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The Convergence
Saturday, October 18, 1997


Banks do little while fraud pumps thousands from accounts

People kept in the dark about crooks hacking bank cards at gas station

by David Jones, dxj@theconvergence.com

If you filled up your tank recently at a certain gas station in a small town about an hour west of Toronto and didn't pay cash, you might soon find your bank account drained dry by fraudulent electronic transactions from various locations around the world.

Waterdown, Ontario residents have been swimming in fraud and authorities in the know have done little to alert customers who have continued to stumble unwittingly into a financial nightmare.

All it takes is a quick double swipe of your credit or debit card: once to pay for your purchase, and a second time under the counter to copy encoded information off the magnetic stripe on the back of your card, to be used later for producing a counterfeit copy. It's that simple.

Customers who thought their cards were safe in their purses or wallets have been surprised to see bogus charges popping up on their monthly statements.

-- Something's wrong --

"I realized something was seriously wrong more than a month ago", says Sandy Roberts, one of several dozen local residents who have been caught up in this international credit and debit card scam.

"It all started early in September, when I pulled into the local Cango gas station", she recalls.

"It was raining so I let him pump the gas, and when I gave him my Visa card, he disappeared into the office. When he came back, he gave me my card, told me it was declined, and asked if I had another card." The second card worked fine. "I remember thinking it seemed really odd", she says.

It wasn't until the next day, when she mentioned the incident to a friend, that she started to get that sinking feeling.

"Oh, you mean you haven't heard yet?" asked her friend, as if she expected everyone in town to know by now.

By mid-September, as more and more customers at the busy gas station fell victim to the simple yet effective counterfeiting scheme, word was beginning to spread.

"Two weeks later", says Roberts, "I was suddenly hit with a dozen fraudulent transactions totalling $978. There was a transaction for $12 the day after I filled up, as if they were testing to see if their scheme would work, and then a series of transactions for much larger amounts."

"And I've since found out there are lots of people I know who've been hit", she adds, wondering why the banks haven't done anything to warn customers. "Maybe they're worried about a stampede."

"Someone I know had $2,000 worth of shoes charged to her account from Saudi Arabia, and someone else's account was charged $9,000 from Iran." There are also reports of bogus charges from various locations in Canada, the United States, and Europe.

-- Who should pay for the losses? --

Another local resident, Doug Wiley, says he's out of pocket $1,900 because his bank says they can't find a transaction at the Cango station in their records. "I don't understand why I should be held liable if the crooks don't bother to charge $10 on my card for gas in their rush to carry out their crime", he says in frustration.

Sipping coffee at the Tim Horton's, with the Toronto Dominion Bank and the Cango station in plain view, you can sense the growing dissatisfaction with how this situation is being handled.

"Even people like me, who can prove they were at the Cango", say one woman, "are being told they still have to pay the first $50 of the bogus charges."

"They say it's bank policy, but it just doesn't make sense", she says. "It isn't fair to make me pay."

-- Cops and Robbers --

The police are reluctant to give any details because they say they're still interviewing witnesses, but RCMP Constable Jim Ogden was able to confirm that three people have been arrested in connection with the fraud operation. They're due back in court on November 5.

It doesn't take much sophistication to pull off this kind of crime. All that's needed is an inexpensive device that is capable of reading and writing the information recorded on the magnetic stripe on the back of a credit or debit card. When connected to the serial port of a laptop computer hidden under the counter, it allows the collection of information that can later be used to produce counterfeit cards.

So it should come as no surprise when RCMP Sergeant Glen Samson in Newmarket, Ontario, say his office has been investigating a similar card-fraud operation in their region for several months now.

-- If they don't ask, don't tell --

The banks have been reluctant to discuss the situation and little has been done to notify customers who might still be at risk.

A quick visit to the local banks just down the road from Waterdown's now-infamous "point of compromise" confirms they know all about the counterfeit operation.

At the Royal Bank and again at the Toronto Dominion Bank, I could barely finish asking a vague question about credit cards before being told: "I know why you're here. I'll see if I can find the manager."

After that, a flurry of activity: whispers, nervous glances, hurried phone calls in the back office...and then: "The manager's not available, and I can't tell you anything."

One bank says "we're directing all inquiries to our public relations office." The other says, "yes there's a problem, but you'll need to talk to the RCMP."

Rob McLeod, spokesman for the Canadian Imperial Bank of Commerce, was at least able to confirm that more than two dozen of his customers had their cards compromised as a result of the counterfeit operation.

Even journalists at the local newspaper, the Flamboro Review, have agreed to keep their vow of silence for another three weeks, in exchange for what they've apparently been told is exclusive access to the juicy details.

Meanwhile, day after day, Waterdown residents and people just driving through this small town on Highway 5, have been getting ripped off. And since it seems likely the counterfeit credit cards were being sold, the recent arrests may not have put an end to the fraud.

-- The bottom line --

The banks say they will be conducting internal audits to determine which of their customer cards have been compromised, but skeptics say they're in a conflict of interest situation. Every fraudulent transaction they identify costs the bank money, in the form of a reimbursement to the customer.

Fraudulent credit card transactions, most of which are due to counterfeiting, amounted to more than $5 billion worldwide last year, according to Catherine Johnston, president of Canada's Advanced Card Technology Association.

Since most of us aren't about to stop using our cards, it's best to take some advice from the police, "Keep a close eye on your credit or debit card when making a purchase, and never let your cards out of your sight."

with files from Barbara Brown



Copyright © 1997 by David Jones. All Rights Reserved. Reprinted with permission.