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Types of card fraud

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by Sarah Orrill

30/12/10 in Card Fraud/Theft |

Card fraud occurs when a criminal uses your card or card details to purchase goods or services in person or online. It can happen when a thief steals your cards from you or obtains your card details by other means, such as email scams, raiding your bins or skimming your card.

How big is the problem of card fraud?
Incidences of card fraud continue to be a problem, despite the collective efforts of the police, the financial services industry and the government. In 2009 total fraud losses on UK Cards were £440.3m according to the UK Cards Association, March 2010.  Fraud is predominently driven via transactions not protected by Chip and PIN (cardholder-not-present fraud), counterfeit fraud (skimmed and cloned cards) and fraud on lost and stolen cards.

How is card fraud committed?
There are many ways in which a criminal can get hold of your card or card details and use them fraudulently:

Theft of a card
Your cards are among your most valuable possessions. Most wallets and purses contain thousands of pounds worth of credit in the form of plastic cards. That's why they are prime targets for thieves.

If a criminal steals your card, or finds a card that has been lost, he or she can use it to purchase goods and services in your name. Chip and PIN technology prevents most face-to-face purchases being made, but online purchases and telephone orders do not require a PIN number and can easily be carried out by criminals using stolen cards and a few of your personal details (see Cardholder-not-present fraud).

Cardholder-not-present (CNP) fraud
This is now the biggest type of fraud in the UK, accounting for 60% of all card fraud losses during 2009 (CIFAS, January 2010).   It is perpetrated when criminals use stolen cards or card details obtained illegally to buy goods and services over the internet, by telephone or by mail order.
It is a difficult type of fraud to combat because neither the card nor the bogus cardholder is present at the point of purchase. It means that online stores and mail order firms are unable to check a card's physical security features or to ask for a PIN number. In addition, card issuers are unable to guarantee that the information provided in cardholder-not-present transactions has been given by the genuine cardholder.

Account takeover
This is a type of identity fraud. Criminals may obtain some of your personal details fraudulently, such as your full name, address and date of birth, and use them to assume your identity. By pretending to be you, they may be able to take over the running of your bank account and arrange for payment to be taken from your account. They may also change some of your details, such as your address, so that they can have newly issued cards and cheque books sent directly to them.

Card trapping
A criminal inserts a trapping device into a cash machine (ATM) card slot which retains the card inside the machine. The criminal, waiting nearby or in the queue, offers to help when an individual's card is retained. The fraudster advises them to re-enter their PIN, which the criminal observes. The card is not released, so the cardholder gives up and leaves. Then the criminal removes the device with the card inside and uses it and the PIN number to withdraw cash or make other purchases before the card is cancelled.  

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