AUTOMATED TELLER MACHINE (ATM)

FRAUD, CAUSES, EFFECTS AND CONTROL

BY

VED PRKASH PALIWAL

M. NO. 435302
 JIBRIL ALI ZANGINA

FOR DESERT CONSULTANCY SERVICES

KEY WORDS

• ATM FRAUD
• AUTOMATED TELLER MACHINE (ATM)
• FRAUD
• CAUSES OF ATM FRAUD
• EFFECTS OF FRAUD ATM
• CONTROL/PREVENTION
INTRODUCTION

• The term "ATM fraud" refers to an

illegal transaction that is committed by
using an ATM; this may include
fraudulent deposits or skimming card
information.
ATM FRUAD
Ogunsemore (1992) defined ATM as a
cash dispenser which is designed to
enable customers to enjoy banking
service without coming into contact with
Bank Tellers (Cashiers, Bankers or
Bank clerk). The ATM performs the
duties of counter staff and cashiers as
cash can be withdrawn or deposited
using the automated machine.
Fraud is a deceit, treachery, trickery or
sham deliberately practiced in order to
secure unfair, unjust, imbalanced or
unlawful gain. As a legal construct,
concept or hypotheses, fraud is both a
civil wrong and criminal wrong. Victims
can sue the perpetrator to recover
valuables or to prevent it and if found
criminally wrong, perpetrators can be
prosecuted.
 • Obiano (2009) blamed the menace
CAUSES OF ATM FRAUD of ATM frauds on indiscriminate
issue of ATM card without regard to
the literacy level of the customer.
He noted that one of the frequent
causes of fraud is when customers
are careless with their cards and
pin numbers as well as their
response to unsolicited,
undesirable or uninvited e-mail, text
messages or phone calls to provide
their card details.
The use of old fashioned ATM card software
(meant to reduce cost of operation by some
banks) that are considered as cheap, low-cost
or economical alternative by Banks (which
compromises quality and security of the
service) also contribute immensely to ATM
fraud as some reported cases of Europeans,
Caucasians and Americans invading Uganda
and other part of the third-world countries in
Africa and other part of the world, for the
solitary purpose of breaching the cheap security
system put in place by the banks for their
heinous acts and quest for unlawful self-
aggrandizement.
 • Financial Costs; - Businesses do not consider
the loss of credit cards via the mail, or in
other ways, to be related to identity theft, and
so such losses are not reported as such. As
for individuals, the costs are enormous, but
EFFECTS OF ATM FRAUD there are no statistics for how great that cost
is. First, there is the direct loss of money from
ATM fraud will not be personal funds. Second, there is the loss of
possible without an funds required to secure and maintain the
identity theft or remaining funds. Third, there are the
expenses required to track the problems.
impersonation; the Huge amounts of government funds are spent
following are the effect at the local, state and federal levels to deal
of this menace to the with identity theft, whether through law
individual, businesses enforcement, the courts or the correctional
and the government. system. All these financial costs add up,
either through higher bank fees, higher taxes
or higher security expenses.
Legal Costs: - For individuals, businesses
and governments, the legal ramifications of
identity theft are untold. There is the
damage to a person's credibility; this can
take years to repair. For businesses, there is
a drain on resources and a strain on
personnel as they try to determine whether
a client has been telling the truth. Identity
theft undermines the very foundation of a
free-market society, which is trust. People
are perceived as less trustworthy, a greater
degree of control has to be initiated and
implemented by the government to protect
society.
Psychological Costs: - Beyond the financial and legal
costs of identity theft, there are the psychological and
emotional ramifications. An individual who has to
spend thousands of dollars and precious time dealing
with stolen identity often has pain and suffering to
cope with. He can feel violated and have emotional
ups and downs. The victim may fear the theft will
happen again and will become less trusting of people
in general. The result is an unraveling of society's
moral fabric as those who steal identities get away
with terrorizing law-abiding citizens. If identity theft is
not curbed or reduced, or becomes less rampant,
honest people become demoralized which may lead
to temporary Mental Anguish.
Identity theft can cause added stress on
your body. Identity theft victims often
claim a feeling of being used, abused,
misused and refused. The effect of
having someone steal your identity to
make unauthorized purchases can take
a toll on your physical and emotional
health, especially when thousands of
Naira in expenses has been illegally
accumulated in your name.
TYPES OF ATM FRAUD

A REPORT ON GLOBAL ATM FRAUDS (2007)

IDENTIFIED THE FOLLOWING TYPES OF ATM
FRAUDS:
(a) Shoulder Surfing: This is
a fraud method in which the
ATM fraudsters use a giraffe
method to monitor the
information the customer
keys-in into the ATM
machine, unknown to the
customers.
(b) Lebanese Loop/ skimming: This is a device used to
commit and identity theft by exploiting Automated Teller
Machine (ATM). Its name comes from its regular use
among Lebanese financial crime perpetrators, although
it has now spread to various other international crime
groups. Skimming involves the use of a storage device
to copy your credit or debit card information. Any clerk or
salesperson could easily run your card through a
skimming device before or after running it for your
purchase without you noticing. Pay close attention to
what is being done with your card; never let a clerk walk
out of sight with your debit or credit card. It is also
possible for thieves to place skimming devices over ATM
slots so that they scan your card on its way into the ATM
machine.
These devices protrude from the machine
and often look out of place with the ATM
design. A card skimmer is a device placed on
the ATM that is unrecognizable by most
users of the machine. The device actually
reads and records the card information, as
well as the pin number entered by the
cardholder, in some cases. The thief simply
returns to the ATM at a later time and
removes the device and then uses the
information gathered to make clone cards.
(c) Using Stolen Cards: This is a situation
in which the ATM card of a customer is
stolen and presented by a fake presenter
or rather an imposter.
(d) Card Jamming: Once the ATM card is
jammed, fraudster pretending as a
genuine sympathizer will suggest that the
victim re-enter his or her security code.
When the card holder ultimately leaves in
despair the fraudster retrieves the card
and enters the code that he has doctored
clandestinely.
(e) Use of Fake Cards: Fraudsters use data
collected from tiny cameras and devices
called ‘skimmers’ that capture and record
bank account information and subsequently
create a clone of the original card.
(f) Duplicate ATMs: The fraudsters use
software which records the passwords typed
on those machines. Thereafter duplicate
cards are manufactured and money is
withdrawn with the use of stolen Passwords.
Sometimes such frauds are insiders’ job
with the collusion of the employees of the
company issuing the ATM Cards.
(g) Card Swapping: This is a card theft
trick whereby a fraudster poses as a
“Good Samaritan” after forcing the ATM to
malfunction and then uses a sleight of
hand to substitute the customer’s card
with an old bank card. As the customer
tries to push the card through, the
fraudster offer assistance by pretending to
help the customer push through the card.
(h) ATM Burglary: This involve the use of
explosives in form of gas canisters or
bomb to blast the ATM and cart away with
the proceeds.
 CONTROLS MEASURES

• TO CUSTOMERS
• (i). Customers must ensure that they are
not careless about (or with) their Personal
Identification Number and must not release
their cards or delegate anyone to ATM
machine.
(II). TO PROTECT THEMSELVES FROM
SHOULDER SURFING, CUSTOMERS MUST
ENSURE THAT THOSE WHO ARE ON THE QUEUE
FOR SIMILAR TRANSACTION ARE FAR AWAY
FROM WHERE THEY ARE DOING TRANSACTION
WITH THE ATM.
(III). IF THE ATM OF A CUSTOMER IS STOLEN OR
LOST, THE CUSTOMER SHOULD ALERT THE
BANK IMMEDIATELY.
(iv). Sign new cards as soon as they
arrive and cut up the old ones when
they expire.
(v). If your card got stuck in the ATM,
do not reveal your PIN even to
concerned bank officials. It suffices
for the official to know that your card
got stuck in the ATM.
(Vi). Avoid being last or first to use
the ATM.
(vii). Notify the bank when
you notice unfamiliar
gadgets attached to the
ATM.
(viii). Destroy old debit
cards.
(ix). Beware of phishing
scams and know who you
are interacting with.
 TO BANKS
Creating a designated time for the
card users; The customers can
choose times for using ATM on phone,
thus once anybody comes outside the
designated time of the customer, he
could be arrested.
• The ATM cards can be provided with microchip
-technology that will make it difficult to forge.
• Illiterate customers should not be issued ATM
cards.
• Banks can monitor the ATM continuously by
installing closed-circuit cameras and other
devices.
• The banks can employ customized software
that records relevant information on ATM cards
so that banks can establish whether
unauthorized transaction has taken place or
not.
• The banks must alert customers on any
suspicious and unusual transaction on their
accounts.
• There must be adequate security
around the ATM.
• Biometric tokens are the safest
means of preventing ATM frauds.
The most widely used biometric
tokens are finger prints, irises, faces
and palms. The fraudster may match
everything but they can never match
any of these unique features of the
customer.
 CONCLUSION
• This paper is of the opinion that every nation has a peculiar ATM fraud that
is common to it. The e-banking has great possibilities but that would be
dependent on the extent to which the ATM frauds are controlled. Banks
should not suffer in silence; they should use the state of the art equipment
for it to curtail the menace of ATM fraud at all cost to avoid being a victim
to this heinous and somewhat preventable act. As a customer, anything
you can do to make a thief's work more difficult, whether it's staying on top
of your balance, spreading your cash out across multiple accounts or
making purchases with credit cards instead of debit cards will help
safeguard your checking account and decrease your chances of becoming
a victim of debit card fraud.

• THANK YOU SO MUCH