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Keeping an eye on the ATM

October 11, 2005

Fraudsters today need only search the Internet to find a wide array of inexpensive devices that can be attached to an ATM in order to skim personal information.

And since the magnetic stripe has been around for three decades, criminals have had plenty of time to figure out how to compromise it, said Rob Evans, director of industry marketing for Dayton, Ohio-based NCR Corp.

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For the last five years, Evans said, the use of foreign devices on ATMs to copy mag-stripe data has steadily increased in the United States.

But the majority of U.S. deployers have only recently begun to take notice. Evans and Claire Shufflebotham, director of NCR's global security research and development organization, said card compromises at the ATM have hiked.

Diane Smith of Gold River, Calif.-based ATM sales and service firm First Line Inc., said interest in preventing physical security is at an all-time high.

"I think that in 2004, this really came to the forefront," she said. "People have become very interested in this. You are seeing interest from all levels, from the government to the ATM industry to the banking industry, even consumers are starting to take notice."

ATM open season

According to one theory, as other nations adopt smart cards, criminals are shifting their focus to the U.S.

"NCR expects to see this surge continue as virtually every market around us migrates to chip-based cards for increased security for the cardholder," Evans and Shufflebotham wrote in an e-mailed response.

"As well as the move to chip where fraud has been highest (in parts of Europe, Asia Pacific and Latin America), ATM deployers are starting to put other complementary security features in place to reduce fraud … which means that as criminals find it harder to beat, they will move on to easier targets."

Bob Miazga, an account manager at Mosinee, Wisc.-based transaction processing and information-management firm Wausau Financial Systems, said the U.S. is expected to adopt chip-based cards, eventually.

"I am surprised the U.S. hasn't recommended switching to smart cards yet," he said. "I am sure that eventually we will switch over, I just have not heard anything about when it might happen."

Manufacturers also are adding protections. Those with a strong global presence such as NCR and Diebold have been working on a number of security solutions for the last few years.

Beyond manufacturer's efforts to prevent fraud, companies such as First Line are taking it upon themselves to educate industry officials on preventing ATM fraud. The company hosted a conference on ATM fraud and security in the spring.

Smith said the goal is to educate industry officials so they can educate their employees and consumers.

Miazga agreed that consumers must be made aware of the problem. "Banks need to tell their customers to be observant and look for extra devices that might have been placed on an ATM," he said. "No system is 100 percent secure, but there are things that consumers can do to help prevent fraud."

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