Author: Michael Boeheim

Skimmer fraud is a global epidemic – are you stepping up to the plate and helping your borrowers?

Skimmer fraud costs businesses billions of dollars annually in the United States, according to a report released in February by the Association of Chartered Certified Accountants USA (ACCA) and Pace University.

The average loss per skimmer scam was around $50,000 in 2011 — up from some $30,000 in 2010. Unfortunately, this trend isn’t showing any signs of stopping.

Skimmer scams can damage a business’s reputation, compromise its ability to service debt and generate financial losses. Even though it’s most common among restaurants and retailers, skimmer fraud is a risk for any business that takes electronic payments.

What is “Skimmer Fraud”?

“Skimmers” are electronic devices that are used to read and store electronic data. They can be installed directly on ATMs, gas station pumps and point-of-sale terminals to extract data from magnetic stripes on payment cards. Some schemes even use small cameras to simultaneously record personal identification numbers (PINs).

After skimming the electronic data, thieves will usually clone payment cards. The phony cards might be used to purchase high-end goods that can sell quite easily on the black market or online marketplaces.

U.S. is Vulnerable to These Threats

Skimmer fraud has become a global epidemic, which is often perpetrated by Eastern European crime rings. Unfortunately, the United States is especially vulnerable to these threats. Why? For one thing, it has more ATMs than any other nation, and U.S. credit cards don’t contain global chips, which makes them easier to skim and clone.

Restaurants in the United States also typically swipe customers’ cards away from the table, which creates an opportunity for dishonest restaurant staff to skim a patron’s electronic data using handheld devices. In other countries, however, payment cards are swiped at the table, never leaving diners’ sight.

While skimmers have been around for years, today’s devices are smaller, they have more memory and they incorporate advanced encryption methods that can make them harder to detect. Some skimmers even use wireless technology. In January, 13 people were indicted for operating a skimmer fraud ring. They stole upwards of $2 million using Bluetooth-enabled skimmers at gas stations.

How to Prevent or Mitigate Skimmer Scams

There are several ways you can protect your borrowers from skimmer scams. Here are just a few:

  • Inspect card readers for tampering and using skimmer detection cards.
  • Install surveillance cameras to record activity at ATMs, gas stations and ticket kiosks.
  • Prohibit cashiers from leaving their registers or terminals.
  • Require employees to swipe payment cards in customers’ plain view.
  • Equip point-of-sale terminals with anti-skimming devices.

U.S. retailers are also validating transactions using ZIP codes, driver’s licenses or PINs. What does the future hold? Look for biometric data — such as fingerprints or irises — to authenticate transactions.

Keep Abreast of Skimmer Fraud

If you want more information on the ACCA’s report, look for “skimmer fraud” on the association’s website (http://www.accaglobal.com). In addition, work our  forensic accounting team. We can provide additional information on prevention and detection.

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asset based lendersFreed Maxick’s Asset Based Lending Team works with dozens of asset based lenders across the country. We can help you reduce the risk of lending or assist your clients with our business advisory, audit, fraud detection and prevention, and tax services.

For more information about our business advisory, audit, and other accounting services contact us here, or call us at 716-847-2651.

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