AUTOMATED TELLER MACHINE ATM FRAUD 2nd version

BY

AUTOMATED TELLER MACHINE (ATM) FRAUD, CAUSES, EFFECTS AND

CONTROL

JIBRIL ALI ZANGINA

FOR DESERT CONSULTANCY SERVICES

KEY WORDS

• ATM FRAUD• AUTOMATED TELLER MACHINE (ATM)• FRAUD• CAUSES OF ATM FRAUD• EFFECTS OF FRAUD ATM• CONTROL/PREVENTION

•The term "ATM fraud" refers to an illegal transaction that is committed by using an ATM; this may include fraudulent deposits or skimming card information.

INTRODUCTION

Ogunsemore (1992) defined ATM as a cash dispenser which is designed to enable customers to enjoy banking service without coming into contact with Bank Tellers (Cashiers, Bankers or Bank clerk). The ATM performs the duties of counter staff and cashiers as cash can be withdrawn or deposited using the automated machine.

Fraud is a deceit, treachery, trickery or sham deliberately practiced in order to secure unfair, unjust, imbalanced or unlawful gain. As a legal construct, concept or hypotheses, fraud is both a civil wrong and criminal wrong. Victims can sue the perpetrator to recover valuables or to prevent it and if found criminally wrong, perpetrators can be prosecuted.

• Obiano (2009) blamed the menace of ATM frauds on indiscriminate issue of ATM card without regard to the literacy level of the customer. He noted that one of the frequent causes of fraud is when customers are careless with their cards and pin numbers as well as their response to unsolicited, undesirable or uninvited e-mail, text messages or phone calls to provide their card details.

CAUSES OF ATM FRAUD

The use of old fashioned ATM card software (meant to reduce cost of operation by some banks) that are considered as cheap, low-cost or economical alternative by Banks (which compromises quality and security of the service) also contribute immensely to ATM fraud as some reported cases of Europeans, Caucasians and Americans invading Uganda and other part of the third-world countries in Africa and other part of the world, for the solitary purpose of breaching the cheap security system put in place by the banks for their heinous acts and quest for unlawful self-aggrandizement.

• Financial Costs; - Businesses do not consider the loss of credit cards via the mail, or in other ways, to be related to identity theft, and so such losses are not reported as such. As for individuals, the costs are enormous, but there are no statistics for how great that cost is. First, there is the direct loss of money from personal funds. Second, there is the loss of funds required to secure and maintain the remaining funds. Third, there are the expenses required to track the problems. Huge amounts of government funds are spent at the local, state and federal levels to deal with identity theft, whether through law enforcement, the courts or the correctional system. All these financial costs add up, either through higher bank fees, higher taxes or higher security expenses.

EFFECTS OF ATM FRAUD

ATM fraud will not be possible without an identity theft or impersonation; the following are the effect of this menace to the individual, businesses and the government.

Legal Costs: - For individuals, businesses and governments, the legal ramifications of identity theft are untold. There is the damage to a person's credibility; this can take years to repair. For businesses, there is a drain on resources and a strain on personnel as they try to determine whether a client has been telling the truth. Identity theft undermines the very foundation of a free-market society, which is trust. People are perceived as less trustworthy, a greater degree of control has to be initiated and implemented by the government to protect society.

Psychological Costs: - Beyond the financial and legal costs of identity theft, there are the psychological and emotional ramifications. An individual who has to spend thousands of dollars and precious time dealing with stolen identity often has pain and suffering to cope with. He can feel violated and have emotional ups and downs. The victim may fear the theft will happen again and will become less trusting of people in general. The result is an unraveling of society's moral fabric as those who steal identities get away with terrorizing law-abiding citizens. If identity theft is not curbed or reduced, or becomes less rampant, honest people become demoralized which may lead to temporary Mental Anguish.

Identity theft can cause added stress on your body. Identity theft victims often claim a feeling of being used, abused, misused and refused. The effect of having someone steal your identity to make unauthorized purchases can take a toll on your physical and emotional health, especially when thousands of Naira in expenses has been illegally accumulated in your name.

TYPES OF ATM FRAUD

A REPORT ON GLOBAL ATM FRAUDS (2007) IDENTIFIED THE FOLLOWING TYPES OF ATM FRAUDS:

(a) Shoulder Surfing: This is a fraud method in which the ATM fraudsters use a giraffe method to monitor the information the customer keys-in into the ATM machine, unknown to the customers.

(b) Lebanese Loop/ skimming: This is a device used to commit and identity theft by exploiting Automated Teller Machine (ATM). Its name comes from its regular use among Lebanese financial crime perpetrators, although it has now spread to various other international crime groups. Skimming involves the use of a storage device to copy your credit or debit card information. Any clerk or salesperson could easily run your card through a skimming device before or after running it for your purchase without you noticing. Pay close attention to what is being done with your card; never let a clerk walk out of sight with your debit or credit card. It is also possible for thieves to place skimming devices over ATM slots so that they scan your card on its way into the ATM machine.

These devices protrude from the machine and often look out of place with the ATM design. A card skimmer is a device placed on the ATM that is unrecognizable by most users of the machine. The device actually reads and records the card information, as well as the pin number entered by the cardholder, in some cases. The thief simply returns to the ATM at a later time and removes the device and then uses the information gathered to make clone cards.

(c) Using Stolen Cards: This is a situation in which the ATM card of a customer is stolen and presented by a fake presenter or rather an imposter.(d) Card Jamming: Once the ATM card is jammed, fraudster pretending as a genuine sympathizer will suggest that the victim re-enter his or her security code. When the card holder ultimately leaves in despair the fraudster retrieves the card and enters the code that he has doctored clandestinely.

(e) Use of Fake Cards: Fraudsters use data collected from tiny cameras and devices called ‘skimmers’ that capture and record bank account information and subsequently create a clone of the original card.(f) Duplicate ATMs: The fraudsters use software which records the passwords typed on those machines. Thereafter duplicate cards are manufactured and money is withdrawn with the use of stolen Passwords. Sometimes such frauds are insiders’ job with the collusion of the employees of the company issuing the ATM Cards.

(g) Card Swapping: This is a card theft trick whereby a fraudster poses as a “Good Samaritan” after forcing the ATM to malfunction and then uses a sleight of hand to substitute the customer’s card with an old bank card. As the customer tries to push the card through, the fraudster offer assistance by pretending to help the customer push through the card.(h) ATM Burglary: This involve the use of explosives in form of gas canisters or bomb to blast the ATM and cart away with the proceeds.

CONTROLS MEASURES

•TO CUSTOMERS•(i). Customers must ensure that they are not careless about (or with) their Personal Identification Number and must not release their cards or delegate anyone to ATM machine.

(II). TO PROTECT THEMSELVES FROM SHOULDER SURFING, CUSTOMERS MUST ENSURE THAT THOSE WHO ARE ON THE QUEUE FOR SIMILAR TRANSACTION ARE FAR AWAY FROM WHERE THEY ARE DOING TRANSACTION WITH THE ATM. (III). IF THE ATM OF A CUSTOMER IS STOLEN OR LOST, THE CUSTOMER SHOULD ALERT THE BANK IMMEDIATELY.

(iv). Sign new cards as soon as they arrive and cut up the old ones when they expire.(v). If your card got stuck in the ATM, do not reveal your PIN even to concerned bank officials. It suffices for the official to know that your card got stuck in the ATM.(Vi). Avoid being last or first to use the ATM.

(vii). Notify the bank when you notice unfamiliar gadgets attached to the ATM. (viii). Destroy old debit cards.(ix). Beware of phishing scams and know who you are interacting with.

Creating a designated time for the card users; The customers can choose times for using ATM on phone, thus once anybody comes outside the designated

time of the customer, he could be arrested.

TO BANKS

• The ATM cards can be provided with microchip -technology that will make it difficult to forge.

• Illiterate customers should not be issued ATM cards.

• Banks can monitor the ATM continuously by installing closed-circuit cameras and other devices.

• The banks can employ customized software that records relevant information on ATM cards so that banks can establish whether unauthorized transaction has taken place or not.

• The banks must alert customers on any suspicious and unusual transaction on their accounts.

• There must be adequate security around the ATM.

• Biometric tokens are the safest means of preventing ATM frauds. The most widely used biometric tokens are finger prints, irises, faces and palms. The fraudster may match everything but they can never match any of these unique features of the customer.

CONCLUSION• This paper is of the opinion that every nation has a peculiar ATM fraud that is common to it. The e-banking has great possibilities but that would be dependent on the extent to which the ATM frauds are controlled. Banks should not suffer in silence; they should use the state of the art equipment for it to curtail the menace of ATM fraud at all cost to avoid being a victim to this heinous and somewhat preventable act. As a customer, anything you can do to make a thief's work more difficult, whether it's staying on top of your balance, spreading your cash out across multiple accounts or making purchases with credit cards instead of debit cards will help safeguard your checking account and decrease your chances of becoming a victim of debit card fraud.