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Connexus : Issue 42
Counterfeit card fraud has fallen signifcantly, refecting the rapid uptake of Europay, MasterCard and Visa (EMV) chip-on-chip compliance in the wake of the largest credit card data theft in Australian history. Counterfeit/skimming fraud dropped 19.5 per cent to $66 million when the 2011 calendar year was compared to the fnancial year to June 2012, according to fgures the Australian Payments Clearing Association released in December. Australia is now almost 100 per cent EMV-compliant across point of sale ter minals and scheme card issuance. Rob Crawford, Abacus' senior analyst, fnancial crimes, says counterfeit card fraud hit a peak in the third quarter of 2011 after hacking attacks on Australian businesses to steal credit card data. The criminal syndicate involved in the attacks had access to 500,000 Australian credit cards. About 30,000 were used in Europe, Hong Kong, Australia and the United States for fraudulent transactions totalling more than $30 million. The theft prompted Operation Lino, an 18-month investigation by the Australian Federal Police, US Secret Ser vice and Romanian authorities, which culminated in seven people being charged in Romania in November last year. Compromised again Leanne Vale, Abacus' senior manager, fnancial crimes, says thousands of terminals were remediated within a few months of the attacks. "We were working with our members almost around the clock at its peak to try to stop the losses. As quickly as they would replace the cards, in some cases they would be compromised again if the terminal hardware and software had not been remediated.” Vale says the impact on mutuals was “amplifed” because of the regional nature of its membership. Mutuals sustained about 10 per cent of the $30 million in losses. It was an impact the Australian Federal Police understood when they launched Operation Lino. "They understood at the outset what a disproportionate effect it had on us, and particularly our brand. For example, in one small town with 1,000 people, 900 cards had to be replaced.” Ian McKindley, director, country risk management at Visa, expects counterfeit card fraud losses on Australian-issued cards will continue to reduce signifcantly in the next 12-24 months. However, there are still places such as the US that are yet to switch to EMV chip. "There's a high risk that fraudsters will attempt to use compromised Australian-issued chip cards to commit fraud in countries like the US where magnetic stripe transactions are still dominant. In addition, many ATMs around the world are not yet chip enabled, says McKindley. “You could still have your card compromised in Australia at an ATM.” Only 8 per cent of Australia's 3,000 ATMs are EMV chip-enabled and another 25 per cent are chip-ready but not yet enabled. Liability shi From April 1 2013, liability for fraud losses at ATMs shifted to whichever party -- acquirer or issuer -- was yet to adopt EMV chip technology. McKindley believes this will prompt a rapid shift to EMV chip-enabled ATMs. "When they start to absorb losses, that will start to build some momentum under the business case [for chip-enabled ATMs]. I would anticipate there will be better than 60 per cent coverage within the next 12 months.” Visa is accelerating the shift to EMV globally and recently announced that liability will also shift for ATM transactions in the Asia-Pacifc region and the US by 2015 and 2017. Which is good news for Australian issuers. Christine Long is a freelance writer. ...in one small town with 1,000 people, 900 cards had to be replaced. Leanne Vale, senior manager, nancial crimes, Abacus Chipping away at fraud Improved data security and a crackdown on international crime syndicates have reduced the risk of credit card fraud. BY CHRISTINE LONG NEWS www.abacus.org.au 13