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Credit card fraud remains unbeatable 
Friday, March 01 2002
by Andrew McLindon


Credit card fraud will never beaten, but can be fought vigorously with a range of
IT measures, says an expert from the world's largest private software firm.



Peter Dorrington, principal initiatives manager at SAS UK & Ireland, told
ElectricNews.Net that while it is not possible to completely eliminate credit
card fraud, a range of future and current IT applications will make it much
harder to carry out. "No IT-based system will ever be 100 percent secure, but
we can make it so that casual fraud is nearly impossible and the professional
fraudster finds it very tough to engage in such fraud," he commented.



Credit card fraud amounted to close to STG300 million in the UK in 2000 and the
recent conviction and imprisoning for four years in Ireland of a credit card
fraudster has shown that despite recent security measures introduced by
retailers, banks and card issuers it remains a serious issue for businesses and
financial institutions.

Common methods of carrying out such fraud include ID theft, skimming (the copying
of card details on to a data reader), which occurred in the Irish case, and the
generation of fake card numbers. 



According to Dorrington, one of the main difficulties in combating credit card
fraud is that the fraudsters always manage to keep one step ahead of the security
people. He cited the example of the introduction of numbers in the signature
block on the back of a credit card. These numbers were supposed to act as a
second barrier to fraud, particularly in combating "card-not-present" fraud, as
the numbers were not contained in the card's magnetic strip. However, fraudsters
were able to get around this by using a hand-held strip reader linked to a Palm
Pilot, which meant that both numbers could be recorded at the same time and then
used to clone a card. 



Moves have also been made by some organisations to combat on-line credit card
fraud by introducing controlled payment numbers (CPN), which is the generation of
a random credit card number for each on-line transaction. Dorrington commented
that while such moves were welcome as they eliminated the possibility of
skimming, there still remained the problem of people forging documentation when
applying for such cards.



But Dorrington said that initiatives have been taken that could reduce the level
of credit card fraud. Among these is the introduction of biometrics, which is the
use of unique personal characteristics such as fingerprints, voice print and iris
prints to identify that the person is who they say they are. Although biometrics
could be a major factor in combating credit card fraud, introducing such systems
into retail outlets will be costly and Dorrington estimated that it could be
another five years before they are widespread.



In the meantime, Dorrington said that SAS is working on improving current
analytical approaches to detecting credit card fraud. "What SAS does is analyse
the transactional data so that fraudulent patterns can be identified and new
business rules in handling credit card applications and payments can be
introduced," he remarked. Dorrington added that Internet retail giant Amazon has
managed to cut its on-line fraud in half by introducing such a system.



SAS is also working on a text mining system that will identify word patterns
associated with fraudulent behaviour or lying. "For example, there are many Web
sites that offer advice on how people can repair their credit rating by answering
forms from banks in certain ways. Our system would scan for similar wordings on
applications and look for word patterns associated with being deceitful," he
explained. However, the system is probably at least two years away from
mainstream use.



SAS employs around 20 people in Ireland and its customers here include AIB Bank,
Bank of Ireland and the Revenue Commissioners. SAS has over 8,500 employees
globally and revenues in 2000 of over USD1 billion.