Many credit card fraud offenders are now becoming more organized than before, resulting in higher losses from their offenses. Countries such as the USA and the UK have been seen improving their fraud prevention strategies by enhancing coordination in combating fraud. The establishment of the President’s Identity Theft Task Force in the USA and the National Fraud Authority in the UK are evidence of the importance of coordinated efforts in addressing fraud problems. Author’s research suggests that the key areas of resource allocation in credit card fraud prevention within a payment system are: understanding of the real problems, fraud prevention policy, fraud awareness, technology-based protection, identity management and legal deterrence. These areas are mainly supported by four pillars: user, institution, network and government and industry. This is dubbed by the author as the “four pillared-house of payments fraud prevention practice” Referring to the fraud statistics from the Financial Fraud Action (FFA) UK and the Australian Payments Clearing Association (APCA), the five most common types of credit card fraud are: application fraud, card-not-received, lost and stolen card, skimming/counterfeiting and card-not-present fraud. Generally, the basis of application fraud is exploitation of loopholes in the application process so that an offender can have his credit card application approved. Commonly, during their credit card application process, an offender gives bank or financial institution false information about his financial status (Bhatla et al., 2003, p. 4).Card-not-received occurs when an individual’s mail is intercepted by an offender (Burns and Stanley, 2002, p. 3). The perpetrators of this scheme rely on the loopholes of the credit card delivery process to intercept the cards. Technically, the cards are stolen in transit, after card companies send them out and before the genuine cardholders receive them (APACS, 2008b, p. 15). In lost and stolen card, credit cards are simply “lost” by the cardholders (e.g. left behind at a point of sale (POS)) (Cornish et al., 2008, p. 13). Credit cards may also be removed from purses or briefcases at work, school or other settings if left unattended by the cardholders (Cornish et al., 2008, p. 13). This type credit card fraud can also be a predicate offence for card-not-present fraud, because offenders can use a card or card number for criminal purposes over the telephone or the internet (Cornish et al., 2008, p. 9). Card-not-present fraud is part of the risk a merchant must be willing to take when accepting card-not-present transactions (e.g. internet transactions). Burns and Stanley (2002, p. 6) discuss how credit card use where the physical card is not present at the POS creates a different set of challenges. Card-not-present fraud poses a great threat to merchants, because they are not protected with the physical verification features present in “brick and mortar” businesses (Cornish et al., 2008, p. 12). This occurs because neither the card nor the cardholder is present at the POS, so the merchant is unable to verify the signature or photo identification of the cardholder. Required: Critically elaborate on any four (4) implications of credit card fraud? Who pays for credit card fraud? Where does credit card fraud generally occurring?
Many credit card fraud offenders are now becoming more organized than before, resulting in higher losses from their offenses. Countries such as the USA and the UK have been seen improving their fraud prevention strategies by enhancing coordination in combating fraud. The establishment of the President’s Identity Theft Task Force in the USA and the National Fraud Authority in the UK are evidence of the importance of coordinated efforts in addressing fraud problems. Author’s research suggests that the key areas of resource allocation in credit card fraud prevention within a payment system are: understanding of the real problems, fraud prevention policy, fraud awareness, technology-based protection, identity management and legal deterrence. These areas are mainly supported by four pillars: user, institution, network and government and industry. This is dubbed by the author as the “four pillared-house of payments fraud prevention practice” Referring to the fraud statistics from the Financial Fraud Action (FFA) UK and the Australian Payments Clearing Association (APCA), the five most common types of credit card fraud are: application fraud, card-not-received, lost and stolen card, skimming/counterfeiting and card-not-present fraud. Generally, the basis of application fraud is exploitation of loopholes in the application process so that an offender can have his credit card application approved. Commonly, during their credit card application process, an offender gives bank or financial institution false information about his financial status (Bhatla et al., 2003, p. 4).Card-not-received occurs when an individual’s mail is intercepted by an offender (Burns and Stanley, 2002, p. 3). The perpetrators of this scheme rely on the loopholes of the credit card delivery process to intercept the cards. Technically, the cards are stolen in transit, after card companies send them out and before the genuine cardholders receive them (APACS, 2008b, p. 15). In lost and stolen card, credit cards are simply “lost” by the cardholders (e.g. left behind at a point of sale (POS)) (Cornish et al., 2008, p. 13). Credit cards may also be removed from purses or briefcases at work, school or other settings if left unattended by the cardholders (Cornish et al., 2008, p. 13). This type credit card fraud can also be a predicate offence for card-not-present fraud, because offenders can use a card or card number for criminal purposes over the telephone or the internet (Cornish et al., 2008, p. 9). Card-not-present fraud is part of the risk a merchant must be willing to take when accepting card-not-present transactions (e.g. internet transactions). Burns and Stanley (2002, p. 6) discuss how credit card use where the physical card is not present at the POS creates a different set of challenges. Card-not-present fraud poses a great threat to merchants, because they are not protected with the physical verification features present in “brick and mortar” businesses (Cornish et al., 2008, p. 12). This occurs because neither the card nor the cardholder is present at the POS, so the merchant is unable to verify the signature or photo identification of the cardholder.
Required:
- Critically elaborate on any four (4) implications of credit card fraud?
- Who pays for credit card fraud?
- Where does credit card fraud generally occurring?
- Do you think, using a credit card of local business is risky? Why? Why not?
Step by step
Solved in 4 steps
