Paul Ewen: Petty fraud that adds up to small fortune for criminals

Fortunately, the security team at my provider are excellent, and the card activity triggered an alert leading me to receiving a phone call asking if I was currently overseas. “No”, I replied, as I was at the time standing in the rugby club’s car park.

The caller asked me to identify a number of unusual, yet relatively small purchases, none of which it transpired that I had made and among them was a booking for a flight on a popular budget airline.

The fraud had been discovered before the scheduled departure date of the flight, so I asked the credit card provider how they would respond – anticipating that the police and the airline would be informed immediately and perhaps steps would be taken to arrest the individual at check-in (rarely do you know the time and date when a criminal will be making an appearance). Instantly, however, my hopes were quashed. I would have my card credited. That was it!

All well and good for me, but what of the fraudster, or perhaps the person who was in league with the fraudster and was gaining a flight at “my” expense?

Seemingly, taking further 
action was not considered to be economic. I volunteered to go to the airport myself and wait at check-in, but ironically was warned that if I followed through on this impulse, I was likely to be the one facing prosecution for a breach of the peace.

And that is the crux of the problem. Financial institutions are required by law to combat fraud but the perceived low value of these “petty”crimes are the reason such activities continue to flourish.

Now, I have worked in a counter-fraud environment myself for nearly 20 years, and I do understand the limitations of cracking down on seemingly minor individual frauds. However, it seems to me that these frauds, while individually “low value”, are unlikely to be one-offs carried out in isolation, and when viewed together amount to a global epidemic. In February 2013 in New York, 18 members of one gang alone were charged with a $200m credit card fraud.

The victims of such organised gangs are not merely the credit card companies. Indeed, with retailers often footing the bill due to the vagaries of card not present sales where the loss is borne by the retailer and not the credit card provider, it again boils down to we, the purchasing public, who will ultimately stand the cost as all those concerned raise their fees/prices to make good their losses.

And the victims need not be restricted to financial services or retail organisations. Recently a small charity was faced with reimbursing a significant sum of money as it was discovered a gang were using their donations page to test whether compromised cards had been identified and were being blocked, a similar modus operandi to the “small purchases” in my own case.

So what is the solution?

To use an old adage: united we stand, divided we fall. While I am aware that different business sectors have their own counter fraud measures in place, I would suggest that an even more joined up approach is required, and that needs an appetite for not only cross sector, but indeed cross border data sharing, intelligence gathering and improved communications.

For example, retailers often have a negative historical file to record cases of fraud, but how common is it for retailers to share this data, and is it shared cross border? The internet has made us a global village as far as crime and shopping are concerned but do counter fraud measures remain as ever seems to be the case, one step behind in this respect.

Credit card fraudsters may 
be stealing somewhat more 
than “a penny from a million pay slips”, to quote a popular story, but as long as we allow the perceived economics of investigating individual small value frauds to deter us from making a stand, those who set out to abuse the system will continue to turn pennies into pounds, by the millions.

*Paul Ewen is head of insurance technical services at AGS Risk Solutions in Leeds.