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Risk and Reward

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Skimmer fraud and payment card fraud is a global crime costing financial institutions and retailers billions of dollars annually, says Dr. Darren Hayes of Pace University, New York

Skimming the surface, a new research report by ACCA USA and Pace University, illustrates how criminal enterprises are employing "skimming" mechanisms - often using the latest technologies - to steal countless dollars from consumers. The report provides examples from across the globe to highlight "skimming" growth and scope, and offers recommendations for institutions and individuals to combat such activities.

A skimmer is an electronic device used to read and store electronic data. While there are many different types of skimmers (including devices used to read data from tags embedded in U.S. driver licenses and passports), the new research focused on devices that read and recorded data from consumer payment cards, such as ATM, credit, debit, prepaid and electronic gift cards. “Devices are becoming smaller and have more memory,” Hayes said. “The quality of data on the devices has improved over time, and skimmers often are password protected and use advanced encryption protocols.”

There are 2.2 million ATMs worldwide, which will escalate to more than 3 million by 2016. A new ATM is installed every five minutes. North America has the largest ATM market in the world, with the most – approximately 425,000 – in the United States.

According to the report:

·         One of the most common types of skimmer is the ATM skimmer, used to record the data contained on the magnetic strip on the back of a consumer’s ATM card. A skimmer may be placed on a stand-alone ATM, such as one at a convenience stores or doorway at a bank.

·         Security standards with European credit, debit and ATM cards differ from standards in the United States, rendering it easier to conduct skimmer fraud in the U.S.

·         The United States is pivotal for criminal gangs because it has more ATMs than another country and because it is not EMV-compliant (cards do not contain a global chip) and its EMV cards skimmed can easily be cloned. Cards that are cloned by criminals are also used in other non-EMV countries, such as Ghana, Costa Rica, Mexico and Malta.

·         Handheld skimmers are not an issue in other countries as much as in the U.S. For example, at U.S. restaurants, a waiter takes a credit or debit card and later with a receipt. At European restaurants, a card remains in sight at all times, and a waiter brings a terminal to the table.

·         Equipment used in various types of skimming operations is readily available from online sites such as amazon.com and spy stores.

The report offered recommendations to combat skimmer fraud. Financial institutions should speed up the integration of anti-skimming solutions and fraud investigations into their daily operations and improve cooperation with national and international law enforcement to keep up with the increased sophistication and global nature of skimmer schemes. The future of ATM transactions lies in contactless cards, biometric security, and smartphone withdrawals instead of traditional ATM cards.

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Published: 12 Feb 2014