Counterfeit card fraud, especially as a result of card skimming, is on the increase again, according to the SA Banking Risk Information Centre (Sabric). And consumers with chip-and-pin cards shouldn’t assume they are protected, the centre warns.

Susan Potgieter, GM of the commercial crime office at Sabric, says that although banks are now issuing more credit and debit cards with integrated chips, requiring customers to enter PIN numbers at points of sale and at ATMs, criminals are able to work around the security.

Last year, Sabric attributed a sharp decline in counterfeit card fraud to the introduction of chip cards. Banking industry financial losses due to the fraudulent use of lost and stolen cards fell by 60% in 2010, from R92,9m to R37,2m.

In 2010, banks lost R263,8m to credit card fraud, down from R409,3m in 2009. Counterfeit card fraud accounted for R141,4m of the losses. During the year, banks seized 189 handheld and 36 ATM-mounted skimming devices.

But criminals are increasingly working around chip-and-PIN security. “Although chip-and-PIN cards are extremely effective to prevent lost and stolen card fraud, they still have a magentic stripe on them,” Potgieter says. “Criminals copy the information on the magnetic stripe in the same way they have been skimming cards all along.”

She says they then use the information from the magstripe to manufacture counterfeit cards without chips, drawing cash and making purchases. “Cards can be skimmed at any point where a customer hands over a card to a third party,” she says. “Once in the hands of criminals, the card is swiped through a skimming device that has the ability to copy and store the data.”

Criminals also tamper with ATMs by fixing a skimming device over the card slot. “During the transaction, criminals film the PIN number using a small spy camera placed on the machine in such a way that it can film the keypad,” Potgieter says. Customers don’t realise their details have been stolen as the transaction proceeds as normal.

Sabric says it doesn’t know exactly how many cards are skimmed as customers often don’t know their cards have been compromised. “The banking industry measures the impact of this type of crime by monitoring closely the level of counterfeit card fraud, which is indicative of the problem.”

As banks crack down on fraud through technologies like chip and PIN, criminals are turning to other types of card fraud, according to Sabric. There is a focus by perpetrators on fraud not requiring the physical presence of the card or the cardholder — known as “card not present fraud”. The centre says here has been a sudden change in tactics by criminals, who are committing more fraud on the Internet, through mail order services and the telephone. — Staff reporter, TechCentral