ON GUARD- Fraud Spotter - #14:
ATM Scams
by Laura Quarantiello
© 2004 Tiare Publications Group
Another modern miracle of banking electronics is the Automatic
Teller Machine. The ATM allows deposits and withdrawals to be made
easily, without having to enter a bank and stand in line, waiting to
be helped by a flesh and blood teller. The ATM machine is also open
day and night, making cash instantly available whatever the hour.
Unfortunately, for all its convenience, removing the human teller
and handing control over to a machine has opened up another
opportunity to abuse the system. Indeed, ATM fraud has been
designated a federal crime
Basically, an ATM is a remote terminal linked to a bank's account
records. It may be free-standing or connected to a bank's outer
wall. Customers are able to perform transactions such as
withdrawals, deposits, account transfers, balance inquiries, loan,
mortgage and bill payments. Access is gained through the use of an
ATM card magnetically encoded with a Personal Identification Number
(PIN). PIN's may be chosen by the user or bank-selected, depending
on the security procedures used by the bank, and are usually
composed of three to eight digits.
When a customer inserts his card into an ATM access slot, the
machine reads the encoded data on the magnetic strip and confirms
that the user holds an account at the bank. The machine then queries
the bank's computer as to the card's validity, checking to see if it
has expired or been reported as stolen. The display screen then asks
the customer for his PIN number. Depending on security procedures,
the ATM may allow up to six attempts at entering the correct PIN
before rejecting or confiscating the card.
Once a valid PIN has been entered and accepted, the display screen
asks the customer to indicate the type of transaction required. Once
this information is given, the bank computer checks the account to
assure that such a transaction can be performed with the currently
available funds and, based on the answer, either authorizes the
action or "fails" it. All transactions are recorded on an internal
log and, as an added safety measure; the machine may even take a
photograph of the customer. Some ATM's have 24-hour video
surveillance coverage. A report by Public Systems Evaluation, Inc.
of Cambridge, Massachusetts, conducted under a Bureau of Justice
Statistic grant, identified 22 potential vulnerabilities in the ATM
system:
1) Fraudulently opened account.
2) Card stolen from storage, processing or vendor sites.
3) Theft of card from mail by employee of the Post Office.
4) Theft of card and PIN from mailbox.
5) Loss of card or theft of card during other crime, such as
burglary or larceny.
6) Unauthorized use of card by another party.
7) Misrepresented ATM transaction.
8) Tampering with magnetic strip.
9) Neglecting to remove card from ATM machine.
10) Overdraft.
11) Depositing fraudulent check, then withdrawing against
insufficient funds.
12) Overdraft by account holder while off-line.
13) Fraudulent reporting that ATM did not dispense correct amount.
14) Vandalism of ATM.
15) Robbery of ATM customer.
16) Theft from ATM envelops.
17) Theft of replenishment cash by service person.
18) Breach of data communications line.
19) Tampering with ATM software.
20) Tampering with account or transaction data.
21) Account data theft.
22) Erroneous system procedures allowing withdrawal from a separate
account.
Stolen cards lead the list as the most popular form of ATM fraud.
Cards can be taken from mailboxes, lifted by pickpockets or purse
stealers, or obtained in a robbery or burglary. Of course the card
is of little use without the Personal Identification Number.
Unfortunately, card users often write down the PIN and keep it with
the card. Some people actually jot down their PIN on the card
itself! PIN's are also obtained by criminals who stand behind the
customer and watch as the number is entered, then distract the
customer and steal the card, or simply rob the customer later.
Sophisticated ATM con artists use a sensitive, highly directional
microphone to pick up and record the tones generated as the PIN is
entered, then they decode the tones using a commonly available
decoder device. Video cameras and binoculars are also used to
observe PIN code entries.
In order to stop a string of charges from appearing on a statement,
the customer must notify the issuer immediately if the card is
stolen. Bank officials can flag the card's number in the ATM
computer - an action called "hot carding" -, which instructs the
machine to confiscate the card the next time it is used.
Unfortunately, the card can be used many times before the customer
realizes it's been stolen.
ATM machines can be manipulated by smart con men that type in a
deposit amount and then insert an empty deposit envelope. A
withdrawal then results in "free" cash. Some ATM's are taken off-
line for maintenance or other procedures, which allow tricksters
time to overdraw.
Customers themselves may decide to conduct a little ATM larceny by
claiming an ATM problem. A customer may say that there has been an
unauthorized withdrawal on his account, or may
claim short dispensing (not receiving the full amount of cash
requested from the machine), or may say that the deposit was never
credited or that the credited amount is inaccurate.
Preventing ATM card fraud is not entirely the cardholder's
responsibility, but some tips and statistics can help to reduce ATM
card fraud. Cards are targets for theft so never keep your PIN
number near your card; store it in a separate, carefully chosen
place. If a robber demands your PIN, you may want to give him a
false number, unless you are in circumstances where the number can
be immediately tested at a machine. That has to be your call.
Be extremely careful around ATM machines. Etiquette usually demands
that those waiting their turn at the ATM stand at a respectful
distance behind ATM users. Before entering your PIN
glance around to make sure no one is watching. Unfortunately, this
isn't foolproof. As mentioned earlier, industrious con artists have
been known to use video cameras to catch PIN codes. Always shield
the keypad with your free hand while entering the code. Try to use
ATM's only during the daytime, when robbery is less likely. If you
are in doubt, go inside to transact your business.
If you lose your card, report the loss to the bank immediately. Not
only will this reduce the amount of money for which you may be
liable, it also reduces the time window in which the thief will be
able to make use of the card.
Laura Quarantiello hates criminals and the crimes they commit. Her
book "On Guard" can help you minimize the risk you family faces from
criminal elements. Get more information at:
www.tiare.com/onguard.htm
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