Skimming fraud: How scammers try to steal your money

Over the years ATM cards have evolved to become a staple, and for many, a necessity in modern society. These digital cards offer an incredible convenience to consumers as a way to have quick access to banking at any given hour or day. No longer are individuals confined to what was traditionally known as “banker’s hours.” Thanks to ATM machines, people can access their bank accounts, make transfers or withdraw money at any time they want.

What is skimming?

However, like with anything else, anything of tangible value typically comes with some drawbacks. ATM cards are no exception. Unfortunately, ATM fraud is running rampant and a process called ‘skimming’ is not only on the rise, but becoming more sophisticated in nature and harder to detect. ATM card skimming occurs when a thief attaches an external device to an ATM machine in order to capture any information stored on the bank card of an account holder. The information is then stolen and used for illicit purposes, mainly theft.

How do skimmers work?

How it works is the physical skimmer, which is a magnetic head, is attached to the ATM machine and positioned on top of the card insert; the skimming device is usually designed to look authentic. Once the user inserts their bank card, the fraudulent device then intercepts the data stored on the ATM card; at this time the user will often see some sort of error message. In addition, thieves also use small pin-sized cameras which can read PIN numbers punched into the ATM keypad, and sometimes mirrors are used to help capture information.

In the past, the skimming equipment was clunky and easier to detect, but as technology progresses, the card-readers are now more sophisticated and harder to differentiate from authentic ATM card-readers. Combine these authentic looking devices with Bluetooth technology and stealing data is quick and easy for the scammers. Scammers also are getting savvy in the way they are installing the skimmers on Saturdays and removing them before the bank reopens Monday morning. By the time people notice something amiss when information is updated, the stolen data has already long been transferred to another country (Wall Street Journal).

An evolving type of fraud

Skimming is not a new technique, but with the precise and improved progression of technology, thieves are exploiting technology in order to design clever ways to, well, rob a bank. Additionally, the days of a one-man thieving operation are over, today’s ATM fraudsters have evolved into huge operations which are run by organized gangs.

Avivah Litan, a fraud analyst at research firm Gartner, “estimates that fraud involving debit cards, PINs and point-of-sale equipment has surged 400 percent over the past five years.” One tactic, she said, has been “flash attacks” Using the stolen information, gangs create thousands of counterfeit debit cards and then dispatch cronies to at least 100 ATM machines in several cities at once. Each withdraws a small dollar amount from several accounts to avoid fraud-detection software, adding up to tens of thousands of dollars in losses, reported the Wall Street Journal. (courtesy Yahoo!)

In years past, many of the ATM scams were executed at independent ATM kiosks or at retail points of sale, however more thieves are currently going right to the bank and using these ATM machines as a target. In 2009, an increased trend of targeted bank-owned ATM machines was observed. Also in 2009 the “U.S. Secret Service estimated ATM skimming theft was about $1 billion a year, or $350,00 a day,” reported ABC News; this is not small potatoes.

More recently, scammers are getting even more bold, even creating total fake ATMs and fitting them over the legitimate machine, as evidenced by an incident in Sweden that occurred as 2013 came to a close.

Vigilance is needed these days

The facts that the thieves are targeting banks is a huge concern. Individuals tend to feel more comfortable and secure when they go directly to the bank rather than use a third party ATM machine. Not to mention successful skims at banks can significantly increase theft statistics as banks typically see over 1,500 transactions per day, whereas independent machines see perhaps 200 or less.

If statistics on ATM skimming continue to rise, coupled with the more difficulty in detecting tampered machines, this is likely eventually going to lead to a requirement of better use of security technology on the banks and retailers end. It will become too costly not to invest in stronger technologies. Currently, banks are already challenged as Microsoft has decided to pull the plug on its Windows XP operation system. The majority of banks in both the United States and globally use ATMs that run XP, so this presents a large dilemma for banks.

In order to protect themselves, consumers would be smart to educate themselves on what to look for in order to avoid becoming a victim of ATM skimming fraud. Krebs on Security has some good information in regard to skimmers. Education, coupled with preventative practices, can help consumers protect their bank information.