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An Abyss of Fraud

It’s an odd story, the journey of a stolen credit-card number that started in Vancouver and ended in Moscow but it remains a comment on the size of the problem now facing law enforcement, financial institutions and business as organised crime becomes as global an enterprise as any bank or car manufacturer.



The credit card in this example was double-swiped in a Vietnamese supermarket in Vancouver and the details, with those of many others were sold to a Chinese gang in the same city. In a political sense, Vietnam and China may not be the best of friends but organised crime isn’t bothered by politics and in Canada, the two ethnic groups frequently work closely with each other in a wide range of crimes.

The credit card number quickly found its way to mainland China, where the gang passed it to a safe credit-card production “factory” in Burma, where it was cloned so perfectly that nobody could tell it from the original, still in its owner’s wallet at home in Canada.

The Chinese gang then sold the cloned card and several thousand others to a Russian Mafia gang, although what form this took nobody knows. This could have been weapons or fake US dollars or any other acceptable underworld currency of exchange.

The shiny new cloned card with its line of credit still intact was then passed along to a “mule” in London. He or she then embarked on a Harrods shopping spree buying popular designer clothes and accessory items such as Dolce Gabana and Channel, which were taken back to Moscow, with the VAT reclaimed of course and re-sold in a leading city centre department store before the hapless Canadian received his or her monthly credit card statement.

Now here’s the problem for the police. Whose problem, investigation and jurisdiction does this lie in and how much would it cost to investigate this one crime?

As the Financial Times revealed this week, hi-tech crime is now starting to hurt retailers. When a cloned credit card is used like this, the card owner is indemnified but the retailer is charged-back with the cost of the fraud. In examples like this, it is almost impossible for the retailer to determine whether the card is valid or not because to all and intents and purposes, it’s a perfect digital copy and hasn’t yet been stolen, in the sense that the owner doesn’t know that the Chinese or Russian Mafia have a duplicate ready to deploy at Harrods.

The broader picture applies not only to the skimming of credit cards but online fraud in general, it’s starting to bite retailers hard and even the latest chip and pin cards can apparently be defeated by a sharp blow with a hammer, which leaves stores with the option of refusing the card altogether or processing the transaction, which many will do and lose any claim to fraud protection as a consequence.

Investigating and tracking a single card’s journey, like the one in this example, can cost tens of thousands of pounds of police budget and hundreds of hours of police times across the world. However, unless the bad guys are caught red-handed, in a department store with the fake card, it’s all too late, the trail will have often have gone cold and the criminal gangs will have moved-on to next month’s scam with thousands more cloned credit cards being used perhaps by beautiful and well-dressed Eastern-European women in fashionable Western department stores.

Joseph Conrad, the author of “Heart of Darkness” once wrote: “Dare not look into the abyss, lest the abyss look into you” and he might have easily been describing the serious law-enforcement and business problem now confronting the transactional technology, the credit card on which much of the world’s commerce and eCommerce now floats.

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