credit card fraud the scale of the problem michael moore regional security & fraud investigation...
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Credit Card Fraud Credit Card Fraud The Scale of the ProblemThe Scale of the Problem
Michael MooreRegional Security & Fraud Investigation Manager14 – 17 Nov 2005
Security & Safety – Middle East 2005Security & Safety – Middle East 2005
AgendaAgenda
The Credit Card System Worldwide Trends CEMEA/Gulf Fraud Performance UAE Fraud Figures
Payment Associations do not:Payment Associations do not:
• Issue Cards
•Acquire merchants
Member InstitutionsMember Institutions
Issuing banks
Acquiring banks
Both
Basic Service ProvidedBasic Service Provided
Authorisation for card transactions
Clearing and Settlement for Member Banks
MerchantAgreement
Merchant Cardholder
CardholderAgreement
Acquirer Issuer
The Credit Card SystemThe Credit Card System
MerchantAgreement
Merchant
Sales Draft
Cardholder
CardholderAgreement
Authorizations
Acquirer Issuer
Card Transaction FlowCard Transaction Flow
MerchantAgreement
Merchant Cardholder
CardholderAgreement
AcquirerIssuer
Clearing & Settlement
Clearing & SettlementClearing & Settlement
Current Worldwide Fraud TrendsCurrent Worldwide Fraud Trends
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$180.00
$200.00
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
Fra
ud U
S$m
LOST\STOLEN NRI FRD APPL CNTRFEIT MISC CNP
Losses during 2004 US$ 1.9 bn Visa Record
Current World wide Fraud TrendsCurrent World wide Fraud Trendsfor MasterCardfor MasterCard
An average of 8 cents for every $100
Worldwide Issuer Counterfeit Losses Worldwide Issuer Counterfeit Losses Ending 4Q 2004Ending 4Q 2004
$0
$10$20
$30$40
$50
$60$70
$80
U.S.A. CANADA E.U. ASIAPAC LAT.AM. C.E.M.E.A.
Fra
ud (M
illions)
2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
2004 losses US$630m (Up 17% over 2003)
Financial loses as a result of POS Fraud Financial loses as a result of POS Fraud MasterCardMasterCard
WorldwideAED 3,385,206,786.44
Middle East & North AfricaAED 66,755,408.64
UAEAED 4,980,195.14
CEMEA Acquired Fraud (RSV)CEMEA Acquired Fraud (RSV)
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
Fra
ud
as
a %
of
Vo
lum
e
CEMEACEMEA
VISA WORLDWIDEVISA WORLDWIDE
$6.96m
$6.50m$7.23m
$6.75m
$6.43m
$6.49m
$8.05m $8.3m
$9.1m
CEMEA Acquired Fraud by TypeCEMEA Acquired Fraud by Type6 Quarters ending 4Q046 Quarters ending 4Q04
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
Lost/Stolen NRI Fraud App Counterfeit Misc CNP
To
tal F
rau
d
('000)
3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
Counterfeit now at US$5m
CEMEA Acquired Fraud Distribution CEMEA Acquired Fraud Distribution 20042004
Fraud Apps $0.4m
Misc $0.5m
Acct Use $5m
Lost/Stolen $8m
NRI $2m
Counterfeit $15mLost/StolenLost/Stolen 18%18%
NRINRI 62%62%
Fraud AppsFraud Apps 31%31%
CounterfeitCounterfeit 21%21%
MiscellaneousMiscellaneous 23%23%
Fraud UseFraud Use 25%25%
Percentage % in GCCPercentage % in GCC
Common Types of Credit Card Fraud - Never Received Common Types of Credit Card Fraud - Never Received Issue (NRI)Issue (NRI)
Definition:
– Card is stolen from the mail system before the cardholder receives it and is subsequently used fraudulently
Use of NRI Cards is normally supportedby forged identity documents.
Easy to FakeEasy to Fake
GCC – Impact of Counterfeit, GCC – Impact of Counterfeit, Lost/Stolen and NRI – 2004Lost/Stolen and NRI – 2004
USA - GCC 37% - $2.1m
EU - GCC44%
$2.5mCANADA - GCC
5% - $304k AP – GCC6% - $325k
LATAM - GCC
1% - $34k
Total Acquired in GCC - $6m
CEMEA –GCC7%
$400k
CEMEA Issuer Fraud to CSVCEMEA Issuer Fraud to CSV
0.00
0.02
0.04
0.06
0.08
0.10
0.12
2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
Fra
ud
as
a %
of
Vo
lum
ee
VISA WORLDWIDEVISA WORLDWIDE
CEMEACEMEA
$5.4m
$6.5m$5.1m
$4.5m
$3.4m$2.8m$2.3m
CEMEA Issuer Fraud by Fraud TypeCEMEA Issuer Fraud by Fraud Type
-$500
$500
$1,500
$2,500
$3,500
$4,500
To
tal
Frau
d
US
$k
2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
Fraudulent Use of Account
Counterfeit MiscellaneousFraudulent Applications
Card NotReceived
Lost /Stolen
Skimming DeviceSkimming Device
CEMEA/GCC - Cash vs. ATM FraudCEMEA/GCC - Cash vs. ATM Fraud
0
0.5
1
1.5
2
2.5
3
3.5
2002 2003 2004 2005
Fra
ud
Am
ou
nt
US
$m
s
Cash 6010 ATM 6011
$27k
$18k
$21k$350k
$29k
$95k
$2k
$22k
GCCGCC
ATM SkimmerATM Skimmer
Fake ATM front side with SkimmerFake ATM front side with Skimmer
UAE Acquired Fraud to 4Q 2004UAE Acquired Fraud to 4Q 2004
$711$676
$553
$334
$547$613
$0
$100
$200
$300
$400
$500
$600
$700
$800
3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
Quarter
Frau
d
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
0.16
Frau
d to
Sal
es %
CEMEACEMEA
UAEUAE
UAE Acquired Fraud by MCC - 2004UAE Acquired Fraud by MCC - 2004MCC Description Amount Count Average% of Total5944 JEWELRY STORES $ 573,384 503 $ 1,140 23%5968 CONTINUITY/ SUBSCRIPTION MERCHT$ 339,554 1,765 $ 192 14%5732 ELECTRONICS STORES $ 266,254 370 $ 720 11%4812 TELECOMMUNICATION EQUIPMENT $ 195,632 275 $ 711 7%5411 GROCERY STORES/ SUPERMARKETS $ 157,617 602 $ 262 7%5969 OTHER DIRECT MARKETERS $ 90,320 128 $ 706 5%5309 DUTY FREE STORES $ 66,049 197 $ 335 3%7011 HOTELS/ MOTELS/ RESORTS $ 65,982 210 $ 314 3%5499 MISC FOOD STORES - DEFAULT $ 56,826 605 $ 94 2%5541 SERVICE STATIONS $ 54,588 617 $ 88 2%
TOP TEN $ 1,866,206 5,272 $ 518 77%ALL OTHER $ 621,609 1,729 $ 149 23%TOTAL $ 2,487,815 7,001 $ 386 100%
UAE – X Border Acquired Sales UAE – X Border Acquired Sales 20042004
UK25%
SWITZ2%
RUSSIA5%
KSA9%
USA10%
GERMANY4%
OTHER32%
AUST2%
EGYPT3% FRANCE
4%
KUWAIT4%
X Border Acquired Sales vs. X Border Acquired Sales vs. Acquired Fraud 2004Acquired Fraud 2004
Issuer Country Fraud Amount Sales Sales Rank Fraud Rate
UNITED STATES OF AMERICA $ 723,415 $128,409,498 2 0.56%UNITED KINGDOM $ 629,331 $329,086,683 1 0.19%CANADA $ 142,669 $24,711,425 13 0.58%FRANCE $ 126,234 $53,542,959 7 0.24%AUSTRALIA $ 62,712 $29,815,969 9 0.21%ISRAEL $ 57,004 $385,746 73 14.78%SAUDI ARABIA $ 55,919 $116,097,186 3 0.05%JAPAN $ 53,817 $18,286,594 18 0.29%HONG KONG, CHINA $ 49,119 $7,846,557 31 0.63%
$0
$100
$200
$300
$400
$500
$600
3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
Quarter
Fra
ud
US
$k
0
0.02
0.04
0.06
0.08
0.1
0.12
Fra
ud
to
Sa
les
%
UAE Issuer Fraud to 4Q04UAE Issuer Fraud to 4Q04
CEMEACEMEA
UAEUAE
UAE Issuer Fraud by MCC 2004UAE Issuer Fraud by MCC 2004MCC Description Amount Count Average % Total5311 DEPARTMENT STORES $ 109,910 258 $ 426 50%5411 GROCERY STORES/ SUPERMARKETS $ 93,513 368 $ 254 12%4812 TELECOMMUNICATION EQUIPMENT $ 69,607 134 $ 519 9%5045 COMPUTERS/ PERIPHERALS/ SOFTWARE $ 37,769 24 $ 1,574 5%5611 MEN/ BOYS CLOTHING/ ACC STORES $ 32,539 20 $ 1,627 3%5541 SERVICE STATIONS $ 29,495 352 $ 84 2%4722 TRAVEL AGENCIES $ 27,174 34 $ 799 2%5399 MISC GENERAL MERCHANDISE $ 19,304 32 $ 603 1%4011 RAILROADS $ 16,843 107 $ 157 1%5310 DISCOUNT STORES $ 15,912 35 $ 455 1%
TOP TEN $ 452,066 1,364 $ 518 86%ALL OTHER $ 1,193,730 3,763 $ 149 16%TOTAL $ 1,645,796 5,127 $ 386 100%
UAE – X Border Spend 4Q 2004UAE – X Border Spend 4Q 2004
UK24%
USA10%
FRANCE7%LEBANON
7%
AUSTRALIA3%
GERMANY5%
OTHER29%
CANADA3%
JORDAN3%
INDIA4%
BAHRAIN5%
UAE Issuer Fraud by Country of UAE Issuer Fraud by Country of Acquisition during 2004Acquisition during 2004
Country Amount Count Average % of TotalJAPAN $ 218,127 604 $ 361 50%UNITED KINGDOM $ 209,696 562 $ 373 12%UAE $ 185,518 915 $ 203 9%AUSTRALIA $ 138,630 336 $ 413 5%FRANCE $ 134,507 286 $ 470 3%USA $ 133,261 546 $ 244 2%ITALY $ 102,017 123 $ 829 2%TURKEY $ 93,569 178 $ 526 1%SPAIN $ 67,230 256 $ 263 1%THAILAND $ 28,611 67 $ 427 1%TOP TEN $ 1,311,166 3,873 $ 518 86%ALL OTHER $ 334,630 1,254 $ 149 16%TOTAL $ 1,645,796 5,127 $ 386 100%
No transaction monitoring from banksNo transaction monitoring from banks
Solutions – Long TermSolutions – Long Term Migration to Chip Technology Terminals – point of acceptance changing in
UAE Cards – incentive plans introduced Chip Liability Shift – 2006 Verified by Visa & SecureCode looking to
secure internet transactions Initiatives to improve data security Mandating banks monitor transactions
Thank youThank youTogether We Fight Fraud