Credit Card Fraud - Part II
In this issue of our series on credit card fraud we're going to
dig a little deeper into some facts and figures that will most
certainly raise the hair on the back of your neck.
In plain dollars and cents, a single credit card fraud can, and
has, accounted for about forty-million dollars in just one year
alone. That translates to about 900,000 victims in 22 countries.
That's a lot of people and a lot of money and that's just ONE
fraud. For those wondering, this particular fraud involved adult
web sites, but credit card fraud was going on long before the
Internet came to be.
What IS new is the ability to run this fraud across the entire
world with just a mouse click and attack thousands of people in
a very short period of time. The Internet has simply given a
very old scam new legs. It has brutally exposed the security
problems with our credit card system and takes advantage of
these leaks to the max.
The particular fraud mentioned up top was perpetrated by a
company called J K Publications. If you want to read about the
details of this fraud you can do so in the August 1999 issue of
Scientific American. Needless to say, it is some juicy reading.
So just where does the money go when a company or merchant or
even individual perpetrates a credit card fraud? Well, if the
fraud goes undetected in most cases the money goes to the
merchant himself with the middle man, if there is one, usually
getting paid a cut, if for no other reason than to make sure he
keeps his mouth shut. In some cases the money goes to the
merchant and the bank. Yes, there are some crooked banks out
there, especially overseas in countries that will remain
nameless for fear of gun toting gangsters being sent over here
to settle a score.
If, however, the fraud IS detected then the money does get
repaid to the victim but in most cases less than the under $50
amount that the banks have to pay. In other words, the victim
doesn't completely come away from this unscathed. Many European
banks won't pay up at all. As for the merchant account, they
don't want to suffer losses, so many times they will simply just
close up and reopen under a new name.
Because the system itself is weak, the thieves themselves are
rarely caught, and then when they are, they rarely get punished
to the extent that they should. The problem with the system is
that is was designed for buying physical goods with the card
holder being physically present. With Internet transactions the
cardholder no longer has to sign for the transaction, at least
not in the usual way, and this makes it way too easy to cheat
the system.
In our next article in this series we'll look more into the
problems of the system and what victims of fraud can do to help
protect themselves, or for that matter prevent themselves from
being the victim of credit card fraud.