NEEDHAM, Mass., March 27 /PRNewswire/ -- Two fraud breaches in the past
week highlight the need for tighter controls on prepaid gift cards and
increased protection from debit skimming.
The first fraud fallout from the TJX fiasco was foiled at a Wal-Mart
near the University of Florida in Gainesville as a ring of thieves from
Miami were apprehended attempting to use gift cards which were converted
from stolen TJX credit card account numbers. It is estimated that up to $8
million in cards were loaded on gift cards purchased at Wal-Mart and Sam's
Club retail locations in Florida. The full scope of the impact has not been
fully determined outside of the state of Florida.
TowerGroup research, published in January 2007, highlights the
vulnerability of store branded gift cards, particularly their anonymous
nature, which was the crux of the criminal activity. The anonymous nature
of gift cards has also been highlighted by various U.S. and Canadian
government agencies for anti-money laundering vulnerability and the
potential for tax avoidance.
The second, unrelated, major fraud event impacted debit cards issued by
the Bank of Montreal, Royal Bank of Canada, and CIBC, which caused the
debit card issuers to freeze thousands of accounts over the past two days.
Two suspects have been apprehended by Winnepeg Police, who recovered
$105,000 in cash and over 100 cards. Card skimming is done either with
rogue electronic surveillance or card swiping technology, which captures
the account number and personal identification number of a legitimate card.
Recent TowerGroup research identifies debit card fraud as a particular
hot spot for criminals and while the industry has done an excellent job of
containing fraud with powerful data analytics, TowerGroup emphasizes that
consumer confidence in electronic payments suffers shock when these
breaches occur, even though incremental loss has proven to be minimal.
While excellent law enforcement efforts led to the prompt
identification of the largest recorded gift card scam and another
sophisticated skimming operation, the exposures of anonymous gift cards and
potential process failure at automated teller machines are challenges for
the payments industry.
Brian Riley, a senior analyst in TowerGroup's Bank Card research
practice, is available to comment on the necessary controls for gift cards
and essential fraud controls. Riley's recent work on this topic includes
two research reports: "Gift Cards: What to Watch for So They Do Not Become
Drift Cards" and "Debit Card Fraud: Because That's Where the Money Is."
Please contact Rachael Adler directly at +1.212.455.8037 or
radler@cooperkatz.com.com if you'd like to arrange an interview with Mr.
Riley.
About TowerGroup:
TowerGroup is the leading research and advisory services firm focused
exclusively on the financial services industry. A respected source for
trusted information and advice, TowerGroup brings many of the world's
leading financial institutions, technology companies, and professional
services firms a deeper understanding of the business and technology issues
impacting their organizations. Headquartered near Boston in Needham,
Massachusetts, and with offices in North America and Europe, TowerGroup
serves a global client base. Visit http://www.towergroup.com for more information.
Contact:
Rachael Adler
212-455-8037
radler@cooperkatz.com
|
