Clamp-down on card fraud

Date: 16/01/1997

By Simon Coss

THE European Commission is considering proposing Union-wide rules to tackle credit card crime, which costs credit companies across all 15 member states an estimated 224 million ecu every year.

A Commission-sponsored report into the problem is due to be published at the end of the month and is likely to be followed up by a formal proposal for action from the Anti-Fraud Commissioner Anita Gradin.

“Various credit card companies have been complaining about the discrepancy between member states' legislation on the issue of credit card fraud. We are hoping to start work on an initiative very soon,” said an official in the Commission's justice and home affairs task force.

Under the Maastricht Treaty, the Commission has the right to take initiatives in the justice and home affairs field, which is normally the preserve of national governments, in order to combat international fraud.

As far as the industry is concerned, an EU-wide approach to the problem cannot come too soon.

Mark Van Wauwe, general secretary of Europay International the Union's largest credit card provider which supplies payment cards to over 100 million European nationals warned that if action was not taken soon, consumer confidence in the multi-billion-ecu credit industry would be seriously damaged.

“In Europe, there is no legal framework to tackle fraud effectively. Crooks in one country often cannot be pursued in another. We want to see an initiative that will harmonise member states' laws,” he explained.

Credit card fraud is a highly organised high-technology business. The international police agency Interpol is currently examining the issue and has set up a working group of experts from EU member states, the USA and Hong Kong.

Interpol officials say many networks involved in producing fake cards are being coordinated by crime gangs in Hong Kong and south east Asia.

“In order to produce counterfeit cards you need an infrastructure,” said Interpol credit card crime expert Wolfgang Schreiber.

Counterfeiting gangs usually have members employed in places such as restaurants and hotels who 'double swipe' cards when customers pay and steal vital encoded information. Then fake cards are made on to which the stolen information can be transferred.

According to Interpol, machines for making such copies can be bought for around 460 ecu. Gangs use the fake cards to buy goods which are then resold and the proceeds used to finance other criminal activities.

Interpol is hoping to set up an international database containing information on counterfeit credit cards which will be based at the organisation's general secretariat in Lyon, France. It wants the scheme, due to come online later this year, to be co-funded by industry Its job will be made harder as more and more organisations, from car manufacturers to political parties, are now issuing credit cards in conjunction with the major companies.

The advent of the Internet has created an added headache for credit card suppliers. Skilful fraudsters can now find detailed instructions on numerous web sites explaining how to steal information and buy goods over the telephone without going to the trouble of making a fake card.

Other sites publish the complex algorithms used by credit card firms to generate numbers. With these formulae, it is possible to generate an almost infinite string of valid credit card numbers which can be extrapolated from one existing card.

Detective Chief Inspector John Newton, who chairs the Interpol group, admitted that this sort of cyber-crime is virtually impossible to control. “That is the price you pay for having a user-friendly system. We cannot regulate the Internet. It is anarchy out there,” he said.