Don’t let fraud credit the criminals

(02/04/2002)

As plastic card usage and the number of cards issued continues to rise in the United Kingdom, so does the occurrence of credit card fraud. Here Brian Wilson, Managing Director of Endusis® looks at the scale of this security issue.

Since 1966, when credit cards were first issued in the United Kingdom, card usage has grown every year, and in the past five years the number of cards in issue has grown by 32 per cent. According to figures published recently by the Association for Payment Clearing Services (APACS) there are more than 42 million cardholders in Britain and almost 127 million plastic cards, including credit, charge, debit, cash (ATM only) and cheque guarantee cards.

Unfortunately the unwanted by-product of this huge growth in popularity and usage is fraud. As card usage and the number of cards issued continue to surge in the UK, the cost of card fraud maintains its path of steady growth. In 2001, card fraud cost the UK a staggering £373 million.

These are shocking statistics, and perhaps even more unnerving is the fact that organised crime is largely to blame in the United Kingdom for the surge in card fraud. Such criminals often use sophisticated methods of card crime as a low risk way of raising revenue to fund more violent crime such as drug trafficking, kidnapping, smuggling and terrorism at a later date.

Criminals use many different types of credit card fraud including: Card Not Present fraud (card fraud over the phone, mail order or internet), Non-receipt of mailed cards, Application Fraud, Automatic Teller Machine (ATM) fraud, and Lost and Stolen cards and Counterfeit card fraud. This latter type accounted for some 40 per cent of total card fraud losses.

Most fraud using lost or stolen cards taken from unattended bags or jackets, takes place well before the owner has reported the loss, often in the very same building within which it was lost or stolen! According to APACS the figure for this type of fraud between December 2000 and November 2001 is almost as much as that of counterfeit cards, at just over £2.5 million.

A counterfeit card is a credit or debit card which has been printed, embossed or encoded without permission from the issuer, then altered or recoded. In most cases, this involves ‘skimming’ the genuine data from the magnetic stripe on one card using a small hand held card reader. The data is then electronically copied to another card all without the cardholder’s knowledge. This ‘skimming’ occurs much more within retail outlets such as pubs and restaurants when a customer’s card is taken away from them or is out of sight under a counter. Sadly, criminals frequently bribe or threaten staff to skim customer cards for them or a corrupt employee will copy a customer’s card and sell the data on higher up the criminal ladder.

Average losses from all types of credit card fraud contribute to make up the average loss of approximately £588,000 per month . Clearly something must be done to stop the incessant rise of this type of criminal activity.

Credit checks
Retail staff vigilance will of course go a long way to aid security and start reducing this rise in card fraud. Simple checks by staff, for example ensuring the embossed number and signature on the card and receipt match, are a good way of reducing the occurrence of fraud.

In addition, when a suspected card fraud takes place, remembering a description of the person involved is incredibly useful to the police. Intelligent surveillance systems are ideal to ensure that the true facts of the event and correct description of the customer or member of staff can be established. Systems which can record events at the till or elsewhere in or around the premises can be invaluable for identifying the perpetrators, whether they are employees or customers, especially if the key witness is unsure whether to come forward because he or she has been threatened.

Furthermore, if the fraud is suspected to be taking place on the premises, and indeed if the staff are suspected to be corrupt, a form of surveillance which is linked to a server off site is an excellent preventative measure as well as ensuring the evidence cannot be tampered with.

In addition to security measures such as CCTV or Intelligent Surveillance Systems, initiatives such as reward schemes for those staff who report counterfeiting or training staff to recognise fraudulent cards using programmes such as ‘Spot and Stop Card Fraud’ , can also offer real solutions to the rising trend in card fraud.

Top Chips!
Technology is also being developed to help in the fight against card fraud. By 2004 all cards will be made with microchips which contain the same information as that currently carried on the magnetic strip. The embedded chip offers virtually impregnable security and makes ‘skimming’ or counterfeiting almost impossible to commit.

This in turn will make a positive security impact on card fraud in those retail (and other) outlets most at risk.

In addition, the suggested introduction of a PIN number for all types of cards at the Point of Sale would provide extra security to chip cards drastically reducing any type of fraud. However this presents a massive project for the banking industry, card schemes and retailers and would necessitate a change in a behavior at some 735,000 retail terminals within the UK.

Until these measures are fully integrated, losses from card fraud in all industry sectors will continue to grow as we rely on cards more and more and their uses become more widespread. It is therefore vital that fraud prevention methods such as surveillance and microchips are continually developed and reviewed as criminals try to evade them.

Note from editor: Endusis Limited can be contacted on 01900 829740, or fax 01900 829733.

Related topics:  Security industry 

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