Skimmer Scams Skyrocket

Skimmer frauds cost U.S. businesses billions of dollars annually, according to a report released by the Association of Chartered Certified Accountants USA (ACCA) and Pace University in February. The average loss per skimmer scam was roughly $50,000 in 2011, up from $30,000 in 2010. This trend shows no signs of stopping.

Skimmer scams potentially damage a company’s reputation, generate financial losses and compromise its ability to service debt. Although most common among retailers and restaurants, skimmer fraud is a risk for any business that accepts electronic payments.

The basics

Skimmers are electronic devices used to read and store electronic data. They may be installed directly on ATMs, point-of-sale terminals and gas station pumps to extract data from magnetic stripes on payment cards. Some schemes use miniature cameras to simultaneously record personal identification numbers (PINs).

After skimming electronic data, thieves typically clone payment cards. The phony cards may be used to purchase high-end goods that sell easily on the black market or online marketplaces.

U.S. threats

Skimmer fraud is a global epidemic, often perpetrated by Eastern European crime rings. The United States is especially vulnerable. It has more ATMs than any other country, and U.S. credit cards don’t contain global chips, making them easier to skim and clone.

U.S. restaurants also customarily swipe customers’ cards away from the table, creating an opportunity for dishonest restaurant staff to skim electronic data using handheld devices. In other countries, payment cards are swiped at the table, never leaving diners’ sight.

Skimmers have been around for years, but today’s devices are smaller, have more memory and incorporate advanced encryption methods that make them harder to detect. Some even use wireless technology. In January, 13 people were indicted for operating a skimmer fraud ring that stole more than $2 million using Bluetooth-enabled skimmers at gas stations.

Preventive measures

• Simple ways for borrowers to protect against skimmer scams include:
• Installing surveillance cameras to record activity at ATMs, ticket kiosks and gas stations,
• Inspecting card readers for tampering and using skimmer detection cards,
• Prohibiting cashiers from leaving their registers or terminals,
• Equipping point-of-sale terminals with anti-skimming devices, and
• Requiring employees to swipe payment cards in customers’ plain view.

Many retailers also validate transactions using driver’s licenses, ZIP codes or PINs. In the future, some may use biometric data — such as fingerprints or irises — to authenticate transactions.

Learn more

You can find more information on the ACCA’s report here. A forensic accountant can provide additional information on prevention and detection. Contact Marvin Willis at 404-874-6244 for more details.