Article

Latest ATM fraud: another 45 million reasons for change

In the wake of a $45 million bank heist via ATM, ValidSoft CEO Pat Carroll proposes a new kind of countermeasure.

May 15, 2013

by Pat Carroll

Once again we have been reminded of the vulnerability of financial institutions to credit card fraud.

Last week we saw the news that a large gang of thieves (a number of whom have been arrested in New York) managed to steal an enormous $45 million from thousands of ATMs in just a matter of hours.

This latest crime may have been complex in its deployment — the sheer scale of it was staggering — but at its heart was the "traditional" technique that I have spoken of before: obtaining customers' credit card details and later using the data to manufacture false credit cards.

Questions must be asked of a system that allowed $40 million to be withdrawn from ATMs in 36,000 cross-border transactions within just 10 hours.

Sadly, this type of fraud might not end up as an isolated case. Last week's crime highlights the fact that cross-border fraud, committed at ATMs and point-of-sale devices, remains a major problem for card issuers the world over.

Many current bank systems are missing fraudulent transactions — as we've seen here. Others are dogged by false positives, declining legitimate transactions in an effort to stop fraudulent transactions — which can result in inconvenienced customers and higher costs.

But there is technology already being used that mitigates both issues, essentially by "tying" individuals' credit cards to their mobile phone and using proximity correlation analysis.

If the accounts affected by the $45 million theft had incorporated this technology, the thieves would not have been able to withdraw money from their various ATMs because the system would have picked up that the account holder's mobile phone was not in the same location as the fake card.

This latest crime underlines once more the need for efficient, real-time detection, prevention and resolution, protecting the customer and the banking organization from both fraudulent transactions and false positives.

Pat Carroll is a founding director and the CEO of London-based ValidSoft, a provider of telecommunications-based multi-factor mutual authentication, identity and transaction verification solutions. Prior to founding ValidSoft, Pat was head of electronic trading technology in Europe for Goldman Sachs International. He also has worked in a senior capacity with JP Morgan, Credit Suisse Financial Products and Bankers Trust Company.