The fraud begins with either the theft of the physical card or the compromise of data associated with the account, including the card account number or other information that would routinely and necessarily be available to a merchant during a legitimate transaction. The compromise can occur by many common routes and can usually be conducted without tipping off the card holder, the merchant or the issuer, at least until the account is ultimately used for fraud. A simple example is that of a store clerk copying sales receipts for later use. The rapid growth of credit card use on the Internet has made database security lapses particularly costly; in some cases, millions of accounts have been compromised.
Stolen cards can be reported quickly by cardholders, but a compromised account can be hoarded by a thief for weeks or months before any fraudulent use, making it difficult to identify the source of the compromise. The cardholder may not discover fraudulent use until receiving a billing statement, which may be delivered infrequently.
Credit card fraud is the misuse of a credit card to make purchases without authorization or counterfeiting a credit card. There are many different types of credit card schemes including: 1. Unauthorized Use of a Lost or Stolen Card – using lost credit card without proper authorization or without knowledge of the authorized user or using stolen credit card. 2. Organized Crime Rings – stealing credit card and bank information from the mail and using these articles to generate false identification documents, such as driver’s licenses and other ID cards. The credit cards themselves are duplicated and distributed to members of the rings. The false IDs are then displayed during purchases made with the stolen cards. Members of the ring go on spending sprees, ending only when the credit has dried up or the legitimate owner reports their card as stolen. Often, counterfeit and stolen cards are express-mailed to members of the ring in other parts of the country. 3. Advance Payments – using a forged or counterfeit check to make an advance or overpayment on a stolen credit card. Since the issuer must credit the payment at the time it is made, there is no time to verify the authenticity of the check. Consequently, cash advances and purchases can be made immediately. This scheme can be extremely lucrative to the perpetrators. 4. Shave and Paste – slicing any number of alpha or numeric characters from the card surface and attaching other characters to the card surface in order to put an entirely different but valid account number on the card or to change the name. 5. De-Emboss/Re-Emboss – exposing the credit card heat, removing the embossed alpha/numeric characters, and putting new numbers and names on the cards. 6. Counterfeit Cards – illegal making of credit cards: the most damaging scheme of all. 7. Telephone/Mail Order Fraud – offering a free trip or other nice prize and requiring the winner to provide a credit card number/expiry date. Once the thieves have the number, he can order merchandise or have money wired to them. 8. False Applications – applying for new card using stolen or stealing a pre-approved credit card application out of the mail or trash. Also “take-one” applications that are prominent in stores offering credit cards to the public, are ripe for fraud. 9. Credit “Doctors” – selling stolen credit card account numbers via newspaper ads to people unable to get credit cards. 10. True Name Fraud – opening new credit card accounts by individuals possessing a victim’s true name identification such as a driver’s license or other ID numbers. The true identification was either obtained as a secondary objective in the commission of a more aggressive offence such as robbery or as the primary target of a lesser crime such as pickpocketing. 11. Non-Receipt Fraud – intercepting credit cards that are in transit between the credit issuer and the authorized account holder. 12. Key-Enter Counterfeiting – leaving the magnetic strip un-coded or making it unreadable, fraudsters force merchants handling the transaction to enter the credit card number manually. 13. Creditmaster software – allows the user to produce valid credit card numbers. Counterfeiters can then put these numbers to use in phony cards. 14. Probing software – runs stolen numbers through various financial institutions in the hopes that one of them will still honor the number. Numbers that clear are often sold to counterfeiters. 15. Skimming – using a device which stores hundreds of credit card numbers or tapping into a line used to transport credit card data.
