Debit Card Fraud - How does fraud occur?
How does fraud occur?
In order for fraud to occur, a thief needs both your PIN and the magnetic stripe information on the back of your card. The PIN is not stored on the card's magnetic stripe. So, if your card is stolen or duplicated, the thief has to find some way to get your PIN. Common methods used to steal or duplicate cards and obtain the PIN are:
- Easily identified PINs – Your purse or wallet is stolen and the thief finds your PIN written down somewhere close to your card, or, successfully tries a commonly used PIN, such as your birth date, based on information found in your wallet. In this instance, you would be liable for your loss.
- Surf and Pick Pocket – A thief watches as you enter the PIN and subsequently distracts you and steals your debit card. If you are a proven victim of such a fraud, your losses would be covered by your financial institution.
- Card Jam – Various devices are used to jam your card in the bank machine. After your card becomes jammed, a helpful stranger suggests that you try to input your PIN a few times, but the card remains stuck. After you leave, they remove your card and have your PIN. Again, if you are a proven victim of such a fraud, your losses would be covered by your financial institution.
- Skim and Clone (Transaction is sent to the financial institution) – There have been cases of equipment being set up at a business to illegally collect your PIN and card information. For example, when you hand over your card to make a purchase, the card is run through a device that sends your magnetic stripe information to the financial institution. The person then swipes the card a second time to record the information into a hidden device which allows them to make a duplicate of the card. At the same time, a camera records your PIN information. In these cases, if you are a proven victim of such a fraud, your losses would be covered by your financial institution.
- Bogus machines (Transaction is not sent to the financial institution) – A bogus machine, that replaces the real PIN Pad, lifts your card and PIN information and issues a transaction receipt but does not actually send the transaction to the FI. The implicated employee covers your purchase by putting cash in the till so that the owner is unaware of any fraud since the outlet's books balance. At a future date, the employee uses the stolen data to create a card to empty the funds from your bank account. The evidence of the fraud could be that you have a transaction receipt (if indeed you received one) for a purchase but the purchase does not appear on your bank statement. In these cases, if you are a proven victim of such a fraud, your losses would be covered by your financial institution.
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