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Protecting Your Financial Institution (FI) against Debit Card and Counterfeit Debit Card Fraud

Debit card theft and counterfeit cards are significant concerns for consumers and Financial Institutions. Fraudsters can steal debit card numbers and create counterfeit cards. There are multiple ways to do this which can result in significant financial and reputational losses for institutions and their customers. In this article, we will explore how debit card theft occurs and what you can do to protect your financial institution and customers from becoming a victim thereby reducing losses.

How Debit Card Theft Occurs

Debit card theft can occur in a few different ways. One way is through data breaches. Here, cybercriminals gain access to the electronic database of a retailer, credit reporting provider, or other legal entity. Another common way to obtain card information is through skimming devices. These are small devices fraudsters attach to card readers, ATMs, and gas pumps. Skimming devices can capture the information stored on the magnetic stripe on the back of the debit card. Criminals can also steal debit card information by looking over your shoulder (shoulder surfing or using their phone camera) while you are making a purchase. They could also physically steal your wallet or purse. Regardless of how the credit and debit card information is obtained, the fraudsters can then use it to create counterfeit cards, that are distributed to money mules for usage. The money mule is engaged by a mid-level distributor that contracts with them to commit fraudulent acts with the cards. These are usually ATM withdrawals or goods purchased from retailers. The goods are then returned for cash. purchase of goods from retailers and returned for cash. Many money mules are part of gangs or individuals who are in desperate need of cash and willing to take a chance, hoping they will not get caught. The money mule retains a small portion of the fraudulently obtained dollars, returning the remainder to the distributor/dealer of the counterfeited cards.

Counterfeit Cards also referred to as White Plastic

Once the card information is obtained, it is given to the counterfeiter, they duplicate the information in a magnetic strip and place it on a credit card sized piece of “White Plastic.” The counterfeit card does not have the chip or the unique designs of the real card. However, card swipe readers can read the magnetic strip, it contains all the required information. Thousands of White Plastic counterfeit cards are produced daily and distributed from a multitude of sources after the thefts are perpetrated. The counterfeiter and the distribution of the counterfeits has a seemingly endless supply.

Protecting Your FI from Debit Card Fraud and Counterfeits

Here are some steps you can take to protect your financial institution from debit card theft and counterfeits:

1. Know your customer behavior patterns and set up monitoring parameters for outside the normal Card Activity Knowing your customer activity and KYC/KYB CDD (Customer Due Diligence) with well-tuned transaction monitoring software is essential for early detection of suspicious activity patterns.

2. Identify Emerging Patterns and Trends While no monitoring software or due diligence can prevent all losses, it can identify emerging patterns of unusual activity and send an alert to the Fraud Analyst for verification and validation. The Fraud Alerts by your transaction monitoring software or customer disputes/complaints can have volume spikes that lead to compliance concerns for timely resolutions. Many FIs simply write off the losses as quickly as possible and reimburse their customers. They close the matter, without identifying the underlying cause. Linking customer disputes and complaints together during an alert investigation you may form a common point of compromise. By doing this, you can limit the amount of damage done to your customers. You could block transactions at the source of the compromise and safeguard your customers. If your FI is not identifying patterns and trends, you may also be out of compliance for required reporting. This can lead to regulatory compliance findings, fines, and penalties.

3. Remind your customer base frequently to report any discrepancies Frequently remind your customer base to report any discrepancies, suspicious activity or unauthorized transactions to your bank immediately. Take all unauthorized transaction complaints seriously and investigate whether this is a one-off or an ongoing scheme affecting your customer base.

4. Guard Your Personal Information Be cautious when sharing your personal information online and in public places. For example, avoid using your debit card in public places like cafes, restaurants, and stores, even if the card reader looks legitimate.

5. Enable Chip Security Enable the chip security feature on your debit card, if available, it provides greater protection than a magnetic stripe.

6. Block Your Card Immediately If your debit card is lost or stolen, block it immediately by contacting your bank or card issuer.

7. Use a RFID Blocking Wallet Consider using a RFID blocking wallet, which helps prevent skimming of your debit card information by blocking radio signals emitted by skimming devices.

Debit card theft and counterfeits are serious concerns that can have a significant impact on your financial stability. By following the tips outlined above, you can protect yourself and your FI from becoming a victim of debit card theft and counterfeits. Monitor your card activity frequently, be cautious with your personal information, enable chip security, and consider using an RFID blocking wallet to protect your debit card information from skimming devices. By taking these precautions, you can minimize the risk of debit card theft and counterfeits.


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