HONOLULU—From ATM vestibule skimmers to “universal keys” that let crooks easily exploit gas pumps, attendees at NAFCU’s Annual Conference learned about some of the latest trends in fraud.
In some cases, the latest fraud attacks are even leading to fraud-related costs for credit unions that are exceeding monthly interchange revenue, one fraud expert stated.
Ann Davidson, VP of risk consulting for Allied Solutions, told NAFCU’s annual meeting that one of the best ways to prevent fraud is via education.
“You need to educate your staff, your members and yourselves on what is happening in the fraud area and what can be done to prevent it,” said Davidson.
Davidson emphasized that board member education is critical in that boards influence many decisions regarding the CU’s card fraud and card payment policies.
For example, Davidson described how chip card fallback fraud—where crooks place a phony chip on a counterfeit card armed with phony mag stripe data—is a critical concern. 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.
Davidson said credit unions face some tough decisions regarding this crime, especially since the credit union is on the hook for the fraud loss. What CUs need to consider, she said, is how often they will allow a fallback and for how much money.
“The issuer can decide, one, if they will allow fallback fraud and the dollar amount,” she said. “You can, for example, allow one fallback per card for no more than $100. Or, you could block all fallbacks.”
But Davidson emphasized if the latter choice is made that the CU faces a risk versus service issue.
“You can’t block your members’ cards too often or at too many stores,” she warned. “Do that and your members will stop using your card.”
Davidson pointed out that crooks are very willing to go with large numbers of small-dollar crimes, noting that one credit union recently faced $250,000 in fraud losses all from swipes under $50 each.
As CUToday.info has extensively reported, ATM skimming attacks have been rising in the last two years. Davidson said she does not expect the crime to lessen. She pointed out some of the unique ways crooks are attacking ATMs, including placing skimming devices on the doors of ATM vestibules.
She said that crooks have learned that while FIs have improved their ATM security with more regular inspections, banks and CUs are not paying much attention to ATM vestibule doors—and fraudsters know that.
“Criminals are placing card skimmers on the vestibule doors, so when the cardholder swipes his card to go inside the vestibule, the crooks get the information,” she said. “We just learned of a credit union that ha 1,000 cards skimmed at a vestibule door.”
Finally, Davidson said that it is simply too easy for crooks to compromise gas pumps with internal card skimmers. She explained that a “universal key” exists to open the door to the payment mechanism of gas pumps. Davidson told credit unions to work with their states, municipalities and communities to demand that gas station have a unique key for their gas pumps.