Friday, 13 January 2017


Here we are going to talk about credit card and cheque fraud happening around this world.

First, what a credit card fraud is?

Credit card fraud is a wide-ranging term for theft and fraud committed using or involving a payment card, such as a credit card or debit card, as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Credit card fraud is also an adjunct to identity theft. According to the United States Federal Trade Commission, while the rate of identity theft had been holding steady during the mid 2000s, it increased by 21 percent in 2008. However, credit card fraud, that crime which most people associate with ID theft, decreased as a percentage of all ID theft complaints for the sixth year in a row.

People misuse credit cards and they purchase merchandise for thousands of dollars before the card holder realizes his card has been stolen. The only common security measure on all cards is a signature panel, but, depending on its exact design, a signature may be relatively easy to forge. Some merchants will demand to see a picture ID, such as a driver's license, to verify the identity of the purchaser, and some credit cards include the holder's picture on the card itself. In some jurisdictions, it is illegal for merchants to demand card holder identification. Self-serve payment systems (gas stations, kiosks, etc.) are common targets for stolen cards, as there is no way to verify the card holder's identity. There is also a new law that has been implemented that identification or a signature is only required for purchases above $50, unless stated in the policy of the merchant. This new law makes it easier for credit card theft to take place as well because it is not making it necessary for a form of identification to be presented, so as long as the fraud is done at what is considered to be a small amount, little to no action is taken by the merchant to prevent it.

Famous credit card attacks.

Between July 2005 and mid-January 2007, a breach of systems at TJX Companies exposed data from more than 45.6 million credit cards. Albert Gonzalez is accused of being the ringleader of the group responsible for the thefts.In August 2009 Gonzalez was also indicted for the biggest known credit card theft to date — information from more than 130 million credit and debit cards was stolen at Heartland Payment Systems, retailers 7-Eleven and Hannaford Brothers, and two unidentified companies.

In 2012, about 40 million sets of payment card information were compromised by a hack of Adobe Systems. The information compromised included customer names, encrypted payment card numbers, expiration dates and information relating to orders Chief Security Officer Brad Arkin said.

In July 2013, press reports indicated four Russians and a Ukrainian were indicted in New Jersey for what was called “the largest hacking and data breach scheme ever prosecuted in the United States.” Albert Gonzalez was also cited as a co-conspirator of the attack, which saw at least 160 million credit card losses and excess of $300 million in losses. The attack affected both American and European companies including Citigroup, Nasdaq OMX Group, PNC Financial Services Group, Visa licensee Visa Jordan, Carrefour, J. C. Penny and JetBlue Airways.

Between 27 November 2013 and 15 December 2013 a breach of systems at Target Corporation exposed data from about 40 million credit cards. The information stolen included names, account number, expiry date and Card security code.

From 16 July to 30 October 2013, a hacking attack compromised about a million sets of payment card data stored on computers at Neiman-Marcus. A malware system, designed to hook into cash registers and monitor the credit card authorisation process (RAM-scraping malware), infiltrated Target’s systems and exposed information from as many as 110 million customers.

On September 8, 2014, The Home Depot confirmed that their payment systems were compromised. They later released a statement saying that the hackers obtained a total of 56 million credit card numbers as a result of the breach.

On May 15, 2016, in a coordinated attack, a group of around 100 individuals used the data of 1600 South African credit cards to steal 12.7 million USD from 1400 convenience stores in Tokyo within three hours. Using a Sunday and acting in another country than the bank which issued the cards, they are believed to have won enough time to leave Japan before the heist was discovered]

Second, what a cheque fraud is?

Cheque fraud refers to a category of criminal acts that involve making the unlawful use of cheques in order to illegally acquire or borrow funds that do not exist within the account balance or account-holder's legal ownership. Most methods involve taking advantage of the float (the time between the negotiation of the cheque and its clearance at the cheque-writer's bank) to draw out these funds. Specific kinds of cheque fraud include cheque kiting, where funds are deposited before the end of the float period to cover the fraud, and paper hanging, where the float offers the opportunity to write fraudulent cheques but the account is never replenished.

Types of cheque fraud

Cheque kiting


Bad cheque writing


Combating cheque fraud

In most jurisdictions, passing a cheque for an amount of money the writer knows is not in the account at the time of negotiation (or available for overdraft protection) is usually considered a violation of criminal law. However, the general practice followed by banks has been to refrain from prosecuting cheque writers if the cheque reaches the bank after sufficient funds have been deposited, thereby allowing it to clear. But the account holder is normally held fully liable for all bank penalties, civil penalties, and criminal charges allowable by law in the event the cheque does not clear the bank.

Only when the successful clearance of a cheque is due to a kiting scheme does the bank traditionally take action. Banks have always had various methods of detecting kiting schemes and stopping them in the act. Computer systems in place will alert bank officials when a customer engages in various suspicious activities, including frequently depositing cheque bearing the same, large monthly total deposits accompanied by near-zero average daily balances, or avoidance of tellers by frequent use of ATMs for deposits.

New technology in place today may make most forms of cheque kiting and paper hanging a thing of the past. As new software rapidly catches illegal activity at the teller/branch level instead of waiting for the nightly runs to the back office, schemes are not only easier to detect, but may be prevented by tellers who deny customers illegal transactions before they are even started.

Part of how banks are combating cheque fraud is to offer their clients fraud protection services. Because it is impossible for banks to know every cheque that a customer writes and which may or may not be fraudulent, the onus is on the clients to make the bank aware of what cheques they write. These systems allow customers to upload their cheque files to the bank including the cheque number, the amount of money, and in some cases, the payee name. Now, when a cheque is presented for payment, the bank scrubs it against the information on file. If one of the variables does not match, then the cheque would be flagged as a potentially fraudulent item.

These services help with external fraud but they do not help if there is internal fraud. If an employee sends information to the bank with fraudulent items, then the bank would not know to deny payment. A system of dual controls should be put into place in order to not allocate all capabilities to one person.

Before the passage of the Check Clearing for the 21st Century Act when cheques could take 3 or more days to clear, playing the float was fairly common practice in the USA in otherwise-honest individuals who encountered emergencies right before payday.

Circular and abandonment frauds are gradually being eliminated as cheques will clear in Bank B the same day they are deposited into Bank A, giving no time at all for non-existent funds to become available for withdrawal. With image-sharing technology, the funds that temporarily become available in Bank A's account are wiped out the same day.

While there may still be some room for retail kiting, security measures taken by retail chains are helping reduce such incidents. Increasingly, more chains are limiting the amount of cash back received, the number of times cash back can be offered in a week or a given period of time, and obtaining transactional account balances before offering cash back, thereby denying it to those with low balances. For example, Walmart's policy is to determine account balances of those obtaining cash back, and some Safeway locations will not offer cash back on any accounts with balances under $250, even when funds are sufficient to cover the amount on the cheque. Customers who are noted to obtain cash back frequently are also investigated by the corporation to observe patterns.

Some businesses will also use the cheque strictly as an informational device to automatically debit funds from the account, and will return the item to the customer thereafter. However, in the United States this is done through the Automated Clearing House (ACH); though faster than traditional check clearing, contrary to popular belief the ACH is not instantaneous. Though this practice reduces the room for kiting (by reducing float), it does not always eliminate it.

These frauds are happening everywhere in this world. This is to make people to be aware about the cases that might really destroy you. Make sure you handle your credit and debit cards safely and do not take it out in unwanted places and take care of your belongings. Make a complaint as soon as possible, when you realise you lost your card, so that the bankers will block the card, which eventually ensures no transactions through that card.