuse mobile scam and its forbidden,& for the law, hard to process/trace this case.

D.Alcocer says:
Feb-05-2013 01:47 am

It's a part of malaysia fraud to accuse mobile scam and its forbidden,& for the law, hard to process/trace this case.

Polls

Consumer confidence is high. Is that reflected in your stores’ revenues?

View Results

Loading ... Loading ...
News

Gift Cards: Tips and Best Practices for Successful Management

BY CSA STAFF

By Randy Frischer and Patricia Brandstetter

Gift card sales have flourished in recent years, with electronic purchase and redeeming options and smart phone applications furthering the expansion of retail sales in this area. Our recent survey of 100 retail CMOs found that 58 percent expect gift card sales to increase this holiday season. In addition, retailers frequently issue gift cards to customers in exchange for returned goods. However, the tax, financial, and legal reporting requirements for gift cards have become increasingly complex.

Tax treatment
A retailer issuing a gift card receives an “advance payment” in exchange for the obligation to provide goods or services at a future date. For tax purposes, although advance payments must generally be included in gross income upon receipt, the sale of a gift card may be deferred from immediate income recognition under two exceptions: Treas. Reg. §1.451-5 and Rev. Proc. 2004-34.

Treas. Reg. §1.451-5 applies to the sale of goods only, and allows an accrual-method taxpayer to defer recognition of advance payments until the taxable year the payments are recognized as revenue for financial reporting purposes. However, inventoriable goods may not be deferred beyond the end of the second taxable year following the year the taxpayer receives the advance payment. This effectively grants a two-year deferral.

Rev. Proc. 2004-34 allows an accrual-basis taxpayer to defer recognition of advance payments for goods, services, or a mix of both, but provides for one-year deferral only: The advance payment must be included in gross income for the taxable year of receipt to the extent recognized in the financial statements for that taxable year; the remaining amount of the advance payment must be included in gross income in the subsequent taxable year.

In addition, the IRS has issued the following guidance involving gift cards:

Rev. Proc. 2011-17 provides a safe harbor method of accounting for returned merchandise: 1. A merchant may give the customer a cash refund in exchange for returned goods, reducing gross receipts in the amount of the refund, or 2. A gift card may be issued in exchange for the returned goods, treating the gift card issued as the payment of a cash refund and sale of a gift card. The retailer may account for the amount deemed received for the sale of the gift card under Treas. Reg. §1.451-5 or Rev. Proc. 2004-34.

Rev. Proc. 2011-18 modifies Rev. Proc. 2004-34 to allow taxpayers to defer revenue from the sale of gift cards that are redeemable for goods or services of the taxpayer or a third party. Deferral is thus permitted even when the gift cards are redeemed by a third party, related or unrelated to the selling entity, under a gift card service agreement.

Effective for taxable years ending on or after December 31, 2010, taxpayers changing to the deferral method as a result of Rev. Proc. 2011-17 and Rev. Proc. 2011-18 may do so as an automatic method change. According to IRS interpretation, Treas. Reg. §1.451-5 does not apply to goods provided by entities other than the taxpayer. Taxpayers currently deferring gift card sales under the two-year deferral of Treas. Reg. §1.451-5 might consider filing an automatic consent Form 3115 to change to the one-year deferral method afforded by Rev. Proc. 2004-34.

Beware of escheat
Retailers’ short-term cash flows benefit greatly where gift cards are never redeemed. This gift card “breakage”, i.e. unredeemed balances, may create legal reporting and remittance requirements for retailers under unclaimed property (escheat) laws in various states, including Delaware and New York. State escheat laws entail a “due diligence” obligation to attempt to return unclaimed property to its owner after expiration of a statutory dormancy period. The dormancy period for unredeemed values ranges from two to five years in the various jurisdictions, and escheat ranges from 60 percent to 100 percent of the value. Some states exempt cards with minor values or cards with clearly stated expiration dates. While online registration systems for gift cards may be helpful in meeting escheat reporting obligations, the transferability of gift cards raises complex legal issues.

To avoid potential unclaimed property liability, and to claim deferral under Treas. Reg. §1.451-5 (which rules out goods provided by third parties), companies often establish a separate gift card management company in the form of a single-member LLC, located in a state with favorable escheat laws. However, any such arrangement must serve a valid business purpose to withstand challenge by the IRS. The subsidiary must have its own management, accounting, board of directors, and anything else that avoids being considered a “sham.”

It should be noted that for financial statement purposes under GAAP, no income from unredeemed value is recognized if amounts are remitted to a government agency under state escheat laws. If no escheat laws apply, GAAP rules would generally not allow for de-recognition of a liability until relief from the liability, i.e., use of the gift card. However, under a special exception for gift cards, where a company can establish that the chance of the customer redeeming the gift card is remote, the revenue from breakage is recognized.

Nexus considerations
Gift cards can also create state nexus — a physical or economic presence sufficient to establish jurisdiction to tax in the state. For example, if gift cards are issued pursuant to a license granted by the retailer, the retailer may be considered to have economic nexus in certain states where the cards are sold. Gift cards, although representing intangible value, are (unless issued electronically) physical objects whose presence in a store may create nexus for tax purposes, even if the issuer otherwise has no presence in that state. It is therefore vitally important for retailers to understand nexus requirements in the respective states where their gift cards are sold.

With sales of gift cards surging, retailers’ strategies to maximize earnings should include knowledge of the rules to achieve deferral of revenue for federal income tax purposes, minimizing breakage subject to state escheat laws, and awareness of state income tax consequences of issuing and distributing gift cards.

Randy Frischer ([email protected]) is a tax partner in the Retail and Consumer Products practice and Patricia Brandstetter ([email protected]) is a senior tax associate at BDO USA, LLP, an accounting and consulting firm.

** To ensure compliance with Treasury Department regulations, we wish to inform you that any tax advice that may be contained in this communication (including any links to outside sources) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Material discussed in this blog post is meant to provide general information and should not be acted upon without first obtaining professional advice appropriately tailored to your individual circumstances.


More Web Exclusives/Guest Commentaries

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

Polls

Consumer confidence is high. Is that reflected in your stores’ revenues?

View Results

Loading ... Loading ...
News

Mars to receive NASCAR Marketing Achievement Award

BY CSA STAFF

DAYTONA BEACH, Fla. — Mars will receive the 2012 NASCAR Marketing Achievement Award at the NASCAR NMPA Myers Brothers Awards held at Encore at Wynn Las Vegas Thursday, Nov. 29.

The award recognizes Mars’ 23-year partnership with NASCAR, during which it has directly engaged race fans, customers and associates through an integrated marketing strategy that spanned across multiple activations, including intellectual property, promotions, public relations, B2B, online, broadcast, event marketing and retail. The partnership represents one of the longest standing within the sport.

“Mars’ execution of a fully integrated strategy within NASCAR exemplifies the spirit of the award and has been the catalyst to the brand’s success in the sport,” said Jim O’Connell, CSO for NASCAR. “One of our longest standing partners took full advantage of its sponsorship, raising the bar with innovative ideas designed to engage our brand loyal fan base, its associates and ultimately move product off the shelf.”

Mars conducted a study recently which found that it receives an impressive 4-to-1 return on its investment in NASCAR, measured by Mars tracking data. Additionally, its sponsorships create a fifth season of sales for the brand, which is on par with the size of the company’s Christmas selling season.

“The NASCAR sponsorship model is driven by brand loyalty and Mars has been behind the wheel of a best-in-class partnership,” said William Clements, VP of sponsorships and sports marketing for Mars Chocolate North America. “Our successes have been led by innovation that extends to customers, consumers and associates, and capitalizes on NASCAR’s broad fan base that represents approximately one-third of the U.S. adult population. We are honored by this award and continue to see the strength and growth of our partnership with NASCAR.”

In 2012, Mars executed several integrated marketing initiatives designed to reach its three key stakeholders — customers, consumers and associates — in an effort to extend beyond the iconic M&M’s paint scheme. Mars conducted consumer-centric promotions such as the current M&M’s When We Win, You Could Win Sweepstakes.” It pioneered the now popular TV panel program that places the logo of key retailers on the rear “TV panel” of the No. 18 M&M’s Toyota to drive exposure and incremental sales. It launched its “Best Seats in the House” program on race day, providing fans with a seat upgrade at select tracks in the series. Mars engaged associates with dedicated NASCAR ambassadors to celebrate the No. 18 M&M’s Toyota successes and team news. It also hosted NASCAR Day at Mars Chocolate North America’s headquarters in Hackettstown, N.J., featuring Joe Gibbs Racing owner Joe Gibbs, Kyle Busch and the entire No. 18 M&M’s Toyota team.

Each year, NASCAR recognizes an industry partner who has exemplified the spirit of NASCAR through integrated marketing campaigns for all racing fans, consumers and employees. Previous winners of the NASCAR Marketing Achievement Award include Anheuser-Busch, Coca-Cola, ESPN, FOX/TNT/NBC, Gillette, Kmart, Nationwide Insurance, Office Depot, Sprint, The Home Depot and Toyota.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

Polls

Consumer confidence is high. Is that reflected in your stores’ revenues?

View Results

Loading ... Loading ...