Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Staying a Step Ahead of Bank Card Fraud Rings

VedomostiCard usage with a PIN code is safer than signature-based transactions, experts say.
Just when it seemed safe to use automatic teller machines again, a new form of bank card fraud has emerged.

Called "skimming" because of the fraudsters' method of skimming information off a card's magnetic strip for use on a fake card, it is the fastest-growing type of fraud in the industry, Visa said.

The hardware to read and record credit card information can be bought over the Internet or assembled from parts available at electronics stores for about $50. No larger than a pager, it is often worn as one by waiters or cashiers who swipe a victim's card through at the time of a purchase. The machine reads all the information on the card's magnetic strip. This information is then transferred to a fake card's magnetic strip and used to create a card with the original card number, the victim's name and the issuing bank's logo and hologram.

Skimming fraud remains a difficult crime to prosecute. The original card stays with the victim, who does not notice anything until a bill arrives. One month is the maximum amount of time a fraudster will use a fake card.

Though credit card companies are scrambling to develop new technologies to prevent card information from being scanned illegally or copied onto another card, the surest way to prevent fraud for now is to keep credit cards in sight at all times when making purchases.

"It is very important for the card holder to make sure that the card does not leave his or her sight for longer than a couple of minutes," Lou Naumovski, the general manager of Visa in Russia, said in an interview.

"I know as a card holder, whenever someone takes the card out of my view, I stop them and say, 'I'm sorry, where are you going with my card?' And I insist on being able to see the terminal to which that card is being taken."

One solution is the development of chip technologies. Naumovski said there will be about 65,000 such cards in Russia by the end of the year.

"Chip technology today is the only way of preventing the growth of skimming fraud ... and the introduction of chip cards can reduce that kind of fraud by as much as 90 percent," Visa said in a statement.

Also referred to as smart cards, chip cards were recently introduced to Russia. Visa worked with Europay and MasterCard to establish EMV, the global standard for chip-based debit and credit payments. Using such a standard means that all compliant debit and credit chip cards can be used at any ATM or credit card outlet, Visa said.

Vedomosti reported last week that the number of fraudulent card transactions has been growing as usage becomes more popular in Russia -- particularly in St. Petersburg, where card usage has become widespread while banks' card security systems are not as advanced as in Moscow.

In an attempt to boost card security, MasterCard is planning to shift responsibility for fraudulent transactions with Maestro cards from card-issuing banks to transaction-processing banks, in cases where fraudulent transactions were performed using a signature instead of a PIN code, Vedomosti reported. Transaction-processing banks do not want to take responsibility for such transactions, so retail outlets will either have to install PIN pads or stop accepting Maestro cards after the new rules come into force in January.

"PIN codes by definition are a safer means," Andrei Korolyov, the head of MasterCard's Russian representation, was quoted by Vedomosti as saying. "To steal a card number is easy enough; there are card-manufacturing plants all over the world. To put a number and a signature on a card is much easier than figuring out the PIN of the real card holder."

An automatic teller machine fraud ring that wiped out the accounts of at least 250 Visa and Mastercard users in 1999 and 2000 left many cardholders fearful of using bank cards in Russia, but it seems confidence has since returned.

Sberbank has been observing steady growth in ATM usage, the bank said in a statement.

"The number of transactions in 10 months in 2002 grew by 70 percent compared with the same period in 2001 and exceeded 2.8 million transactions per month," it said. "The steady growth in the number of transactions carried out on Sberbank ATMs, as well as their volume, show clients' trust in the service."