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. Last Updated: 07/27/2016

Thievery In Cards For Users Of ATMs

On Aug. 5, Jason Downes, who works at a Moscow-based brokerage firm, took out two cash advances at an ATM in Tel Aviv, maxing out his credit card.

At least that's what his last bank statement said. In fact, Downes said, he has never been to Tel Aviv.

His credit statement indicated that the Automatic Teller Machine in question was owned by an obscure Israeli bank with a vaguely Russian-sounding name, something that further aroused his suspicion that his card data had been stolen when he had used it at a local Moscow ATM.

"When I first called my bank in Britain, they weren't aware that this kind of thing existed, and that it was a problem in this part of the world," he said.

Yet his story is hardly unique in Russia. The Moscow Times has confirmed nearly a dozen cases of such card fraud in recent months, including three against employees of Independent Media, the newspaper's parent company.

Investigators say they believe the fraud most likely is a scheme called "skimming," when criminals install electronic devices in ATM machines to steal PIN codes and bank information that is recorded on a card's magnetic strip. Skimming has boomed around the world in the past year.

However, some banking experts in Moscow warn that Russia's unstable banking system provides rich opportunities for fraud perpetrators to access victims' financial information.

Igor Sergeyev of Raiffeisen Bank, who is overseeing the Austrian bank's installation of ATM machines in Moscow, said that an inside job may be behind at least some card-fraud cases. A dishonest employee of a local bank's processing center can easily access card information, including the PIN code, that is received by ATM machines, he said.

"If the bank in question is a small one, and the staff has not been paid for some months, than somebody may feel justified in taking their salary [as part of an inside job]," Sergeyev said.

Russian banks vigorously defended their security record.

The rash of card-fraud cases has prompted many card holders to ask what they can do to prevent being victimized by skimming schemes, and what to do if it happens to them.

In Downes' case, the British bank that issued his card accepted his explanation that he not been anywhere near Tel Aviv when the transactions were made, and credited his account with the $400 he lost, although the bank's official investigation is still open.

But industry insiders warn that every bank has its own policy, and that there are no guarantees that victims of fraud will be compensated by the card issuer.

"The banks usually keep a detailed credit history of the cardholder, so if they see a transaction that is totally out of character, then it should not be too hard to convince them that it was fraud," said Tim Murphy, Visa International's senior official for risk management in Eastern Europe.

For some, such as Downes, this was relatively easy to prove. However, others, such as Sean Holloway, who works for a Russian-American nonprofit organization, have had more difficulty. Holloway said he lost $6,200 from his Citibank account when the money was taken out of Moscow ATMs over a period of four days this summer, and he has been having trouble proving to his bank that the transactions were not his.

"They told me my only option was to appeal and ask for another investigation, but I don't understand how a second investigation will change their mind if they already decided I was lying the first time," he said.

Other skimming victims, who lost money in more distant locales, said their banks promptly credited their accounts with the lost money. Even in the best cases, though, falling victim to a skimming scheme can mean going through the hassle of getting new credit cards, closing old bank accounts and having to wait for the issuing bank to complete a lengthy investigation.

Experts say that there is no way to guarantee the safety of your financial information if you use cash cards or credit cards, but there are some basic steps that can be taken to minimize the risks.

"You should look for anything attached to the ATM 'after market' that doesn't look like it was part of the original machine," Murphy said, adding that ATMs in Britain already display messages to customers warning them to be on the lookout for such devices.

Jim Devlin, head of Visa's investigations unit for Eastern Europe, said that criminals often attach card readers over the ATM's card slot, and install false shelves under the keyboard to record PIN numbers.

"Oftentimes, it is an alert ATM customer who notices the devices and tells us about the problem," he said.

He said the electronic devices necessary for such fraud are readily available.

Sergeyev said it was important to pick an ATM owned by a reputable bank and located in an enclosed area where it is more difficult for outsiders to tamper with the machine.

ATM machines located at metro stations are a risky choice, some experts said, because they are not closely watched, and they are owned by SBS-Agro, a bank severely damaged by last year's financial crisis.

Industry insiders also emphasized the importance of checking credit statements regularly, and immediately reporting any suspicious transactions.

Aleksandr Tkachev of Avtobank, one of Russia's most active card issuers with its own ATM network, said that overall responsibility rested with card companies.

"We are an issuer of other organizations' cards, such as Visa and MasterCard," he said. "We use a payments system that they design for use with their own cards."

Visa International opened an investigation in March into Russian ATM and credit-card fraud.

Devlin said that skimming is a relatively rare form of fraud worldwide, including Russia. Visa says 7 percent of its card transactions worldwide include some type of fraud and that less than 5 percent of this fraud involved skimming.

Devlin added, though, that even a dozen new cases of skimming fraud in Moscow would represent a significant jump.