Financial institutions introduced chip-and-PIN as a panacea, the solution to end debit and credit card fraud once and for all. This has not been the case. Shoulder surfing, cloned cards and ATM fraud remain rife, yet are now more difficult to prove. Just as the technology has advanced, so have the skill sets of criminals. It is believed that countless chip-and-PIN machines and ATM's have now been tampered with.

Chip-and-PIN Debit and Credit Card Fraud Is a Global Operation

Whilst shoulder surfing and even some ATM fraud may be the activity of the crafty opportunist, the bulk of this crime is of an organised nature and involves cloned cards used abroad. Dr. Joel Brenner, the US National Counterintelligence Executive, stated that "Hundreds of chip-and PIN machines in stores and supermarkets across Europe have been tampered with to allow details of shoppers' credit card accounts to be relayed to overseas fraudsters."

Shoulder Surfing, Skimming Machines and Cloning Cards

Shoppers paying for goods and services fail to shield their PIN number. Criminals gather this information and use it to commit debit and credit card fraud using a cloned card. They may even steal the card from the unsuspecting shopper before or after the store is left.

Beware of ATM Fraud

The cash point machine will have been fitted with a skimming device that records the information on the magnetic strip. Opportunists will also be shoulder surfing in order to record the PIN number. The outcome is a cloned card that can be used at retail outlets with a chip-and-PIN device.

How to Report Fraud

  • As soon as a suspicious transaction is identified, immediately report this to the bank in order that a 'stop' can be placed on further transactions.
  • The financial institution must send out a form. This is a declaration that needs to be signed by the legitimate cardholder confirming that any transactions weren't legitimately made.
  • The bank will then credit the cardholder's account, although the merchant has the right to challenge this. The onus is on them to prove that the transaction was made legitimately.
  • If a bank is uncooperative or unhelpful, speak to their supervisor. Section 12:12 of the Banking Code states that the consumer is not financially responsible for any unauthorised transaction unless they themselves acted fraudulently or negligently. For example, the PIN number was carried with the card; even then, this would need to be proved.
  • Chip-and-PIN credit card fraud is more difficult to prove than Card Not Present (CNP) fraud committed over the phone or Internet. If the bank refuses to offer a refund, a complaint can be launched under the Financial Ombudsman scheme once eight weeks has elapsed.

It is important to know how to report fraud in the event of shoulder surfing and ATM fraud. Although the introduction of chip-and-PIN has reduced debit and credit card fraud dramatically, it has also made it more difficult for consumers to charge back in relation to any unauthorised transactions.

Readers that found this article useful may wish to find out how a credit report affects borrowing, discover ways to reduce a credit card balance or secure the best mortgage rate.

Sources

Samuel, Henry. (10 October, 2008) "Chip-and-PIN scam has netted millions from British shoppers." The Daily Telegraph.

(8 April, 2008). "Banks are too chipper about pin fraud." The Daily Telegraph.

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional.