Chip & Pin fraud set to rise

By TOM NICHOLLS
Updated: 08:54 EST, 11 May 2006

THE chip and Pin card payment system is increasingly vulnerable to attack from fraudsters, a leading expert has warned.

Fraud consultant Frank Abagnale is warning the system is being targeted by resourceful, technology-savvy and well- funded scam merchants. He says information transmitted by wireless chip-and Pin payment machines, popular in restaurants and pubs where customers pay at the table, are vulnerable to interception by a fraudster with a laptop and a snooping device.

Other scams to intercept personal and bank details are being aided by the availability of card skimmers being sold for less than £100 on the internet.

Shell this week suspended the chip and Pin system, brought in last year to reduce credit-card fraud, at 600 petrol stations after more than £1m was drained from customers' accounts.

Abagnale - a former master forger who became an anti-fraud consultant-to the FBI for 31 years and on whomthe film Catch Me If You Can, starring Leonardo DiCaprio, was based - says the Shell incident forms part of a major new technology driven crime wave. 'Technology has made what I did very simple. Crime is getting easier, faster and harder to detect,' he adds.

Although card fraud has fallen 13% to £439.5m since chip-and-pin became widely used, the decline has been less dramatic than some had hoped and the benefit will decline as fraudsters take advantage of loopholes in the system. Abagnale also predicts forgers will produce perfect replicas of UK identity cards within six months of their introduction.

That will be a concern as the fastest-growing area of fraud involves identity theft. The Home Office estimates it costs the UK £1.7 billion a year, with about 100,000 victims a year in this country alone.

But Abagnale says victims can expect little help from the authorities. For banks, a certain amount of fraud is an acceptable part of doing business, because of the high cost of fighting it. Punishment for fraud and recovery of stolen funds 'are both so rare that prevention is the only viable course of action', he adds.

While no personal banking system or device is impervious to crime, some are more vulnerable than others, he says, advising against cheques because they carry vital personal information that can be used for identity theft. Credit cards are a better risk than debit cards because, in the event of a fraud, it is harder to persuade a bank to refund stolen money than to refuse to pay off a credit-card debt.

Abagnale says he would not use online banking services unless a bank accepts full liability for frauds.