criminal fraternity can crack their codes and get away with that kind of money – it is understood to have taken them two years, but £650 million isn’t a bad return-on- investment – how vulnerable are other companies and organisations? The answer, it would seem, is “very”. Melissa Gargagliano, head of EMEA commercial cards at Bank of America Merrill Lynch (BAML), says: “Fraud tends to vary by region: Europe sees a high inci- dence of card-not-present [CNP] fraud, as the EMV chip framework in the European Union makes it more difficult to produce counterfeit cards. On the other hand, with the US still transitioning from magstripe [magnetic strip] to EMV chip, the market sees a significant amount of counterfeit fraud.” For the uninitiated, this takes a bit of ex-
plaining: EMV stands for Europay, Master- card and Visa, the three organisations that originally developed the system whereby one simply plugs a card into a point-of-sale terminal, keys in a PIN number, and waits with bated breath for that ‘remove card’ instruction that indicates that one hasn’t yet exceeded one’s credit limit. Older readers will recall when using a
credit card entailed inserting a three-page receipt and a card into an ink-roller, which took an impression of the card details as the client’s signature was checked – the process, particularly when one was waiting to buy the next round, was interminable. Magstripe cards offered more security than this archaic system, but are relatively easy to forge and copy, and any fraud takes days to discover. EMV chip cards are much harder (but not impossible) to fake than magstripe cards. However, they are not invulnerable to CNP fraud: a cardholder who makes a purchase online or over the phone is usually required to provide all the data – card name, number, expiry date and three-digit security code – that the vendor needs for the purchase to go through; but the criminally-inclined smart enough to get hold of those card details could then embark on a shopping spree of momen- tous proportions. Fortunately for unwary corporates, BAML
has already thought of that. “Card issuers have become increasingly sophisticated in order to tackle the fraud challenge,” says Gargagliano. “This includes understanding spend patterns of clients and cardholders, and establishing a series of controls in place to work toward pre-empting and prevent-
30 BBT CORPORATE CARDS SUPPLEMENT 2015
Cyber-criminals accessing procurement card details can reap bigger ill-gotten gains
ing fraud rather than merely to react to it. For example, whereas a transaction at a grocery or a jewellery merchant is normal for consumers, this should im- mediately ring alarm bells when seen on a corporate card.”
John Verver, a former Deloitte staffer who is now strategic advisor Vancouver-based ACL Services,
a
specialist in audit and risk management solutions. Travel and expense (T&E) fiddles generally involve relatively small amounts, but procurement cards (p-cards) – used to buy anything from flipcharts to desktop computers – can involve much larger sums. “I think it’s reasonably likely that in some organisations, p-card fraud involves
Another alarm bell is set off by to
significantly more monetary losses than T&E,” Verver says. Cyber-criminals accessing corporate card details could, potentially, get away with lots of small amounts; those accessing p-card details can reap fewer-in-number, but potentially much bigger, ill-gotten gains. Gargagliano insists she’s on the
case. “Fraud continues to remain one of the harsh realities of the industry,” she says. “And card issuers – both consumer and commercial – have implemented robust fraud controls in order to tackle this challenge.” Predictably enough,
corporates
are on her side. “Savvy organisations implement
robust
controls...to
reduce fraud, and monitor key spend areas in order to spot discrepancies, which could help identify fraud before it occurs,” Gargagliano says. “They also rely on card providers to ensure that their ac- counts are being actively monitored to work toward ensuring that fraud risk is at an acceptable level.” Nigel Farage may wish that he’d had a
few “robust controls” in place in Margate but, whatever the outcome of the general election, he will surely take heart from the fact that February’s bank-busting £650 million cyber-heist is believed to have been masterminded in Russia – those (alleg- edly) dastardly eastern Europeans again. Give the man a beer and summon the snappers – another Ukip photo-call can’t be far away...
Gross fraud losses on UK cards, according to FFA UK 609.9
200 300 400 500 600 700
100 0
2007 2008 Lost/stolen card Third-party application fraud Source: Financial Fraud Action UK Annual Review In association with 2009 2010 Mail non-receipt 2011 Theft of card details (CNP) 2012 Counterfeit card Account takeover 2013 535.2 440 365.4 388 341 450.4
£ MILLIONS
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