As a result of the UK tightening its stance against card fraud, experts are expecting to see "fraud displacement" away from that country, as syndicates shift operations to parts of the world where card security is less sophisticated.
As of the beginning of this year, the UK - traditionally the global hotspot for plastic-card fraud - has implemented a so-called "liability shift" in terms of card transactions, with the introduction of the PIN and chip system.
Martin Hewgill, fraud expert at UK-based company ACI Worldwide, a fraud detection and risk management solutions developer, explains that the PIN and chip system requires a cardholder to enter a personal identification number as authorisation for a plastic card transaction, instead of merely supplying a signature.
With this system, liability for illegal transactions no longer lies with card issuers or banks, but with retailers.
"Signature authorisation has always been the weakness in card transaction security. With the PIN and chip system, the chip (a micro processor) will authenticate the supplied PIN at the point of sale, preventing the possibility of fraud being committed - if the retailer sticks to the rules and staff is properly trained," Hewgill tells ITWeb.
"In principle, all countries will eventually implement this system."
However, for now, fraudsters are likely to start operating in countries that have not yet implemented chip and PIN technology, and recent fraud trends seem to reflect this.
Card-not-present
Hewgill says that counterfeit-card fraud (the most common type of card fraud in the past), where cards are skimmed or falsified, has peaked in 2001 and has since been in decline, mainly due to improved security measures.
However, "card-not-present" fraud, committed using only a card number for transactions over the telephone, Internet or mail order, has risen drastically, and is currently more prevalent than counterfeit-card fraud.
Hewgill points out that plastic card fraud to the value of about $800 million was detected in the UK, with counterfeit-card fraud accounting for about 25% of this. In 2003, the UK`s Association for Payment Clearing Services recorded total card fraud of lb402.4 million, of which counterfeit card fraud amounted to lb106.7 million.
But, while the chip and PIN system has proved effective in combating counterfeit-card fraud, "card-not-present" fraud and "mail non-receipt" fraud - where a card is intercepted and stolen in the mail - have shown a sharp increase, Hewgill commented.
"Technology is now being developed to get chip and PIN benefits to combat 'card-not-present` fraud. For Internet transactions, the chip authentication programme would entail a device connected to a cardholder`s terminal where a card is inserted and a once-off PIN is generated," Hewgill claims.
He maintains that the higher incidence of "mail non-receipt" fraud is another sign that counterfeit card fraud is shifting to other parts of the world. Ironically, while chip and PIN technology makes counterfeit fraud difficult to commit in the UK, cards are now stolen and used in other countries.
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