MADISON, Wis.—What’s on the minds of credit unions when it comes to fraud?
Based on questions asked during a session at CUNA Mutual Group’s eighth annual Discovery Conference Thursday, it’s ATM card skimming and fallback fraud.
A fact shared by session leader Doralee McNeary, consultant, risk and compliance solutions CUNA Mutual group, mirrored growing concerns CUs apparently have about skimming.
“FICO says that there has been a 70% increase in skimming this year over last year,” said McNeary. “This is a growing crime in the ATM space, certainly.”
CUToday.info has extensively reported on the rapid rise in ATM skimming as crooks have turned to more old-school fraud techniques as EMV takes hold in the U.S.
McNeary spoke about not only have criminals’ intent to steal more from ATMs increased, but so have their own skills and the technology they use. She said micro-cameras that steal PINs are getting more sophisticated and harder to detect, even by trained staff. And the use of deep inset “shimmers,” which fit inside the ATM and cannot be spotted with a routine ATM inspection, are being used more.
McNeary also said that crooks are getting better at choosing targets of ATM fraud, being able to empty higher balance accounts quickly.
While training staff helps detect ATM compromises, McNeary said that leveraging technology might be the best move a credit union can make today. She talked about software that can be installed in ATMs to detect shimmers and other skimming devices, as well as new ATMs that claim to be able to prevent skimming entirely.
CUToday.info recently reported that the $1.9-billion GTE Financial in Tampa, Fla., has invested in 61 “skimmer-proof” ATMs from Diebold. The credit union said that that crooks’ increasing focus on skimming, which GTE does not see slowing down, as the reason to convert its entire ATM fleet to the skimmer-proof machines. The CU said the hardware investment will be more than offset by fraud savings.
Asked by an attendee why law local enforcement often does not react quickly enough to a skimming attack, and is often not very helpful, McNeary said, “Sometimes local law enforcement has their hands full with other things. In Houston I know the Secret Service will help you, as well as the International Fraud Association.”
McNeary advised credit unions to follow a checklist of routine steps to prevent ATM skimming, noting that CUNA Mutual has such a checklist on its website.
Fallback fraud was also asked about by several attendees. Chip card fallback fraud—where crooks place a phony chip on a counterfeit card armed with phony mag stripe data—has been growing since the U.S. began its EMV migration. When the phony card is inserted into a POS terminal, the fake chip tells the reader the card is damaged and to fall back to use the mag stripe, which contains compromised card data.
“We have a risk review on fallback transactions on the CUNA Mutual website,” said McNeary.
But McNeary warned that using a strategy of blocking many or all fallback transactions could backfire on the credit union, upsetting members performing legitimate transactions when their swipe is blocked due to the CU’s fallback concerns.
“I suggest (instead of using a blocking strategy) to look more closely at your fraud patterns to pick when you block a fallback transaction. Typically, only 1%-2% of all fallback transactions are fraudulent.”