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COPYRIGHT American Society for Industrial Security 1989
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IN THE 20 YEARS SINCE THE BEGINNING of the credit card boom, plastic
money has become a worldwide-accepted means of buying goods and
services - and equally a worldwide means of fraud. In some cases, the
frauds have been spectacular. Just over a year ago, for example,
nearly $13 million was stolen in a simple operation involving gangs
cooperating in Marseilles, France, and Madrid, Spain.
The interleaving carbon papers from credit card payment slips were
retrieved from trash bins outside restaurants (they'd been carelessly
thrown away intact rather than ripped up). Containing, as they do, all
the card information plus a specimen of the authorized user's
signature, the carbons were sent to Madrid where many duplicate fake
cards were made. In a military-style operation, the cards were then
used simultaneously to gain goods and cash - and within a month $13
million had gone.
The fairly casual granting of credit via credit cards in the late
1960s marked a surprising departure in banks' formally miserly ways of
granting overdraft or credit rights. This was particularly marked in
the United States at that time. Literally millions of unsolicited
credit cards were mailed out to people, mainly from VISA and
MasterCard, who were entering the field and vying with the established
companies such as American Express and Diners Club.
But the pattern of use had been established by then, and the frauds
grew up with them. The major types of fraud are as follows:
Stolen cards. These cards commonly have a useful life of about two
weeks, after which time they begin to show up on warning lists
distributed to merchants by credit card firms. Of course if the
cardholder immediately reports the card missing or stolen, the card is
blocked at once. Thus purchases above the floor limit requiring direct
authorization and purchases in which transaction phones are used for
all credit operations reveal the stolen cards. In stores with security
personnel on the premises, an arrest can follow.
Cards are also often stolen or lost at restaurants and gas stations;
customers may not be aware until a later date that their card were not
returned.
Schemes using counterfeit cards take time to detect as the charges are
interspersed in a customer's bill with legitimate charges. In one case
of an organized counterfeit credit card operation, an underworld
figure stated his group made a rule of throwing away such cards after
a three-week usage.
* Merchants run through a second charge slip and submit it for credit.
There are many solutions to counter the problems of credit card fraud,
but there is a monetary limitation as to what financial institutions
will spend to minimize fraud-related losses.
Later, however, when the number of issuing banks increased and they
became able to issue more than one type of credit card, the surfacing
of fraudulent merchants increased again. These merchants could obtain
merchant credit card status from institutions outside the region where
they were located, and they were sent the embossing machines on
request! The only effective way to defeat this type of fraud is by a
thorough investigation and an on-site inspection of every merchant who
requests to be signed up.
There have been many cases of prosecution for merchant fraud, and
these all entail determined and painstaking investigation on the part
of a law enforcement agency and the credit card fraud investigators.
Issuing card companies must have a department that thoroughly checks
out every applicant for a credit card. Fraudulent applications can be
kept to a minimum if the issuing institutions have competent staff
reviewing each application.
3. Feel the card. Carefully feel the credit card. Does the card feel
too heavy or too light? Does the card feel too lumpy or rough on the
surface or edge? Beware - any card possessing these abnormalities
could be a counterfeit.
4. Examine name. Carefully examine the name to which the credit card
is issued. Beware of any irregularities in the lettering or spacing of
the name. Professional counterfeiters are able to shave off or iron
down the names and numbers on credit cards and then emboss new ones.
These newly embossed names and numbers are used by credit card
criminals to make stolen cards appear valid.
And finally, triple check signatures. Always ask the customer to sign
the credit card sales draft in your presence. Then carefully compare
the signature on the sales draft to the signature on the back of the
credit card. Then compare the signature on the ID. Triple check the
signatures by comparing the ID signatures to the signature on the
sales draft. Beware of any discrepancies in signatures.
edures it requests.