BAI RD: MagTek event underscores critical card-fraud issues

BAI RD: MagTek event underscores critical card-fraud issues
Tags: North America, Security
November 15, 2009 - Caroline Cooper

During last week's BAI Retail Delivery conference, card-security solutions provider MagTek treated select attendees to a poignant presentation about the risks of credit card fraud, a growing and worldwide issue. Given by Tom Patterson, MagTek's chief security officer, and Dr. Chris Corpora, a senior FBI advisor who specializes in cyber and international crime, the presentation touched on card fraud's devastating ramifications, the extent of which few fully understand, the speakers say.

"You may think it's just the money, but you'll find out very quickly it's not," Patterson said of the $4 billion card fraud business.

The two speakers first demonstrated to the audience how easily the typical consumer's credit card might be compromised. Patterson showed the group an example of a small card skimmer, the type a restaurant server or retail cashier might use, and he spoke about how easy they are to obtain.

"This is the scary part for me — it's $20 to buy one of these things on eBay," Patterson said. "And this is the worst part — it's not illegal. That's part of the problem. It's just too easy to steal."

Both speakers shared several real-life examples of card-skimming schemes run by people the average consumer interacts with on a daily basis — a Walmart cashier, a gas station attendant and an Applebee's server were among the case studies.

"They look like the people you went to high school with, they look like the soccer coach, they look like your children's friends' parents," Patterson said. "They look like everybody in the neighborhood. You're comfortable handing your card over. It's safe, it's how you do business."

But the dangerous underside that many in the banking industry don't know about, the speakers say, is that often these individuals are part of a network for local street gangs, many of which now count card fraud among the top five ways they finance illegal activity.

Patterson and Corpora say gangs often turn around and sell the stolen information upstream to organized crime groups, which then run entire online auctions just to sell counterfeit cards in bulk, often to global terrorist entities. The chain is known among security professionals as the "illicit political economy," Corpora says, and credit card fraud is a critical part of its operation.

"These key enabling activities are essential for us to get our arms around if we want to move from a reactive capability to a proactive capability moving forward," he said. "So, yes, the money matters. But this is an issue of national security."

The speakers also shared with attendees specific examples of terrorist groups using stolen credit card information to fund their often devastating activities:

One citizen of London involved in terrorist activities used 27,000 stolen credit card numbers to obtain $3.5 million, which he then funneled to terrorist chapters in the U.K.
A terror organization in North Africa bought 200 stolen credit cards, which authorities believe were then used to fund the Madrid subway bombings.
The head of finance for Sri Lanka's Tamil Tigers was arrested with thousands of counterfeit credit cards in a suitcase. The cards had been used to buy weapons and pay soldiers.
One cyber terrorist associated with Al Qaeda used stolen card information to purchase 180 Web sites, which he then used to broadcast the execution of American journalist Daniel Pearl.
The Al Qaeda cell behind a recent nightclub bombing in Bali used skimmed credit card information to fund the incident. More than 200 people were killed in the bombing, most of them tourists.

"These numbers could have come from the woman at Walmart or the guy at the gas station or the little Applebee's waitress, who 'wasn't doing any real harm,'" Patterson said. "It only takes a few stolen cards to finance some real terror."

And these terrorist groups didn't simply stumble upon an easy scheme to make money, the speakers said. In fact, Patterson shared photos of the 800-page, handwritten Al Qaeda terrorist handbook, which specifically instructs readers to use stolen card information for their activities.

"Obtain credit card numbers, and use them to fund the struggle," the book says, according to a translation Patterson shared.

As he wrapped up the event, Patterson pleaded with attendees to continually work on security issues and to refuse to accept card skimming as an "acceptable loss" to their bottom lines.

"They're all financing this the same way; this is their plan, and we are part of the plan," he said. "There are global ramifications to your decisions about how you handle security in your operation. The organized criminals, the Russian business mafia, the terrorists — they're all counting on you doing nothing different. So I'm hoping otherwise. I believe it's time we put a stop to this."