[LINK] SMH: 'Card fraud soars' - FIs defraud Consumers

Fri Jul 13 22:08:07 AEST 2012

[As Fairfax rings the (necessary) changes, its web-sites are in chaos.

[There's a proliferation of versions of the same article, with subtle 
and not-so-subtle differences, scattered not only over many different 
mast-heads - I mean sub-sites - but even multiple versions across 24 
hours within a single sub-site.

[But professional journalists continue to produce quality amidst the 
dross - and society is heavily dependent on someone, *any*one (Gina 
Rinehart as white knight??), discovering a sustainable business model.

[I needed to copy three versions from the SMH sub-site into this 
email, in order to get hold of most of the paras. that were in the 
dead-trees version that this fossil read over breakfast this morning.]

[Okay, important aside finished, what was the point?

[The article below is important for what it says, but also for what 
it failed to say:

>[ABA Munchkin] said that, when fraud did occur, customers were not 
>liable for losses from unauthorised transactions where it was clear 
>that the user has not contributed to the loss.

[And there's the con.

[Consumer are not *liable* for losses.

[But they wear them, and they will increasingly wear them.

[The first reason is that, in order to recover each loss, you have to:
(a)   get  a statement of all transactions on each of your accounts
(b)   reconcile each of your accounts against vouchers
(c)   detect transactions that aren't yours
(d)   construct a complaint
(e)   submit the complaint
(f)    say 'yes, I really mean this and I don't mind if it costs me 
$10 to find out'
(g)   wait
(h)   remember
(i)   maintain the rage
(j)   follow up, if and when they forget

[And that's not the difficult part.

[That's been the case for some years, and a modest proportion of 
consumers have still managed to navigate the maze in respect of a 
modest proportion of the fraud that's been perpetrated.

[The horrendous part of the story is that the financial institutions 
have succeeded in their endeavours to explode the volume of 
line-items in consumers' statements, and undermine consumers' ability 
to reconcile their accounts.

[They've done this by:
-  convincing consumers to value convenience way above security
    (e.g. use your card, without authentication, in a nice, safe place
    like a car-park exit, preparing you for authentication to become,
    well, unusual, like, s-o-o-o 20th century)
-  imposing on consumers cards that contain chips that can't be seen,
    and convinced them to wave them at semi-visible terminals ('any
    sufficiently advanced technology is indistinguishable from magic')
-  installing terminals in large numbers of places
-  increasing the number of transactions conducted using cards by a
    factor of 5-10
-  making it optional for vouchers to be issued

[So consumers simply can't do (b), (c) and (d), and are rapidly 
giving up on (a), and all of the other confusing things in the list 
from (e) to (j).

[It's a con, fellers, and consumers are being sucked in so fast that 
you can hear the sound it makes.]

_________________________________________________________________________

Card fraud soars as shoppers move online
July 12, 2012
Eric Johnston
Financial services editor
http://www.smh.com.au/business/card-fraud-soars-as-shoppers-move-online-20120712-21xrp.html

Credit card fraud has jumped more than 50 per cent over the past year 
to a record $278.2 million as the boom in online shopping has led to 
more Australians being swindled.

As more payments move online and offshore, banks and card issuers are 
struggling to curb the rate of fraud. Around half of the losses 
occurred outside Australia, which means customers were caught out 
buying goods on suspect websites.

Losses are also occurring as criminals set up scams to lure customers 
into making payments. Figures released by industry body the 
Australian Payments Clearing Association show 1.1 million fraudulent 
credit card and scheme cards such as Visa debit occurred in the year 
to December 30. This translates to 96.04 cents in fraud for every 
$1000 spent on cards, up from 67.24 cents in the previous year. The 
average value for each fraud transaction is $250.

The bulk of these were card-not-present transactions - where the card 
holder and retailer do not meet face to face - such as online or on 
the phone. About 71 per cent of the credit card fraud cases were due 
to card-not-present transactions.

Australians are among the most prolific card users in the world, 
making more than 140 million card transactions a month, according to 
APCA figures.

However, efforts by banks to stamp out "skimming" among debit cards 
at Eftpos terminals and ATMs has carved out some gains. The incidence 
of fraud due to skimming has fallen 18 per cent over calendar 2011.

The introduction of chip credit cards has caused a sharp decline in 
fraud across transactions where the card holder is present, but 
criminals have directed fraud efforts to online channels or over the 
telephone.

Steven Munchenberg, chief executive of the Australian Bankers' 
Association said that, as technology advanced and customers' payment 
patterns changed, "so too does criminal behaviour".

"And so that's why criminals are seeking to defraud customers online 
because so many of us are shopping on the internet, especially last 
year when the Australian dollar was high in comparison to the US 
dollar".

Mr Munchenberg said that, when fraud did occur, customers were not 
liable for losses from unauthorised transactions where it was clear 
that the user has not contributed to the loss.

[And there's the con.

[They're not *liable* for losses, but they wear them, and they will 
increasingly wear them.

[The reason is that you have to:
(a)   get  a statement of the transations on each of your accounts
(b)   reconcile each of your accounts against vouchers
(c)   detect transactions that aren't yours
(d)   construct a complaint
(e)   submit the complaint
(f)    say 'yes, I really mean this and I don't mind if it costs me 
$10 to find out'
(g)   wait
(h)   remember
(i)   maintain the rage
(j)   follow up, if and when they forget

The decline in the use of the cheque as a payment channel had seen 
fraud rates fall. Just 883 suspect cheques were written, although the 
total value of the fraudulent transactions came in at $8.8 million. 
This was down from $18.1 million a year earlier.

Dark side of the online shopping boom: credit card fraud soars
July 13, 2012
Eric Johnston
Financial services editor
http://www.smh.com.au/national/dark-side-of-the-online-shopping-boom-credit-card-fraud-soars-20120712-21ywl.html

Much of the increase in losses is due to hacking of online retailers 
and stolen card details, although increasingly it was a result of 
home computers being compromised. Photo: Jim Rice

ONE IN 15 adults was the victim of credit card fraud over the past 
year with losses blowing out to a record $278 million as the online 
shopping boom leads to more Australians being swindled.

The losses, up more than 50 per cent compared with the previous year, 
have led to banks and card issuers, such as Mastercard and Visa, 
scrambling to keep ahead of fraud, particularly as more payments move 
online and offshore.

Much of the increase in losses is due to hacking of online retailers 
and stolen card details, although increasingly it a result of home 
computers being compromised.

''We've got more transactions and shopping occurring online than has 
traditionally occurred so that's driving these losses,'' said 
National Australia Bank's head of cyber security, Nick Scott. 
''Customers are becoming more comfortable with the concept of 
shopping online and with that comes the potential for having those 
credentials compromised.''

Australians are among the most prolific card users in the world, 
making more than 152 million card transactions a month, according to 
Reserve Bank figures.

Despite the increase in losses banks insist there are no plans to 
water down their commitment to repay fraud victims.

''When fraud does occur, customers can be assured that they are not 
liable for losses from unauthorised transactions where it is clear 
that the user has not contributed to the loss,'' said the chief 
executive of the Australian Bankers Association, Steven Munchenberg.

For credit cards and credit-style cards such as Visa Debit, about 1.1 
million cases of fraud occurred over the past year.

This translates to 96¢ in fraud for every $1000 spent with cards, up 
from 67.2¢ in the previous year. The average value for each 
fraudulent transaction is $250.

Just over 71 per cent of fraud cases involved ''card-not-present'' 
transactions - in which the cardholder and retailer do not meet face 
to face, such as online or over the phone.

Elsewhere, intensive efforts by banks to stamp out ''skimming'' of 
debit cards at eftpos terminals and ATMs have had some success. The 
incidence of fraud due to skimming fell 18 per cent over 2011 to 
$13.7 million.

Much of the falls are attributed to the use of chip technology on debit cards.

The decline in the use of the cheque as a payment channel had lowered 
fraud rates. Just 883 suspect cheques were written. The total value 
of the fraudulent transactions was $8.8 million. This was down from 
$18.1 million a year earlier.

Banks invest hundreds of millions in fraud prevention, and most 
operate sophisticated systems that track transactions and often flag 
suspicious behaviour. This means a credit card used in an Australian 
restaurant and then in Hong Kong within a few hours, would set alarm 
bells ringing.

One new area of risk is when credit card data is held by telecoms or 
utilities for long periods for automatic payments. The entertainment 
giant Sony was hit with three separate attacks last year when its 
PlayStation network was targeted and the details of tens of millions 
of customers compromised.

Mr Scott said banks always tried to stay one step ahead of what 
criminals did. ''At the end of the day our customers don't set out to 
be defrauded. We don't want to move them away from this online 
channel. Online is the next major space in trade.''

Mr Munchenberg said it was critical for customers to upgrade their 
security software.

One million credit card crimes
July 13, 2012
Eric Johnston
Financial services editor
http://www.smh.com.au/national/one-million-credit-card-crimes-20120712-21yyj.html

One in 15 adults were hit with credit card fraud over the past year. 
Photo: Karl Hilzinger

THE online shopping boom has spawned a surge in credit card crime, 
with more than a million cases of card fraud in Australia last year 
and total losses blowing out to a record $278 million - almost double 
the level of two years earlier.

The ballooning losses have prompted a scramble among card issuers, 
including Visa and MasterCard, and banks to try to keep ahead of the 
criminals, as more consumers put themselves at risk with online and 
offshore transactions.

A large proportion of the rise in losses is due to online retailers 
having their systems hacked and credit card details stolen. There has 
also been a big increase in home computers being compromised for 
fraud.

"We've got more transactions and shopping occurring online than has 
traditionally occurred so that's driving these losses," said Nick 
Scott, head of cyber-security at National Australia Bank. "Customers 
are becoming more comfortable with the concept of shopping online and 
with that comes the potential for having those credentials 
compromised," he told The Age.

But despite the increase in losses, banks insist there are no plans 
to water down their commitment to repay fraud victims.

"When fraud does occur, customers can be assured that they are not 
liable for losses from unauthorised transactions where it is clear 
that the user has not contributed to the loss," Australian Bankers 
Association chief Steven Munchenberg said.

New figures from industry body the Australian Payments Clearing 
Association show a total of $300.8 million was lost on credit cards, 
debit cards and cheques over 2011.

The association found that:
-  There were about 1.1 million individual cases of fraud on credit 
cards and debit cards.
-  About 71 per cent of losses were on transactions in which the 
cardholder and retailer did not meet face to face, such as online or 
on the phone.
-  The average value of each fraudulent transaction was $250.
-  The total losses translate to 96¢ in fraud for every $1000 spent 
on cards, up from 67.2¢ in 2010.
-  With the plunge in cheque use came a big fall in cheque fraud. 
Just 883 suspect cheques were written, to a value of $8.8 million, 
down from $18.1 million in 2010.

While online card fraud is booming, efforts by banks to stamp out 
card "skimming" - in which people's details are copied and stolen at 
eftpos terminals and ATMs - have generated some success. The 
incidence of skimming fraud fell 18 per cent in 2011 to $13.7 million.

Much of the fall was attributed to new chip technology on debit cards.

[But only if the transaction is authenticated - and consumers are 
being trained to accept unauthenticated transactions!]

Banks invest hundreds of millions of dollars in fraud prevention, and 
most operate sophisticated systems that track transactions and often 
flag suspicious behaviour. For example, a credit card used in Hong 
Kong within a few hours of being used in a restaurant in Australia 
would set off alarm bells.

One new area of risk has been created with the trend for companies 
such as telcos to hold credit card data for long periods for 
automatic payments.

NAB's Nick Scott said banks always tried to stay ahead of what 
criminals do. "At the end of the day our customers don't set out to 
be defrauded. We don't want to move them away from this online 
channel. Online is the next major space in trade."

Mr Munchenberg said that as technology and consumer payment patterns 
changed, "so too does criminal behaviour".

Matt Levey, of the consumer watchdog Choice, said research was the 
key to avoiding credit card fraud online.

"Safe online shopping means doing your homework. Start with 
recommendations from family and friends, and always try to find out 
as much as possible about the company before you hand over any credit 
card details," Mr Levey said.

He recommended shopping only on websites that use secure payment 
facilities indicated by a locked padlock in the right-hand corner. He 
also advised against responding to unsolicited contact, and to "be 
suspicious of anyone who is pressuring you to buy something right 
away".

With Rachel Wells

-- 
Roger Clarke                                 http://www.rogerclarke.com/

Xamax Consultancy Pty Ltd      78 Sidaway St, Chapman ACT 2611 AUSTRALIA
                    Tel: +61 2 6288 1472, and 6288 6916
mailto:Roger.Clarke at xamax.com.au                http://www.xamax.com.au/

Visiting Professor in the Faculty of Law               University of NSW
Visiting Professor in Computer Science    Australian National University