Management Functions and Organizational Behavior of the City Bank Limited, Bangladesh

1.1.      An Overview of the City Bank Ltd.

City Bank is one of the oldest private Commercial Banks operating in Bangladesh. It is a top bank among the oldest five Commercial Banks in the country which started their operations in 1983. The Bank started its journey on 27th March 1983 through opening its first branch at B. B. Avenue Branch in the capital, Dhaka city. It was the visionary entrepreneurship of around 13 local businessmen who braved the immense uncertainties and risks with courage and zeal that made the establishment & forward march of the bank possible. Those sponsor directors commenced the journey with only Taka 3.4 crore worth of Capital, which now is a respectable Taka 330.77 crore as capital & reserve. 

City Bank is among the very few local banks which do not follow the traditional, decentralized, geographically managed, branch based business or profit model. Instead the bank manages its business and operation vertically from the head office through 4 distinct business divisions namely 

• Corporate & Investment Banking; 

• Retail Banking (including Cards); 

• SME Banking; & 

• Treasury & Market Risks. 

Under a real-time online banking platform, these 4 business divisions are supported at the back by a robust service delivery or operations setup and also a smart IT Backbone. Such centralized business segment based business & operating model ensure specialized treatment and services to the bank's different customer segments. 

The bank currently has 90 online branches and 1 SME service centers and 11 SME/Agri branch spread across the length & breadth of the country that include a fully fledged Islamic Banking branch. Besides these traditional delivery points, the bank is also very active in the alternative delivery area. It currently has 140 ATMs of its own; and ATM sharing arrangement with a partner bank that has more than 550 ATMs in place; SMS Banking; Interest Banking and so on. It already started its Customer Call Center operation. The bank has a plan to end the current year with 200 own ATMs.

City Bank is the first bank in Bangladesh to have issued Dual Currency Credit Card. The bank is a principal member of VISA international and it issues both Local Currency (Taka) & Foreign Currency (US Dollar) card limits in a single plastic. VISA Debit Card is another popular product which the bank is pushing hard in order to ease out the queues at the branch created by its astounding base of some 400,000 retail customers. The launch of VISA Prepaid Card for the travel sector is currently underway. 

City Bank has launched American Express Credit Card and American Express Gold Credit card in November 2009. City Bank is the local caretaker of the brand and is responsible for all operations supporting the issuing of the new credit cards, including billing and accounting, customer service, credit management and charge authorizations, as well as marketing the cards in Bangladesh. Both cards are international cards and accepted by the millions of merchants operating on the American Express global merchant network in over 200 countries and territories including Bangladesh. City Bank also introduced exclusive privileges for the card members under the American Express Selects program in Bangladesh. This will entitled any American Express card members to enjoy fantastic savings on retail and dining at some of the finest establishment in Bangladesh. It also provides incredible privileges all over the globe with more than 13,000 offers at over 10,000 merchants in 75 countries. 

City Bank prides itself in offering a very personalized and friendly customer service. It has in place a customized service excellence model called CRP that focuses on ensuring happy customers through setting benchmarks for the bank's employees' attitude, behavior, readiness level, accuracy and timelines of service quality. 

City Bank is one of the largest corporate banks in the country with a current business model that heavily encourages and supports the growth of the bank in Retail and SME Banking. The bank is very much on its way to opening many independent SME centers across the country within a short time. The bank is also very active in the workers' foreign remittance business. It has strong tie-ups with major exchange companies in the Middle East, Europe, Far East & USA, from where thousands of individual remittances come to the country every month for disbursements through the bank's large network of 99 online branches and SME service centers. 

The current senior management leaders of the bank consist of mostly people from the multinational banks with superior management skills and knowledge in their respective "specialized" areas. The newly launched logo and the pay-off line of the bank are just one initial step towards reaching that point. 

 2.   Management Functions

2.1 Planning

2.1.1 Vision:

The vision of city bank limited is:

“The Financial Supermarket with a Winning Culture Offering Enjoyable Experiences”

  

2.1.2 Mission:

The Mission statements are:

• Offer wide array of products and services that differentiate and excite all customer segments
• Be the “Employer of choice” by offering an environment where people excel and leaders are created
• Continuously challenge processes and platforms to enhance effectiveness and efficiency
• Promote innovation and automation with a view to guaranteeing and enhancing excellence in service
• Ensure respect for community, good governance and compliance in everything we do.

2.1.3 Objectives (financial and strategic):

Here are some basic objectives of the city bank ltd.:

·      Ensure customer delight

·      Ensuring transparency

·      Ensuring effective and efficient banking

·      Consume as less time as possible in satisfying customers

·      Provide new services to customers with superior information technology platform

·      Improve human resource quality.

·      Ensure effective risk management.

·      Achieve shareholder’s confidence

                             

2.2 The Organizational Chart:

The organizational chart of the city bank ltd is as below. 

                         

2.3 Leadership Style:

The city bank limited uses a mixed style of leader ship.  But basically, as we came to identify, the leadership style is a mixture of Relationship Oriented Leadership, Transformational Leadership and Situational Leadership. In some departments of the bank, Task Oriented and Transactional Leadership does exists.

A short explanation of the leadership styles:

Relationship Oriented Leadership: A participative style, it tends to lead to good teamwork and creative collaboration. This type of leadership was identified in the Information and technology department of the bank.

Transformational Leadership: this type of leaders generally gives a brief explanation about the future of the group. They inspire to share views and values and are very much effective communicator. This type was observed in the marketing department of the bank.

Situational leadership: leadership style depending on situation that is given. This type sustains in the higher level management of the organization. 

Task oriented leadership: more like Autocracy where subordinates are bound to carry orders. This is a very effective type in the Financial Planning and Human Resource department.

Transactional leadership: is this system, subordinates are paid for performing a specific task. This type exists in the research and development department, where the research teams are paid smart incentives for finding out positions for opening new branches.

                                       

2.4 Controlling:

The board of directors provides governance, guidance and oversight to senior Management. It is responsible for approving and reviewing the overall business strategies and significant policies of the organization as well as the organizational structure. The board of directors has the ultimate responsibility for ensuring that an adequate and effective system of internal controls is established and maintained. Board members are objective capable and inquisitive with a knowledge or expertise of the activities of and risks run by the bank. This board is strong, active board, particularly coupled with effective upward communication channels and capable financial, legal, and internal audit functions. They provide an important mechanism to ensure the correction of problems that may diminish the effectiveness of the internal control system.

Generally, the senior management who are the subordinates of the board members divides the task of different business unit according to the goal that has been decided for them. And from a higher position of the organizational chart, the keep eye on the performance and supervise where needed.

In the root level the picture is totally different from other banks. Rather than designating all the employees under branch manager and assistant branch manager, there are different groups for carrying out different tasks. For example, in every branch there is an operational department, whose task is to supervise the new account openings and helping clients with the Loan transactions. Basically in these groups all employees are of same designation and under one operational manager.

At the end of the day, these group managers report to the Branch manager. So, it is clearly seen that, in The City Bank Limited, the responsibilities of branch managers are not that much heavy like other banks. What they do is, supervise if all policies of Bangladesh Bank and the Company itself are being followed or not and if any group leaders need any guidance they provide them. So, it is understood that their duties are divided amongst his sub ordinates.

                             

3. Organizational Behavior:-

1. Employee motivational tools used within the organization:

Employee motivation process in City Bank has some specialty for attaining their organizational goal. The bank uses different types of motivational tools as well as internal and external motivation.

Tools for motivating employees fall into two basic categories. The first is external or extrinsic. These tools deal with physical or monetary rewards, such as bonuses or child care. The second category is internal or intrinsic. These rewards meet a psychological or personality need of employees, such as feelings of validation or pride in a job well done.

Tool type:-

1. Internal or intrinsic motivation:

Empowerment: Empowerment is an intrinsic motivator. City Bank does empower employees by giving them individual responsibilities and the authority to make at least basic decisions. They also motivate employees by encouraging them to be as creative and innovative as possible.

Self-Improvement: City Bank self-improvement programs allow employees to receive the training or classes they need to be better at their jobs. This motivates employees in two ways. First, it shows employees the company believes they are capable of achieving with additional skills or information.

Recognition/Attention: When employees accomplish something they have achieved something recognition is appreciation for that achievement. City Bank promotes their best employee of the year to give such recognition.

Applause: City Bank physically applauds people by giving them a round of applause for specific achievements.

One-on-One Coaching: Coaching is employee development only cost is time. Time means care. City bank has training facility. Training schedule "tune- up" training sessions will continually enhance the performance of people and the productivity of business.

Career Path. Employees need to know what is potentially ahead for them, what opportunities there are for growth. This issue is a sometimes forgotten ingredient as to the importance it plays in the overall motivation of people. City bank sets career paths within organization for helping employee.

Job Titles: City Bank talks about job titles and tapping the self-esteem of people. Someone feels about the way they are perceived in the workforce is a critical component to overall attitude and morale.

On-the-Spot Praise: This too is associated with recognition but the key here is timing. When there is a reason for praising someone for any reason! Promptness equals effectiveness.

Leadership Roles: City Bank gives people leadership roles to reward their performance and also to help to identify future promotable people. Most people are stimulated by leadership roles even in spot appearances. For example, when visitors come to workplace use this opportunity to allow an employee to take the role of visitors guide.

Team Spirit: Here people like to physically see themselves as part of a group or team.

Executive Recognition: This is the secret weapon. And like any secret weapon, timing is most critical. If this is used too often the value is diminished. And if it is used only for special occasions and rare achievements the value is escalated.

Social Gatherings: Scheduled offsite events enhance bonding which in turn helps team spirit, which ultimately impacts City Bank positive work environment.

Time Off: Implement contests that earn time off. People will compete for 15 minutes or 1/2 hour off just as hard as they will for a cash award.

Outside Seminars: Outside seminars are a stimulating break. City Bank does outside seminars for most people; consider on-site seminars or workshops for the staff.

Additional Responsibility: There are definitely employees in organization who are begging for and can handle additional responsibility.

Theme Contests: Over the years contests have produced up to 170% increase in performance. But equally as important, contests helped maintain positive environments that have reduced employee turnover by 400%.

Stress Management: City Bank provides articles and books on this subject. They make sure they know it is available and encourage them to use it.

2. External or extrinsic motivation:

Life Enhancement: Some employees underperform or resist company change or instructions because of things happening in their lives. So City Bank arranges motivational program to enhance employee life by giving bonuses, ceremonial/celebration incentives etc.

Good Work Environment: City Bank provides excellently decorated office spaces. This for sure gives a positive vibe in the minds of the employees.

2. Organizational Structure:

City Bank is among the very few local banks which do not follow the traditional, decentralized, geographically managed, branch based business or profit model. Instead the bank manages its business and operation vertically from the head office through 4 distinct business divisions namely

I.           Corporate & Investment Banking;

II.         Retail Banking (including Cards);

III.        SME Banking; &

IV.        Treasury & Market Risks.

Under a real-time online banking platform, these 4 business divisions are supported at the back by a robust service delivery or operations setup and also a smart IT Backbone. Such centralized business segment based business & operating model ensure specialized treatment and services to the bank's different customer segments.

The bank currently has 90 online branches and 1 SME service centers and 11 SME/Agri branch spread across the length & breadth of the country that include a fully fledged Islamic Banking branch. Besides these traditional delivery points, the bank is also very active in the alternative delivery area. It currently has 140 ATMs of its own; and ATM sharing arrangement with a partner bank that has more than 550 ATMs in place; SMS Banking; Interest Banking and so on. It already started its Customer Call Center operation. The bank has a plan to end the current year with 200 own ATMs.

3. Organizational Culture:

The Top Level Management of City Bank ltd. stated their culture as follows:

“…This triumphant journey has been possible only because at CBL we believe in a culture that is rewarding. In line with our Vision, CBL encourages each individual to achieve their true potential. Being a part of CBL, one has the opportunity to work in his/her area of expertise or one that he/she is interested in. We are a fast growing and superior bank, not only in terms of our products and services but also in terms of our people philosophy. Whichever function one might choose, be it Core banking, Finance, Brand, HR or any other functions, we at CBL foster a Winning Culture for both our internal and external stakeholders and ensure our talents can grow and excel in both functional and leadership front.

• The Financial Supermarket with a Winning Culture Offering Enjoyable Experiences.
• Offer wide array of products and services that differentiate and excite all customer segments
• Be the Employer of choice by offering an environment where people excel and leaders are created
• Continuously challenge processes and platforms to enhance effectiveness and efficiency
• Promote innovation and automation with a view to guaranteeing and enhancing excellence in service
• Ensure respect for community, good governance and compliance in everything we do is result driven
• Accountable & Transparent, courageous & respectful, engaged & inspired focused on customer delight….”

 4. Conclusion

The City Bank Limited as per Bangladesh Bank’s ranking is the 3^rd biggest bank in our country. While working within our limited scope, we tried our best to present the information. Yet, through this assignment anyone can have a glimpse inside management of The City Bank Ltd. We tried to discuss about different managing tools, spreading its wings from planning to the culture inside the organization, from basic organizational chart to the vast banking network throughout Bangladesh. Some flaws might be there in this assignment, as we had to handle a huge amount of data from online, reference books and some stuffs of The City Bank itself. 

4.1 References

• Organizational behavior, Robbins Judge, 13^th Edition. (Chapter 7, pg# 246 and onwards)
• www.wikipedia.com (for definitions and other explanations)
• www.thecitybank.com.bd (annual report, highlights, CEO’s message, Chairman’s Message)
• Wanda Thibodeaux, Demand Media, www. smallbusiness.chron.com
•  Mr. Mabrur Hasan Chowdhury was asked several questions about the internal affairs. He is currently working as Cluster Branch Operations Manager (Dhaka Outer). And his office is in The City Bank Ltd, Dhanmondi Branch, Rd No. 27, Dhanmondi. (opposite of Meena Bazaar)

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Current scenarios of debit and credit cards forgery in Bangladesh: Forgery technologies and prevention techniques

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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