Credit Card Crooks Ramping Up Fraud As New Chip Era Approaches

By - June 17, 2016
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As the country is transitioning to credit cards with chips embedded in them to reduce fraud, criminals are taking notice and are making illegal hay while they still can.

Counterfeit-card fraud will increase actually to $4.5 billion in 2016 which is up a huge 12% from last year, as credit card crooks are ramping up their thievery before all US merchants move to accept chip technology, which is more secure.

The increase in theft has hurt retailers that have yet to equip their stores to accept the new chip cards by oct. 1. That is when banks will stop paying for fraud that is committed at non-compliant stores.

Criminals are still able to use personal credit card data that they have stolen during previous security breaches, such as at Target Corp, Michaels Corp. and others. Nordstrom has reported that its fraud chargebacks are much higher this year than expected as fraudsters are using up their stolen data to create the illegal cards.

The thieves typically use the stolen data to create fake cards with magnetic stripes to shop at brick and mortar stores. This is known in the credit card industry as EMV, and chip cards stop this type of duplication.

Fees for phony credit card charges, which are called chargebacks, are hitting both small and large retailers. So, Visa this week changes some of its policies to give relief to some merchants who do not yet have chip card readers.

Merchants who are using EMV have seen a serious drop in fraud. In January, merchants that are chip enabled that are tracked by Visa saw a 26% drop in dollar volume of counterfeit fraud.

However, most consumers still have a card with a magnetic stripe in their wallet, and those will be heavily targeted by fraudsters for as long as they can.

Many retailers wanted to bring in chip acceptance much faster but were not able to because of the long waits to install and certify the new chip software. Many companies have delayed bringing in chip technology as long as they could or only have adopted it as they have been getting hit with chargebacks.

Now, Mastercard is about to announce new measures that will make it less complicated for retailers to get their chip equipment certified. The word is that it should cut down the certification process down to hours, rather than weeks.

Visa also announced that it is going to simply its equipment certification processes and change chargeback policies to cut down on liability that is faced by merchants who are not accepting chip cards yet. As of July 22, Visa will block all counterfeit card chargebacks that are less than $25. In October, Visa, only will let banks charge back 10 counterfeit transactions per account. They must assume liability for all transactions after that.

Visa states that these changes will cut down the number of chargebacks that the retailers see. Merchants should see 40% fewer counterfeit chargebacks and 15% less in US counterfeit fraud dollars being done as charge backs.

About Credit Card Fraud

Federal laws on this crime cover anyone who knowingly produces or distributes fake credit cards. Also, anyone who uses a fraudulent credit card to obtain items of value can be hit with federal charges.

Federal credit card fraud laws are made to discourage organized criminals from trafficking in access devices. These crimes are responsible for hundreds of millions in losses each year for retailers and banks each year. Unlike the federal crime of counterfeiting, credit card fraud only provides for the creation/use of access devices. However, people can be charged with a federal crime for using these devices, even if they are not the originator.

The punishment for credit card fraud will vary upon the exact details of the case, such as whether the activities were done across state lines and how much the goods or services were worth. In all cases, however, the law requires some combination of fines, jail time and property forfeiture.

About Wire Fraud

People who engage in credit card fraud also may be charged with wire fraud, which is the type of fraud that uses telecommunications equipment to commit fraud. This may include the use of wire, TV, radio and Internet.

Wire fraud is a very serious charge in most cases because it usually is a federal crime as it crosses state lines in most circumstances. The federal government deals harshly with people convicted of wire fraud: You can be fined as much as $1 million and sent to prison for up to 30 years.

People who engage in wire fraud that are made in relation to any type of disaster event, such as a natural disaster or terrorist attack, can be punished even more harshly.