Since the migration to EMV in the largest card market in the world (the U.S. in October of 2015), the incidences of counterfeit card fraud at chip-enabled merchants have fallen sharply — some 76 percent, as reported by card networks. Once cards became significantly harder to clone, fraudsters took their bag of bad tricks online.
At least, that is the narrative that most people in developed countries have internalized, said Derek Pak, regional head of Customer Fraud Management for Asia-Pacific at Mastercard, in a recent conversation with Karen Webster. In reality, he said, the idea that counterfeit card fraud is 2014’s security problem lacks a fair amount of nuance. Mag stripes have far from disappeared off the face of the earth, and fraudsters are still exploiting their easy clonability all over the planet, particularly in the developing world.
This, he noted, leaves law enforcement with two major challenges. The first is discovery, and knowing for certain that cards in the possession of suspected criminals have been faked. The second is recovery, and setting the process into motion that protects the consumer against any and all losses. Solving these two critical issues for law enforcement is why, in partnership the Commercial Affairs Department of the Singapore Police Force, the payments company is rolling out its own Mastercard Forensic Reader (MFR), the world’s first device to help law enforcement agencies detect fraudulent payment cards with greater speed, accuracy and efficiency.
Pak told Webster that Mastercard has been cooperating with and supporting law enforcement for many years. Over that period of time, a consistent compliance system was created through the time spent verifying that counterfeit cards are, in fact, counterfeit. Previously, Pak said, the technology hasn’t been in place to help at the moment suspected criminals are detained, but the rapid developments in technology could make verification almost instant for law enforcement.
Speeding Up Discovery And Recovery
Law enforcement in Singapore and elsewhere in the Asia-Pacific region, Pak told Webster, encounters counterfeit cards in a variety of contexts. Sometimes officers are specifically investigating financial crimes, wherein card counterfeiting is a central operation. Sometimes the cards are ancillary to a different criminal purpose. And sometimes, someone committing a wholly unrelated crime happens to be in possession of counterfeit credit cards.
Financial crime officers, he noted, have specialized training so they know what to look for in counterfeit cards, which often have telltale signs.
“But to the untrained eye,” Pak told Webster, “these counterfeit credit and debit cards look very convincing, and it is often not possible at a quick glance to be sure.”
Pak noted that police will also encounter situations that are very suspicious with cards, but not necessarily proof-positive on their own.
“If someone is arrested with 10 or 20 or 30 cards, on their person, that tends to be a giveaway,” Pak said. “But officers — even trained officers — don’t want to rely solely on one piece of information. In that moment, they must be sure they are not arresting or charging someone who genuinely owns the card or cards.”
What’s needed then, Pak added, is a few pieces of accurate and reliable information so that law enforcement can draw a reasonable conclusion. The MFR, he said, is designed to be the piece of hardware that law enforcement can use to instantly achieve that level of certainty. Resembling an in-store point-of-sale (POS) terminal, the MFR allows law enforcement to swipe a suspected counterfeit card to see if the data read by the terminal matches the data on the card.
Usually, he said, the mismatch will be in one of two places, or often both: The name on the card will not match the account holder that the MFR says is associated with that card number or the issuing bank will be wrong. Seeing that is enough to give law enforcement the information it needs to take the appropriate next steps. In addition, and just as important, he noted, the MFR tells officials the real issuing bank, which helps them stop to fraudulent charges for those cards and allows the actual cardholder to have a new card reissued much more quickly than it had been in the past.
“This device lets them contact the issuing bank straight away without having to go through a middleman. That is empowering for them because working through various contact people in the past, just to get connected to the issuing bank, used to take days or sometimes weeks,” Pak said.
That ability to move more quickly, he noted, is critical, as issuers in these regions are looking to build trust with an emerging group of customers who are still learning what to expect when it comes to security and reliability in digital payments.
The Push For Scale
Among the good and bad things about living in the developed world, Webster noted, customers have had 60 years to get used to the idea that thieves are out there, trying to steal their information and defraud them. Consumers don’t like that, Webster said, but they are almost immune to it. More importantly, though, they are used to the idea that they will not be liable for those charges and that their issuers will work overtime to protect them.
In the developing work, particularly in Asia-Pacific, consumers who have been through the process of fighting digital fraud are pretty confident that the banks will have their back — and that they won’t be liable. That’s good news, Pak said. But unlike the United States, the majority of consumers in these markets don’t live with the certainty that the dark web has their data, and they aren’t sure what happens in the event that someone steals their cards.
“Working with our stakeholders is really about increasing the security of the product,” he said,“because top of mind for most of our consumers is the security of the product they’re using, and will they be liable for a loss if something happens with their personal information.”
The ability to more quickly discover and recover counterfeit cards, he noted, is important enough to build that ongoing relationship of trust with cardholders — which, with this launch, Mastercard is “definitely looking to scale.” Pak said that he and his team are reaching out to law enforcement agencies through the Asia region — Hong Kong, Macau, Thailand, Malaysia and Indonesia — and responding to requests from outside of Asia, including South Africa.
As the program expands and more feedback is received from law enforcement, Pak said that Mastercard will continue to enhance the product and add new services, though he declined to offer more specifics. However, he added, the strength of the MFR grows from the strength of Mastercard’s partnership with law enforcement.
“It is the combined force of the industry that will allow us to effectively combat card fraud, with the common goal of safeguarding cardholders’ private information,” Pak said.