Reversible payments

Members should be aware many payments can be reversed. This includes cash deposits. A reason cryptocurrency is popular is it's one of the few things that can't be reversed. This article looks at some ways scam artists reverse payments.

Cash Deposit

There are many ways bank cash deposits can be reversed. One is the man in the middle scheme (MITM). Another involves obtaining a deposit receipt and using it as proof of payment, but returning to the bank later and claiming there was some mistake and requesting a refund. This may not work every time, but scam artists are free to make multiple attempts.

A defensive practice by sellers is to require a picture of the deposit receipt with some message written on it. For example, the message might be "No reversal - for purchase of Bitcoin." While effective this isn't 100% secure, because banks have different refund procedures and security practices. There have been reports of people returning to banks 24 hours after a deposit and successfully gaining a refund, although the first hour seems particularly successful. The ability to hold a receipt for such a long time along with image altering techniques and inconsistent bank policies means sellers remain at risk.

A final way cash deposits may be reversed is the passing of counterfeit bills. Such bills show up often during in-person exchanges, but this is less likely for human tellers. However, there is increasingly the use of ATMs with virtual tellers accepting deposits. In this case it's a machine that must detect counterfeit bills, which may not be as effective. For this reason it's usually a requirement to submit identification to make deposits, but fake IDs are also increasingly sophisticated and easily obtained.

To summarize scam artists have time to discover weaknesses in procedures and are not prevented from making multiple attempts so they have an advantage. Cash deposits should not be considered safe from reversal until a sufficient amount of time (e.g. 7 to 14 days) has passed without incident.

Bank Transfer

Banks increasingly allow account holders to transfer funds directly to other account holders at the same bank or even different banks. This is separate from traditional wire transfers which are slower and more expensive.

These transfers are a popular method to buy cryptocurrencies, but in a world of growing reliance on digital technologies there is increased hacking and fraud, often successful. Sellers accepting an electronic funds transfer will be uncertain whether the transfer is legitimate until a sufficient amount of time has passed without incident.

Illegitimate transfers will often be reversed and can result in account closure for the seller. Even legitimate transfers fraudulently claimed to be illegitimate could be reversed. Finally, bank transfers, similar to cash deposits, are vulnerable to the man in the middle scam.

PayPal

PayPal almost always reverses payments in favor of a sender, including up to six months after fund transfer. Since PayPal at present doesn't support cryptocurrencies sellers usually have little recourse, even when clearly defrauded in a trade. Sellers are advised to either avoid accepting PayPal or be certain the buyer will not reverse a PayPal payment.

 

 


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