Credit Card Fraud The Scale of the Problem Michael Moore Regional Security & Fraud Investigation...

Credit Card Fraud Credit Card Fraud The Scale of the ProblemThe Scale of the Problem

Michael MooreRegional Security & Fraud Investigation Manager14 – 17 Nov 2005

Security & Safety – Middle East 2005Security & Safety – Middle East 2005

AgendaAgenda

The Credit Card System Worldwide Trends CEMEA/Gulf Fraud Performance UAE Fraud Figures

Payment Associations do not:Payment Associations do not:

• Issue Cards

•Acquire merchants

Member InstitutionsMember Institutions

Issuing banks

Acquiring banks

Both

Basic Service ProvidedBasic Service Provided

Authorisation for card transactions

Clearing and Settlement for Member Banks

MerchantAgreement

Merchant Cardholder

CardholderAgreement

Acquirer Issuer

The Credit Card SystemThe Credit Card System

MerchantAgreement

Merchant

Sales Draft

Cardholder

CardholderAgreement

Authorizations

Acquirer Issuer

Card Transaction FlowCard Transaction Flow

MerchantAgreement

Merchant Cardholder

CardholderAgreement

AcquirerIssuer

Clearing & Settlement

Clearing & SettlementClearing & Settlement

Current Worldwide Fraud TrendsCurrent Worldwide Fraud Trends

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$180.00

$200.00

1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

Fra

ud U

S$m

LOST\STOLEN NRI FRD APPL CNTRFEIT MISC CNP

Losses during 2004 US$ 1.9 bn Visa Record

Current World wide Fraud TrendsCurrent World wide Fraud Trendsfor MasterCardfor MasterCard

An average of 8 cents for every $100

Worldwide Issuer Counterfeit Losses Worldwide Issuer Counterfeit Losses Ending 4Q 2004Ending 4Q 2004

$0

$10$20

$30$40

$50

$60$70

$80

U.S.A. CANADA E.U. ASIAPAC LAT.AM. C.E.M.E.A.

Fra

ud (M

illions)

2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

2004 losses US$630m (Up 17% over 2003)

Financial loses as a result of POS Fraud Financial loses as a result of POS Fraud MasterCardMasterCard

WorldwideAED 3,385,206,786.44

Middle East & North AfricaAED 66,755,408.64

UAEAED 4,980,195.14

CEMEA Acquired Fraud (RSV)CEMEA Acquired Fraud (RSV)

0.00

0.02

0.04

0.06

0.08

0.10

0.12

0.14

0.16

4Q02 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

Fra

ud

as

a %

of

Vo

lum

e

CEMEACEMEA

VISA WORLDWIDEVISA WORLDWIDE

$6.96m

$6.50m$7.23m

$6.75m

$6.43m

$6.49m

$8.05m $8.3m

$9.1m

CEMEA Acquired Fraud by TypeCEMEA Acquired Fraud by Type6 Quarters ending 4Q046 Quarters ending 4Q04

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

Lost/Stolen NRI Fraud App Counterfeit Misc CNP

To

tal F

rau

d

('000)

3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

Counterfeit now at US$5m

CEMEA Acquired Fraud Distribution CEMEA Acquired Fraud Distribution 20042004

Fraud Apps $0.4m

Misc $0.5m

Acct Use $5m

Lost/Stolen $8m

NRI $2m

Counterfeit $15mLost/StolenLost/Stolen 18%18%

NRINRI 62%62%

Fraud AppsFraud Apps 31%31%

CounterfeitCounterfeit 21%21%

MiscellaneousMiscellaneous 23%23%

Fraud UseFraud Use 25%25%

Percentage % in GCCPercentage % in GCC

Common Types of Credit Card Fraud - Never Received Common Types of Credit Card Fraud - Never Received Issue (NRI)Issue (NRI)

Definition:

– Card is stolen from the mail system before the cardholder receives it and is subsequently used fraudulently

Use of NRI Cards is normally supportedby forged identity documents.

Easy to FakeEasy to Fake

GCC – Impact of Counterfeit, GCC – Impact of Counterfeit, Lost/Stolen and NRI – 2004Lost/Stolen and NRI – 2004

USA - GCC 37% - $2.1m

EU - GCC44%

$2.5mCANADA - GCC

5% - $304k AP – GCC6% - $325k

LATAM - GCC

1% - $34k

Total Acquired in GCC - $6m

CEMEA –GCC7%

$400k

CEMEA Issuer Fraud to CSVCEMEA Issuer Fraud to CSV

0.00

0.02

0.04

0.06

0.08

0.10

0.12

2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

Fra

ud

as

a %

of

Vo

lum

ee

VISA WORLDWIDEVISA WORLDWIDE

CEMEACEMEA

$5.4m

$6.5m$5.1m

$4.5m

$3.4m$2.8m$2.3m

CEMEA Issuer Fraud by Fraud TypeCEMEA Issuer Fraud by Fraud Type

-$500

$500

$1,500

$2,500

$3,500

$4,500

To

tal

Frau

d

US

$k

2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

Fraudulent Use of Account

Counterfeit MiscellaneousFraudulent Applications

Card NotReceived

Lost /Stolen

Skimming DeviceSkimming Device

CEMEA/GCC - Cash vs. ATM FraudCEMEA/GCC - Cash vs. ATM Fraud

0

0.5

1

1.5

2

2.5

3

3.5

2002 2003 2004 2005

Fra

ud

Am

ou

nt

US

$m

s

Cash 6010 ATM 6011

$27k

$18k

$21k$350k

$29k

$95k

$2k

$22k

GCCGCC

ATM SkimmerATM Skimmer

Fake ATM front side with SkimmerFake ATM front side with Skimmer

UAE Acquired Fraud to 4Q 2004UAE Acquired Fraud to 4Q 2004

$711$676

$553

$334

$547$613

$0

$100

$200

$300

$400

$500

$600

$700

$800

3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

Quarter

Frau

d

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

Frau

d to

Sal

es %

CEMEACEMEA

UAEUAE

UAE Acquired Fraud by MCC - 2004UAE Acquired Fraud by MCC - 2004MCC Description Amount Count Average% of Total5944 JEWELRY STORES $ 573,384 503 $ 1,140 23%5968 CONTINUITY/ SUBSCRIPTION MERCHT$ 339,554 1,765 $ 192 14%5732 ELECTRONICS STORES $ 266,254 370 $ 720 11%4812 TELECOMMUNICATION EQUIPMENT $ 195,632 275 $ 711 7%5411 GROCERY STORES/ SUPERMARKETS $ 157,617 602 $ 262 7%5969 OTHER DIRECT MARKETERS $ 90,320 128 $ 706 5%5309 DUTY FREE STORES $ 66,049 197 $ 335 3%7011 HOTELS/ MOTELS/ RESORTS $ 65,982 210 $ 314 3%5499 MISC FOOD STORES - DEFAULT $ 56,826 605 $ 94 2%5541 SERVICE STATIONS $ 54,588 617 $ 88 2%

TOP TEN $ 1,866,206 5,272 $ 518 77%ALL OTHER $ 621,609 1,729 $ 149 23%TOTAL $ 2,487,815 7,001 $ 386 100%

UAE – X Border Acquired Sales UAE – X Border Acquired Sales 20042004

UK25%

SWITZ2%

RUSSIA5%

KSA9%

USA10%

GERMANY4%

OTHER32%

AUST2%

EGYPT3% FRANCE

4%

KUWAIT4%

X Border Acquired Sales vs. X Border Acquired Sales vs. Acquired Fraud 2004Acquired Fraud 2004

Issuer Country Fraud Amount Sales Sales Rank Fraud Rate

UNITED STATES OF AMERICA $ 723,415 $128,409,498 2 0.56%UNITED KINGDOM $ 629,331 $329,086,683 1 0.19%CANADA $ 142,669 $24,711,425 13 0.58%FRANCE $ 126,234 $53,542,959 7 0.24%AUSTRALIA $ 62,712 $29,815,969 9 0.21%ISRAEL $ 57,004 $385,746 73 14.78%SAUDI ARABIA $ 55,919 $116,097,186 3 0.05%JAPAN $ 53,817 $18,286,594 18 0.29%HONG KONG, CHINA $ 49,119 $7,846,557 31 0.63%

$0

$100

$200

$300

$400

$500

$600

3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

Quarter

Fra

ud

US

$k

0

0.02

0.04

0.06

0.08

0.1

0.12

Fra

ud

to

Sa

les

%

UAE Issuer Fraud to 4Q04UAE Issuer Fraud to 4Q04

CEMEACEMEA

UAEUAE

UAE Issuer Fraud by MCC 2004UAE Issuer Fraud by MCC 2004MCC Description Amount Count Average % Total5311 DEPARTMENT STORES $ 109,910 258 $ 426 50%5411 GROCERY STORES/ SUPERMARKETS $ 93,513 368 $ 254 12%4812 TELECOMMUNICATION EQUIPMENT $ 69,607 134 $ 519 9%5045 COMPUTERS/ PERIPHERALS/ SOFTWARE $ 37,769 24 $ 1,574 5%5611 MEN/ BOYS CLOTHING/ ACC STORES $ 32,539 20 $ 1,627 3%5541 SERVICE STATIONS $ 29,495 352 $ 84 2%4722 TRAVEL AGENCIES $ 27,174 34 $ 799 2%5399 MISC GENERAL MERCHANDISE $ 19,304 32 $ 603 1%4011 RAILROADS $ 16,843 107 $ 157 1%5310 DISCOUNT STORES $ 15,912 35 $ 455 1%

TOP TEN $ 452,066 1,364 $ 518 86%ALL OTHER $ 1,193,730 3,763 $ 149 16%TOTAL $ 1,645,796 5,127 $ 386 100%

UAE – X Border Spend 4Q 2004UAE – X Border Spend 4Q 2004

UK24%

USA10%

FRANCE7%LEBANON

7%

AUSTRALIA3%

GERMANY5%

OTHER29%

CANADA3%

JORDAN3%

INDIA4%

BAHRAIN5%

UAE Issuer Fraud by Country of UAE Issuer Fraud by Country of Acquisition during 2004Acquisition during 2004

Country Amount Count Average % of TotalJAPAN $ 218,127 604 $ 361 50%UNITED KINGDOM $ 209,696 562 $ 373 12%UAE $ 185,518 915 $ 203 9%AUSTRALIA $ 138,630 336 $ 413 5%FRANCE $ 134,507 286 $ 470 3%USA $ 133,261 546 $ 244 2%ITALY $ 102,017 123 $ 829 2%TURKEY $ 93,569 178 $ 526 1%SPAIN $ 67,230 256 $ 263 1%THAILAND $ 28,611 67 $ 427 1%TOP TEN $ 1,311,166 3,873 $ 518 86%ALL OTHER $ 334,630 1,254 $ 149 16%TOTAL $ 1,645,796 5,127 $ 386 100%

No transaction monitoring from banksNo transaction monitoring from banks

Solutions – Long TermSolutions – Long Term Migration to Chip Technology Terminals – point of acceptance changing in

UAE Cards – incentive plans introduced Chip Liability Shift – 2006 Verified by Visa & SecureCode looking to

secure internet transactions Initiatives to improve data security Mandating banks monitor transactions

Thank youThank youTogether We Fight Fraud