Cannabis businesses thrive in a booming market, but they’re also a magnet for fraudsters. Chargebacks drain profits, predatory payment processors freeze funds, and supplier scams risk legal nightmares.
With traditional banks sidelining the industry and the FDA cracking down on non-compliant CBD products, many cannabis companies unknowingly partner with unreliable providers, amplifying their risks.
The good news here is that fraud doesn’t have to be the cost of doing business. In this guide, we’ll expose the most common cannabis scams and how FastoSafe’s cannabis fraud protection tools shield your revenue, secure transactions, and ensure long-term growth.
The Top 3 Frauds Crippling Cannabis Businesses
Stolen Credit Cards & Chargeback Fraud
Selling cannabis products comes with serious risks, and not just from professional fraudsters. One growing problem is minors using stolen or borrowed card data to make purchases, particularly for THC products.
In many cases, the chargeback doesn’t come from a career criminal, it comes from a parent who discovers a charge they didn’t authorize. When they dispute it, the dispensary loses not only the product and the sale, but also takes a hit to their chargeback ratio.
Friendly Fraud (a.k.a. First-Party Fraud)
A customer makes a legitimate purchase, receives the product, then disputes the charge with their bank, claiming the transaction was unauthorized or the item never arrived.
In the cannabis space, minors often use a parent’s card to buy CBD or vape products, leading to chargebacks when the cardholder finds out.
Consequences:
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Loss of revenue and product, even though the sale was real
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Elevated chargeback ratios (over 1%) can trigger account penalties or blacklisting
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Merchant may be added to the MATCH list, making it difficult to get approved for payment processing in the future
Fake & Synthetic Identities
In cannabis e-commerce, fake or synthetic identity fraud typically involves bad actors using either fully fabricated customer profiles or a blend of real and fake credentials.
These identities can pass basic onboarding checks to make high-risk purchases—often involving age-restricted products like THC vapes or edibles.
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Fake identity: A made-up name, photo, address, and birthdate.
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Synthetic identity: A mix of real data (e.g., a real SSN or DOB) with fake name or contact details. Harder to detect.
In many cases, these identities are used to:
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Bypass age restrictions
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Evade state-level regulations (e.g. shipping THC to restricted zones)
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Abuse referral programs
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Make high-dollar purchases with stolen or prepaid cards
Refund Fraud
Refund fraud is a subtype of friendly fraud. It’s more calculated. The customer receives the product but lies about delivery issues or damage to get their money back without returning the item.
Sometimes this is done repeatedly, using slightly different addresses, identities, or return excuses.
Supplier & Vendor Fraud
Vendor fraud happens when businesses are deceived by suppliers who misrepresent their identity, licenses, or the quality and safety of their products.
This can include selling counterfeit or contaminated goods, inflating lab results, or posing as legitimate vendors to intercept payments. Because cannabis markets are fragmented and often lack centralized verification tools, it’s easier for bad actors to slip through.
The consequences are serious: fines, product recalls, license suspension, or even lawsuits if consumers are harmed. And since retailers are ultimately responsible for what they sell, claiming ignorance won’t protect you.
To reduce the risk, cannabis merchants should rigorously verify vendor licenses, test products through trusted labs, and avoid too-good-to-be-true deals.
How FastoSafe Protects Your Cannabis Business from Fraud
FastoSafe screens every transaction in real time, analyzing device data, location history, and buying behavior to catch fraud before it happens. Suspicious orders are stopped before they ever reach checkout.
With 3D Secure built in, liability shifts to the card issuer, reducing your risk and blocking unauthorized transactions without interrupting legitimate customers.
Our early dispute alerts give you a head start. Instead of finding out after the chargeback hits, you’ll be notified the moment a customer initiates a claim. That extra time lets you issue refunds, resolve concerns, or gather evidence to fight back.
FastoSafe’s AI learns how fraud looks in your business. It flags rapid-fire orders, duplicate transactions, and high-ticket anomalies, stopping chargeback schemes before they drain your revenue.
We also help you stay compliant. Built-in age and identity checks verify each buyer and ensure you’re not shipping restricted products into the wrong hands. As CBD and THC regulations shift, FastoSafe keeps you in step.
And whether you run your store on Shopify, WooCommerce, BigCommerce, or a custom-built site, Fasto integrates seamlessly. Our system works with major high-risk payment processors and supports credit cards, ACH, and crypto.
