Introduction:
In the present world, though Debit/Credit Card is a new phenomenon in business and transaction arena but has already won the hearts of millions across the globe and set its footprint in this part of the world with its magical power and becoming a way of life here by offering its handy feature and usefulness. The global technological advancement has immense influence to ease the lifestyle of human being. Credit Cards are vital components of electronic fund transfer and may be deemed as ‘Plastic Money’ which provides smarter and secured way of life. Apart from carrying hard cash, people are now a day very much used to bear cards that give them comfort and also giving the flexibility in their daily transactions in Shopping Mall, Hospital, and Clinic etc. In the advent of Information Technology and globalization, now shoppers need not worry about money, all they need is willingness and a credit card to buy anything they want at any places A debit or credit Card is a piece of plastic used for purchasing goods & services and for obtaining cash disbursements and especially for credit card on credit terms. These cards has smoothen our life for payment system but with the growing technology it has been going through hard problem called debit credit forgery. Debit and Credit Card Forgery is one of the biggest threats to business establishments today.
However, In Bangladesh the scenarios are at an increasing trend to fraud effectively, it is important to first understand the mechanisms of executing a fraud. Credit card fraudsters employ a large number of modus operandi to commit fraud. So for this kind of digitalized theft directly or indirectly bank employees and IT specialist, either from bank or other, are involved in the debit-credit forgery.
Many cardholders lost their money, because of hidden cameras and other devices. Forgers set up cameras above ATM machines to record the clients typing in their passwords and a Near Field Communication (NFC) device on the booths’ doors to copy the cardholders’ information as they swiped their cards. They then put the information into new cards with magnetic blank strips, using devices that can read and write cards.
The fraudsters used to enter ATM booths of different banks with fake ID cards introducing themselves as IT experts and maintenance engineers of the banks. In the name of security upgrade, they told the clients to swipe their cards in the NFC (a wireless connectivity technology) devices, mounted on the doors. When the cardholders did so, the fraudsters got their hands on all the information they needed. Using duplicate cards, they withdrew money from ATM booths or purchased products from different shopping malls and later sold them at a discount.
In simple terms, Debit/Credit Card forgery is defined as: “When an individual uses another individuals’ credit card for personal reasons while the owner of the card and the card issuer are not aware of the fact that the card is being used. Further, the individual using the card has no connection with the cardholder or issuer, and has no intention of either contacting the owner of the card or making repayments for the purchases made”.
Credit card frauds are committed in the following ways:
- An act of criminal deception (mislead with intent) by use of unauthorized account and/or personal information
- Illegal or unauthorized use of account for personal gain Misrepresentation of account information to obtain goods and/or services.
Techniques of forgery:
There are many ways in which fraudsters execute a debit/credit card forgery. As technology changes, so do the technology of fraudsters, and thus the way in which they go about carrying out fraudulent activities. Frauds can be broadly classified into three categories, i.e., traditional card related frauds, merchant related frauds and internet frauds. The different types of methods for committing credit card frauds are described below:
Card Related Frauds:
APPLICATION FRAUD
This type of fraud occurs when a person falsifies an application to acquire a credit card.
Application fraud can be committed in three ways:
Assumed identity, where an individual illegally obtains personal information of another individual and opens accounts in his or her name, using partially legitimate Information.
Financial fraud, where an individual provides false information about his or her financial status to acquire credit.
Not-received items (NRIs) also called postal intercepts occur when a card is stolen from the postal service before it reaches its owner’s destination.
LOST/ STOLEN CARDS
A card is lost or stolen when a legitimate account holder receives a card and loses it or someone steals the card for criminal purposes. This type of fraud is in essence the easiest way for a fraudster to get hold of other individual's credit cards without investment in technology. It is also perhaps the hardest form of traditional credit card fraud to tackle.
Here is an article from The Daily Sun about how the fraudster used stolen cards for shopping:
Credit Card Fraud Gang Held in City: http://www.daily-sun.com/details_yes_10-04-2013_Credit-card-fraud-gang-held-in-city_464_1_62_1_3.html
Rapid Action Battalion (RAB) Tuesday arrested three persons from Uttara in the capital on charge of burglary and fraudulent use of credit cards. The arrestees were identified as Siddika Urmi, 20, Uzzal Hossain, 29 and Jobaida Sultana, 32. RAB sources said the gang has been lifting credit cards from others through forgery and then used the stolen cards for buying high value products. They used to sell the products in cash later on. RAB members also seized a wide range of expensive items bought from different shops using the stolen cards. The arrestees were taken to the RAB-1 he-adquarters in Uttara, where a press briefing was held in the afternoon. During the media briefing, Kismat Hayder, director of RAB-1, said they earlier received several complaints alleging that a gang was involved in taking other people’s credit cards through forgery and using those at various shops in the city.
“We were informed that a woman was purchasing products from Tokiyo shopping mall at Uttara using a stolen card. We conducted a drive immediately at the mall and arrested Urmi” he added.
Based on information extracted from Urmi, the elite force members later arrested Uzzal and Jobaida.
The RAB officials also informed that the gang has been running forgery activities in guise of gentlemen.
ACCOUNT TAKEOVER
This type of fraud occurs when a fraudster illegally obtains a valid customers’ personal information. The fraudster takes control of (takeover) a legitimate account by either providing the customers account number or the card number. The fraudster then contacts the card issuer, masquerading as the genuine cardholder, to ask that mail be redirected to a new address. The fraudster reports card lost and asks for a replacement to be sent.
FAKE AND COUNTERFEIT CARDS
The creation of counterfeit cards, together with lost / stolen cards poses highest threat in credit card frauds. Fraudsters are constantly finding new and more innovative ways to create counterfeit cards. Some of the techniques used for creating false and counterfeit cards are listed below:
1. Erasing the magnetic strip: A fraudster can tamper an existing card that has been acquired illegally by erasing the metallic strip with a powerful electro-magnet. The fraudster then tampers with the details on the card so that they match the details of a valid card, which they may have attained, e.g., from a stolen till roll. When the fraudster begins to use the card, the cashier will swipe the card through the terminal several times, before realizing that the metallic strip does not work. The cashier will then proceed to manually input the card details into the terminal. This form of fraud has high risk because the cashier will be looking at the card closely to read the numbers. Doctored cards are, as with many of the traditional methods of credit card fraud, becoming an outdated method of illicit accumulation of either funds or goods.
2. Creating a fake card: A fraudster can create a fake card from scratch using sophisticated machines. This is the most common type of fraud though fake cards require a lot of effort and skill to produce. Modern cards have many security features all designed to make it difficult for fraudsters to make good quality forgeries. Holograms have been introduced in almost all credit cards and are very difficult to Understanding Credit Card Frauds forge effectively. Embossing holograms onto the card itself is another problem for card forgers.
Here is an article about innovative fraudulent activities taken from The Daily Star:
http://www.thedailystar.net/beta2/news/ingenious-fraud/
Ingenious fraud
Several gangs involved in credit card fraud in Dhaka and Chittagong have cheated many cardholders out of their money, using hidden cameras and other devices. They set up cameras above ATM machines to record the clients typing in their passwords and a Near Field Communication (NFC) device on the booths’ doors to copy the cardholders’ information as they swiped their cards. They then put the information into new cards with magnetic blank strips, using devices that can read and write cards. The Detective Branch of police on Saturday busted two such fraudsters belonging to two gangs in the capital. Of the two, Mosharraf Hossain, who studied information technology in England, was arrested in Mirpur area, and Mohana Thas, a Sri Lankan-born British national and IT specialist, was arrested near Shahjalal International Airport.
The arrestees told police that they used to enter ATM booths of different banks with fake ID cards introducing themselves as IT experts and maintenance engineers of the banks. In the name of security upgrade, they told the clients to swipe their cards in the NFC (a wireless connectivity technology) devices, mounted on the doors. When the cardholders did so, the fraudsters got their hands on all the information they needed. Using duplicate cards, they withdrew money from ATM booths or purchased products from different shopping malls and later sold them at a discount, said DB Joint Commissioner Monirul Islam at a press briefing at the media centre of the Dhaka Metropolitan Police. Mosharraf learnt the trick from Bulgarian national Rosen Ili when he was in Denmark. Mohana Came to Bangladesh in March and he is an accused in a credit card fraud case filed with
Panchlaish Police Station in Chittagong city on Friday. In a six-hour drive that started at 3:00pm on Saturday, the law enforcers seized a card reader and writer, an NFC device, a high-powered camera, a laptop, nine blank cards, a few duplicate credit cards, foreign currencies, fake ID cards of a private bank and some forged documents.
3. Altering card details: A fraudster can alter cards by either re-embossing them — by applying heat and pressure to the information originally embossed on the card by a legitimate card manufacturer or by re-encoding them using computer software that encodes the magnetic stripe data on the card.
4. Skimming: Most cases of counterfeit fraud involve skimming, a process where genuine data on a card’s magnetic stripe is electronically copied onto another. Skimming is fast emerging as the most popular form of credit card fraud. Employees/cashiers of business establishments have been found to carry pocket skimming devices, a battery-operated electronic magnetic stripe reader, with which they swipe customer's cards to get hold of customer’s card details. The fraudster does this whilst the customer is waiting for the transaction to be validated through the card terminal. Skimming takes place unknown to the cardholder and is thus very difficult, if not impossible to trace. In other cases, the details obtained by skimming are used to carry out fraudulent card-not-present transactions by fraudsters. Often, the cardholder is unaware of the fraud until a statement arrive showing purchases they did not make.
An article from The Daily Star about Skimming in Dhaka City is given below:
ATM Forgery Unearthed: http://www.thedailystar.net/beta2/news/atm-forgery-unearthed/
ATM card users are a new target of fraudsters as the use of plastic money is on the rise. The Detective Branch of Police on Tuesday night busted a gang of four fraudsters for stealing around Tk 2 crore from automated teller machines (ATM) of different banks in Dhaka in the last two years. Of them, two are IT experts at Mutual Trust Bank, one is from Advanced Data Network, and the other, who is suspected to be the gang leader, is a former employee of Aamra Technologies. Sharful Islam, chief operating officer of Aamra Technologies, said three of the culprits were once colleagues at the IT Company where they had learnt how card fraud takes place. In June 2012, a credit card scam involving over Tk 10 crore was detected at the United Commercial Bank (UCB). The bank identified four of its top and mid-ranking officials, who withdrew the amount from the UCB using 21 credit cards between 2007 and 2012. DB police last month arrested two persons for their involvement in credit card fraud in Dhaka. One of them is an IT expert, who was educated in England.
In almost all cases of debit and credit card fraud, it was found that bank employees were involved in those, either directly or indirectly, and they provided the fraudsters with information about clients. However, many such cases have gone unreported, as Bangladesh Bank, the regulator of the country’s banking industry, has no mechanism to get information on this type of fraudulence. And it is yet to issue any security guidelines in this regard. “We do not receive any such complaint from an aggrieved person or a bank,” said Mahfuzur Rahman, executive director and spokesperson of the central bank. “Police will take action once this type of fraud is detected,” he said. Bangladesh is a cash-based economy, and the use of plastic cards is a new phenomenon. Recently, there is a rise in the use of plastic money, so are cases of card fraud. According to the banking industry, around 10 lakh credit cards worth $120 billion are active in the economy.
DB police said several gangs are involved in ATM card fraud in the capital, and they swindled many cardholders, using hidden cameras and other devices. They sometimes enter ATM booths of different banks with fake ID cards, and introduce themselves as IT experts of the banks. They install a camera above the ATM machine to record the image of a cardholder typing the password, and fix a small device to the ATM card reader to copy the cardholder’s information. The fraudsters then put the information in a new card with magnetic blank strips, using devices that can write and read cards. With the help of unscrupulous IT experts at different banks, they also steal customers’ information from computers at ATM booths, using pen drives. They then withdraw money from the booths or buy products from shopping malls using the cards and passwords.
“Fraudulence can take place even at the stage of issuing and acquiring cards [during purchase],” said Masrur Arefin, deputy managing director of the City Bank, the second largest credit card provider in Bangladesh after the Standard Chartered Bank. Such cases of fraud happen when cards are given on fake information. In some cases, sellers of goods and services accept cards despite knowing that the buyer is not the real cardholder, he said. “There is no alternative but to make shop owners aware of it to prevent card fraud at the acquiring level,” said Masrur. He said his bank received complaints of credit card fraud involving around Tk 6 lakh in 2012.
Bitopi Das Chowdhury, head of corporate affairs at the Standard Chartered Bank, said they haven’t received complaints of any large-scale fraud involving bank cards. She said the bank has a monitoring system to avert card fraud. “Even if there is any such case of fraud, victims can contact our call centre any time to deactivate the card,” she added. Anis A Khan, managing director of Mutual Trust Bank, said the recent card fraud involving its two employees would not affect any of its cardholders, as none of the clients was swindled by the gang. Referring to the arrests of the bank’s two staff on Tuesday night, he said the two IT experts had already been suspended.
5. White plastic: A white plastic is a card-size piece of plastic of any color that a fraudster creates and encodes with legitimate magnetic stripe data for illegal transactions. This card looks like a hotel room key but contains legitimate magnetic stripe data that fraudsters can use at POS terminals that do not require card validation or verification (for example, petrol pumps and ATMs).
Merchant Related Frauds
Merchant related frauds are initiated either by owners of the merchant establishment or their employees. The types of frauds initiated by merchants are described below
:
MERCHANT COLLUSION
This type of fraud occurs when merchant owners and/or their employees conspire to commit fraud using their customers’ (cardholder) accounts and/or personal information. Merchant owners and/or their employees pass on the information about cardholders to fraudsters.
TRIANGULATION
The fraudster in this type of fraud operates from a web site. Goods are offered at heavily discounted rates and are also shipped before payment. The fraudulent site appears to be a legitimate auction or a traditional sales site. The customer while placing orders online provides information such as name, address and valid credit card details to the site. Once fraudsters receive these details, they order goods from a legitimate site using stolen credit card details. The fraudster then goes on to purchase other goods using the credit card numbers of the customer. This process is designed to cause a great deal of initial confusion, and the fraudulent internet company in this manner can operate long enough to accumulate vast amount of goods purchased with stolen credit card numbers.
FRAUD PREVENTION:
With all the negative impacts of fraudulent credit card activities – financial and product losses, fines, loss of reputation, etc, and technological advancements in perpetrating fraud – it's easy for merchants to feel victimized and helpless. However, technological advancements in preventing fraud have started showing some promise to combat fraud. Merchants and Acquirers & Issuers are creating innovative solutions to bring down on fraudulent transactions and lower merchant charge-back rates. The Bangladesh Bank is also going to make mandatory for the scheduled banks to introduce electronic chip-based credit and debit cards by replacing the existing magnetic stripe technology-based ones to tackle fraudulent acts.
One of the main challenges with fraud prevention is the long time lag between the time a fraudulent transaction occurs and the time when it gets detected, i.e., the cardholder initiates a charge-back. Analysis shows that the average lag between the transaction date and the charge-back notification could be as high as 72 days. This means that, if no fraud prevention is in place, one or more fraudsters could easily generate significant damage to a business before the affected stakeholders even realize the problem.
Fraud Prevention Technologies
While fraudsters are using sophisticated methods to gain access to credit card information and perpetrate fraud, new technologies are available to help merchants to detect and prevent fraudulent transactions. Fraud detection technologies enable merchants and banks to perform highly automated and sophisticated screenings of incoming transactions and flagging suspicious transactions.
CONCLUSION:
As card business transactions increase, so too do frauds. Clearly, global networking presents as many new opportunities for criminals as it does for businesses. While offering numerous advantages and opening up new channels for transaction business, the internet has also brought in increased probability of fraud in credit card transactions.
The good news is that technology for preventing credit card frauds is also improving many folds with passage of time. Reducing cost of computing is helping in introducing complex systems, which can analyze a fraudulent transaction in a matter of fraction of a second.
It is equally important to identify the right segment of transactions, which should be subject to review, as every transaction does not have the same amount of risk associated with it. Finding the optimally balanced ‘total cost of fraud’ and other measures outlined in this article can assist acquiring and issuing banks in combating frauds more efficiently.
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