Application Frauds in Credit Card
This type of fraud occurs when a person falsifies an application to acquire a credit card.
Application fraud can be committed in three ways:
Assumed identity, where an individual illegally obtains personal information of
another individual and opens accounts in his or her name, using partially
legitimate information.
Financial fraud, where an individual provides false information about his or her financial status to acquire credit.
Not-received items (NRIs) also called postal intercepts occur when a card is stolen from the postal service before it reaches its owner’s destination.
LOST/ STOLEN CARDS A card is lost/stolen when a legitimate account holder receives a card and loses it or someone steals the card for criminal purposes. This type of fraud is in essence the easiest way for a fraudster to get hold of other individual's credit cards without investment in technology. It is also perhaps the hardest form of traditional credit card fraud to tackle.
ACCOUNT TAKEOVER This type of fraud occurs when a fraudster illegally obtains a valid customers’ personal information. The fraudster takes control of (takeover) a legitimate account by either providing the customers account number or the card number. The fraudster then contacts the card issuer, masquerading as the genuine cardholder, to ask that mail be redirected to a new address. The fraudster reports card lost and asks for a replacement to be sent.
FAKE AND COUNTERFEIT CARDS The creation of counterfeit cards, together with lost / stolen cards pose highest threat in credit card frauds. Fraudsters are constantly finding new and more innovative ways to create counterfeit cards. Some of the techniques used for creating false and counterfeit cards are listed below:
1. Erasing the magnetic strip: A fraudster can tamper an existing card that has been acquired illegally by erasing the metallic strip with a powerful electro-magnet. The fraudster then tampers with the details on the card so that they match the details of a valid card, which they may have attained, e.g., from a stolen till roll. When the
fraudster begins to use the card, the cashier will swipe the card through the terminal several times, before realizing that the metallic strip does not work. The cashier will then proceed to manually input the card details into the terminal. This form of fraud has high risk because the cashier will be looking at the card closely to read the numbers. Doctored cards are, as with many of the traditional methods of credit card fraud, becoming an outdated method of illicit accumulation of either funds or goods.
2. Creating a fake card: A fraudster can create a fake card from scratch using sophisticated machines. This is the most common type of fraud though fake cards require a lot of effort and skill to produce. Modern cards have many security features all designed to make it difficult for fraudsters to make good quality forgeries. Holograms have been introduced in almost all credit cards and are very difficult to forge effectively. Embossing holograms onto the card itself is another problem for card forgers.
3. Altering card details: A fraudster can alter cards by either re-embossing them — by applying heat and pressure to the information originally embossed on the card by a legitimate card manufacturer or by re-encoding them using computer software that encodes the magnetic stripe data on the card.
4. Skimming: Most cases of counterfeit fraud involve skimming, a process where genuine data on a card’s magnetic stripe is electronically copied onto another. Skimming is fast emerging as the most popular form of credit card fraud. Employees/cashiers of business establishments have been found to carry pocket skimming devices, a battery-operated electronic magnetic stripe reader, with which they swipe customer's cards to get hold of customer’s card details. The fraudster does this whilst the customer is waiting for the transaction to be validated through the card terminal. Skimming takes place unknown to the cardholder and is thus very difficult, if not impossible to trace. In other cases, the details obtained by skimming are used to carry out fraudulent card-not-present transactions by fraudsters. Often, the cardholder is unaware of the fraud until a statement arrives showing purchases they did not make.
5. White plastic: A white plastic is a card-size piece of plastic of any color that a fraudster creates and encodes with legitimate magnetic stripe data for illegal transactions. This card looks like a hotel room key but contains legitimate magnetic stripe data that fraudsters can use at POS terminals that do not require card validation or verification (for example, petrol pumps and ATMs).
Application fraud can be committed in three ways:
Assumed identity, where an individual illegally obtains personal information of
another individual and opens accounts in his or her name, using partially
legitimate information.
Financial fraud, where an individual provides false information about his or her financial status to acquire credit.
Not-received items (NRIs) also called postal intercepts occur when a card is stolen from the postal service before it reaches its owner’s destination.
LOST/ STOLEN CARDS A card is lost/stolen when a legitimate account holder receives a card and loses it or someone steals the card for criminal purposes. This type of fraud is in essence the easiest way for a fraudster to get hold of other individual's credit cards without investment in technology. It is also perhaps the hardest form of traditional credit card fraud to tackle.
ACCOUNT TAKEOVER This type of fraud occurs when a fraudster illegally obtains a valid customers’ personal information. The fraudster takes control of (takeover) a legitimate account by either providing the customers account number or the card number. The fraudster then contacts the card issuer, masquerading as the genuine cardholder, to ask that mail be redirected to a new address. The fraudster reports card lost and asks for a replacement to be sent.
FAKE AND COUNTERFEIT CARDS The creation of counterfeit cards, together with lost / stolen cards pose highest threat in credit card frauds. Fraudsters are constantly finding new and more innovative ways to create counterfeit cards. Some of the techniques used for creating false and counterfeit cards are listed below:
1. Erasing the magnetic strip: A fraudster can tamper an existing card that has been acquired illegally by erasing the metallic strip with a powerful electro-magnet. The fraudster then tampers with the details on the card so that they match the details of a valid card, which they may have attained, e.g., from a stolen till roll. When the
fraudster begins to use the card, the cashier will swipe the card through the terminal several times, before realizing that the metallic strip does not work. The cashier will then proceed to manually input the card details into the terminal. This form of fraud has high risk because the cashier will be looking at the card closely to read the numbers. Doctored cards are, as with many of the traditional methods of credit card fraud, becoming an outdated method of illicit accumulation of either funds or goods.
2. Creating a fake card: A fraudster can create a fake card from scratch using sophisticated machines. This is the most common type of fraud though fake cards require a lot of effort and skill to produce. Modern cards have many security features all designed to make it difficult for fraudsters to make good quality forgeries. Holograms have been introduced in almost all credit cards and are very difficult to forge effectively. Embossing holograms onto the card itself is another problem for card forgers.
3. Altering card details: A fraudster can alter cards by either re-embossing them — by applying heat and pressure to the information originally embossed on the card by a legitimate card manufacturer or by re-encoding them using computer software that encodes the magnetic stripe data on the card.
4. Skimming: Most cases of counterfeit fraud involve skimming, a process where genuine data on a card’s magnetic stripe is electronically copied onto another. Skimming is fast emerging as the most popular form of credit card fraud. Employees/cashiers of business establishments have been found to carry pocket skimming devices, a battery-operated electronic magnetic stripe reader, with which they swipe customer's cards to get hold of customer’s card details. The fraudster does this whilst the customer is waiting for the transaction to be validated through the card terminal. Skimming takes place unknown to the cardholder and is thus very difficult, if not impossible to trace. In other cases, the details obtained by skimming are used to carry out fraudulent card-not-present transactions by fraudsters. Often, the cardholder is unaware of the fraud until a statement arrives showing purchases they did not make.
5. White plastic: A white plastic is a card-size piece of plastic of any color that a fraudster creates and encodes with legitimate magnetic stripe data for illegal transactions. This card looks like a hotel room key but contains legitimate magnetic stripe data that fraudsters can use at POS terminals that do not require card validation or verification (for example, petrol pumps and ATMs).
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