ATM Fraud: Causes and Techniques/Types

Internet banking frauds and credit card frauds are growing in India. Internet is global in nature with no single territory and jurisdiction. This is both beneficial as well as harmful. It is beneficial as it connects people and organisation and helps them in interacting efficiently. It is dangerous as well as it provides the means to commit cyber crimes by its misuse.

According to PRAVEEN DALAL, IT Expert, “The modem contemporary era has replaced these traditional monetary instruments from a paper and metal based currency to “plastic money” in the form of credit cards, debit cards, etc. This has resulted in the increasing use of ATM all over the world. The use of ATM is not only safe but is also convenient. This safety and convenience, unfortunately, has an evil side as well that does not originate from the use of plastic money rather by the misuse of the same. This evil side is reflected in the form of ATM frauds that is a global problem. The use of plastic money is increasing day by day for payment of shopping bills, electricity bills, school fees, phone bills, insurance premium, travelling bills and even petrol bills. The convenience and safety that credit cards carry with their use has been instrumental in increasing both credit card volumes and usage. This growth is not only in positive use of the same but as well as the negative use of the same. The world at large is struggling to increase the convenience and safety on the one hand and to reduce its misuse on the other. An effective remedy for prevention of ATM frauds, however, cannot be provided unless we understand the true nature of the problem.”

Many ATM vendors have devised specialized machines, embedded with biometric devices for authentication. Catering to the rural population, these machines have enabled them to interact with the machine in their local language and on a graphical user interface. The rural customer is seemed to accept this new medium. This has the potential to further widen the scope of ATM usage in the interior parts of the country.

Causes of ATM fraud

Most ATM frauds happen due to the negligence of customers in using the ATM. The cases of ATM frauds in India are more due to giving up Personal Identification Number (PIN) to others, than by sophisticated crimes like skimming. There are many cases where customers give out their PIN number to their driver or a relative to withdraw money for them. Most ATM frauds in India, thus, happen due to this negligence, and not ‘fraud’ per se.

In view of PRAVEEN DALAL, “ATM frauds happen when someone leaves his/her credit card unattended in a vehicle or changing room or allows anyone else to use the card or loses the card that is misused by others or discloses the Personal Identification Number (PIN) to others, etc. These mistakes allow the offender to withdraw money by using the stolen information. Fraudsters are using special devices, skimmers, duplicate ATMs, etc to withdraw money from ATMs. Sometimes, such frauds are an insider job with the collusion of the employees of the company issuing those cards”.

Techniques/Types  of ATM fraud:-

ATM frauds are executed by techniques like wire tapping, replicating the digital signature of the card, getting authentic personal data at fake data call centres, tampering ATM slots by rigging, phishing through e-mail accounts and fixing hidden cameras at vantage points inside ATM installations to steal the secret PIN number of the customers. Fraudsters use special devices like skimmers, duplicate ATMs, to withdraw stacks of money from ATMs.  The most common types of ATM fraud are as following-

(1) Card Theft:-Card theft is where the perpetrator physically obtains the consumer’s card at or in the vicinity of an ATM. The most common method of card theft is Card Trapping. The most popular method of trapping a card at the ATM is known as Lebanese Loop. A Lebanese Loop is designed to be entered within the card entry slot of the ATM card reader in such a way as it does not prevent the consumer from entering his card, but it does prevent the ATM card reader from ejecting or returning the card to the consumer. The perpetrator can subsequently remove the trapped card once the consumer has departed from the ATM with the belief that the ATM has captured or swallowed his card.

(2) PIN Compromise:-PIN compromise methods range from the very technically sophisticated to the relatively easy technique known as shoulder surfing. Shoulder surfing involves the perpetrator standing close enough to the consumer to observe the numbers entered on the key pad. A more sophisticated method of observation or surveillance involves the use of a miniature camera which can either transmit the image of the PIN being entered or store the recording within the device. With the increase in the number of mobile phones with video capture capabilities, such phones are adapted to compromise PINs.

(3) Card Skimming:-Card skimming involves making a copy of the information encoded on the magnetic stripe of the card. There are various different types of skimming device designed to be used in different environments, from hand held devices through door access skimmers to miniature card entry slot skimmers. Hand held skimming devices are more commonly associated with card skimming in restaurants and other retail establishments.

(4) Cash Trapping:-Cash trapping is the term used to describe attacks where the consumer’s cash is trapped and prevented from being presented or delivered to the consumer. The variety of trapping devices is significant, ranging from those which require insertion within the ATM’s cash dispenser through false fronts to well engineered electro-mechanical devices which simulate the removal of the cash by the consumer.

(5) Transaction Reversal:-Transaction reversal techniques involve highly skilled manipulation of the ATM during a transaction with the result that the host computer believes that the consumer did not receive his cash and thus re-credits or reverses the transaction.

(6) Deposit Fraud:-Deposit fraud covers a variety of criminal techniques from making false deposits to trapping deposits through skilful manipulation of the deposit accepting device. False deposit fraud includes exploiting processing rules to draw on funds before they have been verified and officially cleared for crediting to an account.

In a recent case investigated in Nagpur region, ATM cards belonging to new applicants were dispatched through official couriers at the residences of the victims after their applications were sanctioned by the bank authorities. “Interestingly, the ATM cards which belonged to applicants whose addresses were either not traced or were absent during delivery, were received by the bank officials and after getting the possession of the same cards, they started withdrawing the money from the accounts of the depositors of the bank. Banks never ask for personal information of their patrons over the e-mail, through post or by sending executives. Customers should very carefully mention their user ID’s, credit card numbers and passwords under their own watchful eyes.


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