aught somewhere in the middle of the battle against credit card fraud, often left unmentioned in the shadows of financial institutions and consumers, are merchants. As fraudsters get more creative in their methods for stealing and replicating the identities and account information of unwary victims, there are strategies both retailers and e-tailers can implement to stop bogus transactions.

At the frontlines are ISOs, whose relationships with merchants, their customers, position them to pass on information and share tools and tips. (See chart for a brief outline of fraud-prevention tips to copy and give to your merchants. Visit www.greensheet.com/fraudpreventiontips.pdf for a full-length, printable version to pass on to them.)

Where consumers are responsible for only the first $50 in illegal purchases, the businesses who accepted and put through the false charges have to cover the rest of the bad tab, which is estimated to be as high as $2 billion - and growing - a year. Chargeback fees can range from $15 to $25 per incident. Transaction fees and discount rates often increase.

Beyond direct revenue losses and increased fees, there are hidden costs that merchants incur with fraudulent purchases. Loss of staff time is the most significant; the loss of customer goodwill is hard to quantify.

There are steps businesses can take to reduce tangible and intangible expenses from fraud. Vigilance will pay off for merchants in the long run, but they should establish a system to investigate questionable purchases that makes sense for the business.

First, make sure all of your employees can recognize the signs indicating fraudulent transactions. These can include first-time shoppers (criminals usually hit once and disappear), larger-than-normal purchases (shopping sprees, big-ticket items), orders consisting of several of the same item and orders shipped to a single address but purchased with several cards.

Customers using bad cards might buy a lot with no regard to size, style, color or price. They might make major purchases with no questions asked, try to distract the clerk or rush the sale through. They also tend to make purchases right as the store opens or closes, and they might make purchases, leave the store and come back later to buy more.

Visa USA's Web site points out other ways to spot a bad card: Visa accounts always begin with a "4," and a special security feature shows a dove on the front of the card when placed under ultraviolet light. Visa offers merchants prevention information as well as an address-verification service; it also warns merchants to never risk their own safety if they become suspicious that card fraud is taking place.

Off-site purchases via Internet, mail or telephone are more difficult to police but not impossible. Process orders only with complete information - name, billing address, card number, etc. Review orders to see if everything matches up - area codes, zip codes and addresses should all be in the same region geographically. Don't accept overseas orders.

If an alarm bell rings, get more information. Ask for the bank name on the card or day and evening phone numbers. Confirm large orders with a note, call or e-mail. Call directory assistance to match names and numbers, then make an order-confirmation call.

As consumers make more online purchases, more merchants are taking more precautions against fraud. In a report released by CyberSource on online fraud for 2002, 65% of merchants surveyed said they have beefed up investments in managing and preventing card fraud.