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PIN Fraud – Keeping Your Customers Safe

(Adopted from ICBA)

In recent months, a flurry of articles has warned consumers that criminals are stealing bank account data from third-party companies, and then using the data to steal money from related accounts using counterfeit cards at ATM machines. While there is no doubt that sophisticated security breaches and network hacks are taking place, the most frequently occurring types of PIN fraud are much more pedestrian.

Skimming is the most prevalent form of debit fraud. It has earned this dubious honor, namely because it's a relatively easy crime to perpetrate and more importantly, it's very effective. Criminals plant a device on an ATM that downloads information about a cardholder's account to a remote computer. A hidden camera (or in some instances an individual peeping over the shoulder of the victim) records the cardholder's PIN.

Thieves only need to leave the device on the ATM for thirty to forty-five minutes to quickly access numerous checking and savings accounts. By the time the bank detects a problem (or the cardholder realizes that their account balance has been diminished) the criminals and the money are long gone.

ICBA Bancard's Senior Vice President Kevin Bell states that while PIN fraud has traditionally been low, it has been increasing over time and exposing industry weaknesses. Bell points to the rapid deployment of PIN/POS devices and says that customers' expectations of 24-hour account access have contributed to the problem by expanding potential points of compromise.

To ward off potential skimmers many of the ATMs that are manufactured today come with advanced security features such as enhanced card drives that scramble magnetic stripe data or fraudulent device inhibitors that detect and notify a financial institution if the ATM has been tampered with.

"The problem is, we're not simply talking about ATMs," says Bell. "Most merchants have a PIN device for customers to pay for their purchases at the point of sale. This includes department stores, gas stations and even some restaurants where you can pay for your meal at the table."

Fortunately there are a few relatively simple steps that financial institutions can take to help mitigate PIN fraud.

Bell says that every bank should begin by educating their debit cardholders. "You would be surprised how duplicitous thieves are and how easily people can be taken advantage of. Tell your customers to never give their PIN to anyone –especially the friendly person who is trying to help them at the ATM."

He also recommends that cardholders shield their PIN number when entering it into the PIN pad at an ATM or a merchant terminal. "When withdrawing money be aware of your surroundings at all times." And while it may seem like common sense, Bell says that debit cardholders should never write their PIN on the card itself or its carrying case.

Customers should also follow their gut feelings and not use ATMs that just seem wrong or have an out of the ordinary appearance. Fraudsters have been known to fabricate fake ATMs.

"These are just a few tactics that cardholders can use to help keep their PIN information and their money secure," says Bell. "Merchants, network owners, financial institutions and ATM manufacturers are all fighting PIN fraud. Consumers can too."