Tuesday, April 22, 2003

Malaysia swipes back at
credit card fraudsters

By Patrick Chalmers

KUALA LUMPUR, April 22 (Reuters) - Faced with savvier retailers and better police work, Malaysia's credit card thieves are getting smarter, although authorities say they are catching up with them.
The arrests of two people in January for alleged theft of card data through a wire tap has been touted as the latest blow to syndicates who had threatened to make card fraud a major crime in rapidly developing Malaysia.
Authorities said the two hit RHB Bank for three million ringgit ($790,000), exploiting poorly protected phone lines in a Johor shopping centre in southern Malaysia.
"The latest incident is another demonstration of how the syndicates have become more sophisticated," said the head of credit cards at a foreign bank in Malaysia, who declined to be identified.
"There's a pattern to it. Countries get hit, police get involved very quickly, they stamp it out and syndicates move on. It's a big industry," he said.
Once second only to Taiwan in the region for card fraud, Malaysia has stepped up coordination among industry players and introduced stiffer penalties for a crime that threatened to become a big embarrassment.
Yet despite progress in fighting an offence police say mainly involves ethnic Chinese gangs, anecdotes from cardholders suggest the problem persists.
One expatriate household in Kuala Lumpur reported three different VISA cards ripped off during a period of weeks at the end of last year, with charges arriving from three different countries.
The thefts involved $6,000 spent in South Korea on a card issued by Britain's Halifax Bank, another few hundred dollars in Australia on a Lloyd's debit card and 1,200 ringgit ($320) on a third issued by Malayan Banking.
All funds were credited back to cardholders, as is usual.
Similar stories are easy enough to unearth, which is bad news for a country keen to bolster tourist arrivals.
Bank Negara Malaysia, the central bank, says fraud against locally issued cards peaked in the first quarter of 2001 before falling to 0.3 percent of total transactions late last year.
Using central bank data for credit card purchases by local and foreign cardholders last year, end-2003 rates of fraud imply losses of $19.2 million on the $6.4 billion annual total.
The bank refused to confirm any figure or say how bad the crime became at its peak, a reticence shared by card issuers MasterCard and Visa International as well as Malaysian credit card leader Citibank.
Neither would card issuers or big banks give comparative fraud data for other countries.
Nineteen local and foreign banks have 4.4 million cards issued, largely to the growing middle class among Malaysia's 24 million population.
The crime, while a lower-tier affair than more obviously damaging cross-border offences like drugs trafficking, is a big headache for the companies and countries worst hit.
Malaysia, whose economy weathered both the Asia financial crisis of 1997-1998 and the latest global downturn better than most, sees tourism as a great hope for growth as its electronics sector comes under competitive pressure from China.
But foreigners are fraudsters' favoured prey.
Their higher credit limits and longer lead times to detection make it worthwhile for criminals to clone their details on fake cards.
Maizan Shaari, a senior officer in Malaysia's commercial crime investigating division, says police have made headway by focusing on high-risk events.
At last year's Formula One grand prix in Malaysia, they found 48 illegal chips embedded in 1,000 or so card readers monitored at hotels and other outlets used by race goers.
Another sweep ahead of February's summit of the Non-Aligned Movement, when delegates from 116 countries came to Kuala Lumpur, found none in checks on more than 250 places.
"I guess what we did in 2002 must have been a deterrent. They know what we are doing," said Maizan.
Crime figures dating back to 1999 show card fraud reported to police peaked at nine million ringgit in 2000, when there were 173 incidents.
The next year losses fell to 1.6 million ringgit as cases rose to 252, followed by falls in value and volume in 2002.
Over the whole period, Singapore, France and Japan arrested 19 Malaysians on suspicion of card fraud, the latest a Malaysian airline flight attendant held in Tokyo in February for alleged possession of 3,000 card blanks.
Straight theft of cards and the capture of cardholder data by double swiping, known as skimming, or via illegal chips at points of sale, typified the wave of card fraud to hit Malaysia.
Maizan says consumer and vendor awareness campaigns, tougher penalties and better cooperation among banks, police and card issuers had cut the opportunities for fraud in Malaysia.
Despite official bullishness, the problem seems far from fixed, with fraudsters still gleaning data for use abroad.
Maizan admits syndicate leaders remain at large.
"At the moment, we are going down line making the arrests, not upstream. We are still working on that one."
Malaysia-based financial crime expert Nigel Morris-Cotterill is impressed by Malaysia's efforts to curb card fraud.
"They are certainly addressing it. Whether it's possible or not to fix, it is not Malaysia's problem. Malaysia is doing more than most," he says.
Though not yet enough for him to pull out the plastic.
"The only time I use it is in a shop when I'm standing next to a machine where I can see exactly what's happening."