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  • Stanley Self

    By Stanley W. Self, Full-Time Faculty, Kaplan University
    Published December 2014

    Recognizing Vulnerability: Financial and Credit Card Fraud

    Two cases of financial and credit card fraud are presented this month. Following those examples, some FAQs are presented as possible steps that can be taken to minimize potential risk of financial and credit card fraud.


    Financial fraud can take many forms. The most notorious examples in recent memory include Enron, WorldCom, and Bernie Madoff, among others. Sometimes, these crimes seem too remote to be relevant to us. However, we all are affected either directly or indirectly.

    Financial fraud might be defined as any theft that occurs when money or property is stolen or used in an unlawful or dishonest manner. Financial crimes typically involve deception and the abuse of trust and are usually not included as common theft or robbery. But, some types of financial crimes do hit closer to home, such as credit card fraud.

    Example One  

    This first example is typical of a growing problem with credit card transactions. And, the first indication that a problem exists may be when a credit card holder has a card transaction denied.

    In the example, a credit card holder went to make a credit card purchase but the card was declined. The card holder immediately called the credit card company for an explanation.

    The credit card company representative told the card holder that there had been two very large purchase attempts made on the card in Dubai. Further, the credit card company representative stated emphatically that the transactions were not electronic in nature. A physical credit card was used in an attempt to make a purchase at a precious metals dealer in Dubai. That is, a physically forged credit card was actually carried into a store and a standard purchase was attempted.

    That meant that not only was the legitimate cardholder’s information stolen, but the image was used to create a replica of the actual card. Investigation yielded the process used by the fraudsters.

    In a previous transaction at a restaurant by the true card holder, the legitimate credit card was processed to purchase a meal; but a second, illicit reader was used to capture the electronic information. In addition, a cell-phone was used to capture front and back images of the credit card. All of the electronic and physical information was sold to a forgery network. The credit card was duplicated and by all appearances, was the actual credit card.

    This cardholder was fortunate because they were proactive and the credit card company was able to recognize the unusual activity. Sometimes, action is taken too late to stop an illegitimate transaction.

    Example Two  

    The cardholder lived on a rural highway and had a USPS mandated mailbox in a location that made its visibility difficult. The cardholder did not notice that a credit card statement was late one month.

    It was not until reviewing the next moth’s statement that the cardholder discovered unusual transactions exceeding $10,000 to a boarding school in England. The cardholder immediately called the credit card company to dispute the charges but significant inconvenience was involved.

    Investigation revealed the process used to perpetrate this fraud:

    • The cardholder’s statement had been physically stolen from the mailbox.
    • That statement was sold to a credit card fraud ring in New York.
    • The credit card information was then sold to a fraudulent “Charitable Organization” in Nigeria.
    • The ring advertised grant money available for students to go to school in England.
    • The “grant recipient” had to pay an initial “Deposit” of $2,000. The rest of the funding would be “provided.” The $2,000 was then converted to U.S. currency.
    •  The airfare and tuition for the boarding school was paid using the stolen credit cards.

    By the time the fraud was discovered, the ring operators had vanished. Although the cardholder was eventually released from the debt, the unfortunate students were forced to withdraw from the school and were returned, at the students’ expense, to Nigeria.

    To learn more about ways to protect yourself from financial or credit card fraud, visit the Frequently Asked Questions.

     

    Stanley W. Self is a full-time faculty member with Kaplan University. The views expressed in this article are solely those of the author and do not represent the view of Kaplan University.

     

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