Module 3: Incident Response and Post-Fraud Investigation Workflows
First Principles
Fraud in virtual card systems cannot always be prevented in real time. But your response determines your loss exposure, operational impact, and reputational damage.
Effective incident response must be:
Fast (contain damage quickly)
Documented (for internal audit and external partners)
Cross-functional (finance, support, legal, engineering)
Recoverable (able to refund, freeze, reverse if needed)
Example Scenarios That Require Incident Response
| Scenario | Why It Matters |
|---|---|
| Card receives large refund with no matching spend | Float may be credited improperly |
| Support reports multiple users complaining of unauthorized spend | Could indicate a compromise or system-wide issue |
| Rapid spike in top-ups and refunds across different users | May be a coordinated laundering attempt |
| Merchant reports chargebacks from known user base | Requires backtrace, merchant support, and logs |
| Internal detection flags a user for 5+ card terminations | Suggests behavioral fraud needing containment |
Standard Investigation Playbook
Every virtual card fraud response should include the following trace:
Identify the Card and User Fetch the cardId, cardUserId, or reference used in the support ticket or fraud alert.
Retrieve the Timeline Use the trip object or your internal logs to determine:
When the card was created
When it was topped up
When the spend happened
If and when a refund or reversal was received
Whether the card was terminated/frozen before or after
Confirm Webhook and API Behavior
Pull webhook logs by reference ID
Confirm webhook delivery for transaction.debit, refund, or chargeback
Look for duplicated webhook IDs (common with retries or abuse)
Analyze Float Exposure
Was float deducted but not matched to valid spend?
Did a terminated card result in refund to float or wallet?
Is the system compensating fraudulently credited funds?
Review Device and IP History
Was the card issued from a known fingerprint?
Is the user related to flagged accounts (same IP/device)?
Containment Action
Freeze all active cards on the user profile
Block user from creating new cards
Disable withdrawals until internal review is completed
Log incident in audit system with timestamp and handler signature
Incident Response Matrix
| Fraud Type | Action | SLA |
|---|---|---|
| Suspicious refund to terminated card | Freeze account, investigate refund path | 1 hour |
| Multiple failed spends on new card | Freeze card, alert fraud analyst | 30 min |
| Chargeback from partner merchant | Pull logs, generate incident report | 24 hours |
| API key leak detected | Revoke, rotate, alert engineering | Immediate |
| User impersonation reported to support | Lock account, request KYC re-verification | 2 hours |
Internal Report Template
Each fraud incident should have a post-mortem record including:
Template: Fraud Incident Summary
Incident ID: FRC-2024-0021
Date/Time Detected: [timestamp]
Reporter: [name or system flag]
User ID(s):
Card(s) Involved:
Webhook Reference(s):
Float Exposure:
Fraud Type: [e.g., refund abuse, ATO, merchant collusion]
Timeline: (chronological summary of events)
Containment Actions:
Final Resolution:
Lessons Learned / Process Improvements:
Audit Log Link:
Escalation Protocol
| Condition | Escalate To | Channel |
|---|---|---|
| Float exposure > $1000 from refund or reversal | Treasury Lead | Slack / PagerDuty |
| Missing webhook after confirmed refund | API Infra / Engineering | Internal ticket |
| User behavior matches existing flagged pattern | Risk Ops | Graph investigation |
| Merchant suspected of collusion | Compliance / Legal | Email, submit SAR if required |
Aftermath & Monitoring
Add user and card to blocklist/fraud database
Re-test webhook and refund matching engine for similar flaws
Review logs for other cards with similar behavior
Create internal incident review summary and circulate
Update ruleset (velocity, refund validation, merchant limits)
Module 3 Knowledge Check
1. What is the first step in fraud incident investigation? A. Alert the legal team
B. Freeze all user cards
C. Pull user and card ID
D. Contact the merchant
Correct Answer: C
2. Why is the webhook log critical to fraud investigations? A. It shows if the merchant is fraudulent
B. It determines the current card balance
C. It confirms transaction timeline and integrity
D. It reveals KYC documents
Correct Answer: C
3. What is the correct action when you detect a refund to a terminated card?
A. Refund the card again
B. Create a new card for the user
C. Credit user wallet and freeze their account
D. Escalate to engineering
Correct Answer: C
