ATM frauds

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By Neil Honeyman

An Independent View

Wednesday, September 3, 2014

"BANKING is an integrity game. If you want somebody to entrust their financial resources to you, then you better be trustworthy and transparent." -- Lamberto R. Villena, president and chief executive officer, Sterling Bank of Asia

Well said! We have an account with Sterling Bank and have found the bank to be 100% trustworthy.

Technology is now used extensively to improve service and flexibility. We are given plastic cards which enable us, usually conveniently, to do banking transactions without having to go to our own branch.


Problems arise, however. Earlier this year it was reported that P220 million was lost to Automated Teller Machine (ATM) fraud in 2013.

"Skimming" of data on the magnetic stripe together with stealing the customer's Personal Identification Number (PIN) has become prevalent. Worse, once the bad guys realize how easy it is to steal the information needed to perpetrate a fraudulent transaction, the trickle becomes a flood. Unless banks move quickly, we shall see an epidemic of improper ATM activity. Perhaps it is already happening. Banks are not quick to advertise that fraudulent transactions are easily undertaken.

The bad guys need to know, and know quickly, that they run the risk of being caught. I am not aware of cases going to court and the fraudsters being found guilty and punished. There was a case in Bacolod City last year involving a Russian national allegedly fraudulently using a plastic card to purchase a television set, but as far as I know the case did not go through the full court procedures.

Banks can help themselves and their customers by communicating any suspicious ATM activity to their customers as quickly as possible. At 0538 hours on Sunday 17 August we received a text message from Security Bank asking if we had made withdrawals from Maybank, Cainta, Rizal from 0532 hours to 0535 hours. We had not and immediately expressed concern. Security Bank presumably made its investigations so that by Wednesday 20 August refunded the money which had been fraudulently withdrawn from our account.

We appreciate Security Bank's proactiveness in informing us about transactions that it found to be suspicious. Not all banks do this and refunds are not always given.

Senator Grace Poe has proposed the enactment of a law that would require banks to reimburse depositors victimized by ATM scams. This is well-meaning but it is unrealistic because it is not clear whether the depositor is the victim in a disputed transaction. Trust is a two-way street. We want to be able to trust the bank and we want the bank to trust us. Regrettably not all customers are trustworthy and in some disputed transactions an accomplice of the customer has made the withdrawal. I understand that ATM transactions are filmed. If the withdrawal is made by someone who avoids being filmed, this in itself is suspicious.

Banks need to face the unpalatable fact that some fraudulent transactions are carried out by bank employees or that bank employees have provided the information which enables the fraud to be made. The unauthorized Security Bank withdrawals from our account were probably made as a result of skimming our plastic card at an ATM withdrawal that we made from Security Bank's ATM machine in Bacolod City on 21 March 2014. We know this because our account has had no subsequent activity.

This means that the fraudsters waited almost five months before using the illicit information they obtained. This is known because the card was absolutely safe. Only the account holder had access to it.

Security Bank witnessed our destruction of the plastic card that had been compromised. We no longer use Security Bank's plastic. Some banks now use cards which have an embedded chip. This chip has information which has not (so far) been comprised by fraudsters. The banks have assured Bangko Sentral ng Pilipinas (BSP) that they are migrating to this new technology. We believe the migration should be faster.

BSP's role, in part, is to encourage the use of safe banking practices. Plastic cards which do not have the embedded chip are not safe. We recommend that BSP uses its persuasive powers to cause banks to accelerate their adoption of new technology plastic cards.

Published in the Sun.Star Bacolod newspaper on September 03, 2014.


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