Credit card fraud is one of the biggest loss concerns in a bank. The frauds are usually performed by a group of people either using counterfeit credit cards to cheat unsuspecting merchants or in collaboration with the merchants to cheat the banks. This group of people who performed fraud is known as fraud syndicates.
Types of frauds
There are many types of frauds that have identified by the banks. To ease the efforts of fighting fraud, they are classified into various categories by their natures
1. Counterfeit cards
Counterfeit credit card transactions are one of the biggest fraud reasons in the industry. It make up about 40% of all money lost through credit card frauds. The syndicates used various methods to obtain card information to create counterfeit cards. The illegally created counterfeit cards will have all the information of the genuine credit cards in their magnetic stripes. One of the known methods used is card skimming whereby information contained on magnetic stripes of cards recorded into chips illegally installed into EDC machines or through wire tapping technology.
2. Lost or stolen cards
Lost and stolen credit card fraud formed 20% or the second highest fraud reason. In most cases, the genuine cards are stolen from cardholders in their workplace, gymnasium and unattended vehicles.
3. Mail order or telephone order Fraud
Mail order or telephone order fraud accounts for 10% or is the third highest fraud reason. Usually the fraud syndicates use shady telemarketers and deceptive internet sites to obtain credit card information from the genuine cardholders. In this kind of fraud, the three digits the syndicates need the security number or card verification code (CVC2) which is printed at the back of the genuine card to complete the fraud transactions.
4. Non-receipt Fraud
Non-receipt fraud occurs when the credit cards are intercepted by the syndicates when they are on the way to the cardholders which are usually by courier or registered mails. This fraud reason accounts for about 7% of the total fraud transactions.
4. Other fraud reasons
The balance 23% of fraud transactions made up of the following fraud reasons not exhaustive:
a. Fraudulent applications
b. No cardholder signatures
c. Unauthorized transactions
d. Invalid transactions