Plastic cards in Ukraine – fraud classification
According to Ukraine’s National Bank Payment System Department, on July 1, 2003, eighty-five banks (nearly 55% of their total number) are members of internal and international payment systems that issue and obtain payment cards.
In the second quarter of 2003, the total quantity of operating cards issued by Ukrainian banks has run up to 8% and makes up more than 8016 pieces.
The number of ATMs has come up to 3770, POS terminals – up to 23817 and imprinters – up to 26162.
Payment card operations have also risen up to 35 million, plastic card turnovers reached 7762 million UAH.
As well, cards account balances has risen up to 2579 million UAH (for natural persons – up to 2486 million UAH, for legal entities – up to 92.8 million UAH).
On July 1, 2003, 59.8% of cards account balances for natural persons were in national, and 40.2% in foreign currency. Cards account balances of legal entities made up 73.9% in national, and 26.1% in foreign currency.
Nowadays there is also a risk of losses increase caused by crimes committed in field of bank technologies. Official statistics illustrates that during 2000-2003, 78.5% of all losses were caused by economic crimes committed in the field of commercial banks. Only the level of credit frauds in Ukraine is 4-5 times higher than in other countries (more than 82% falls on Kiev).
The system of legal and financial security of banks and their clients, as well as its development should be considered together with methods of illegal plastic card transactions that can be divided into nine main types:
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Cards forgery;
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Lost or stolen cards fraud;
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Multiple payment of services and goods;
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Post or phone order fraud;
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Repeated cash withdrawals;
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Slip fraud;
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ATM fraud;
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Skimming (connecting an electronic recorder to the POS-terminal or ATM);
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Other.
Crimes committed by using plastic cards may be regarded as the most dangerous economic crimes because of their negative influence on work not only of a bank but also on work of other legal entities. Such crimes cover corpus delicti specified in Criminal Code of Ukraine, Articles 36, 90, 200.
The classification given above shows that ways of committing card frauds have distinctive features. Generally, they are based on criminal actions directed on obtaining any access to the cashless settlement system (preparatory stage of fraud). In most cases, all these procedures are perfectly disguised what makes them hard to reveal, expose and investigate the frauds.
One of the widely used methods of obtaining payment card requisites in criminal structure is creating porno web sites. According to foreign special services, the Internet porno business is closely related to criminal groups specializing in plastic card frauds.
Porno web sites are also used to launder stolen card requisites. For example, after visiting of a porno site, a card owner finds out, with surprise, that he/she subscribed for the service and it will collect subscription fees monthly, and it is quite problematic to cancel it.
Finally, card requisites can be empirically found. For example, if a swindler knows a card number, he/she can easily determine card’s validity term. In fact, the plastic card is usually issued for two-year term. The parameter of “card validity term” defines a month and two last figures of a year of card’s expiry date. Thus, a swindler should look through only 24 possible variants of this parameter. This can be done easily in the virtual world. A swindler should send at least 24 authorising requests to obtain a highly probable card validity term. After that, obtained card requisites may be used in various ways. The simplest is to perform a transaction using e-commerce. However, making a counterfeit card with found requisites to purchase in real stores is more effective. In that case, such a fraud is classified as “Counterfeit”.
In conclusion, it should be noted that all plastic card frauds are based on using illegally obtained requisites of currently valid cards. The increase in domestic plastic card market makes the problem of its security more acute. The mass issue of plastic cards and their cheapness increases the risk of their fraud. Though methods of fighting plastic card frauds are being constantly improved, bank losses make up millions of USD. Annually swindlers stole about 2 billion USD all over the world using Visa and Europay cards. The practice shows that the number of card frauds depends on the maturity of the market. Swindlers are looking for countries with considerable issues of plastic cards but without enough experience in fighting card misuses.