The Globe & Mail
Monday, February 16, 1998

Billed for Guccis in Paris? Card scams hit Canadians

Record number of customers victimized as fraud goes global

by Susan Bourette,

Alan Martin took one look at his Visa bill and gasped in disbelief.

Along with the charges made during the family's recent 10-day vacation in London, there were a litany of unexplained figures: over a 24-hour period, someone had racked up $3,000 in exclusive Parisian clothing stores, restaurants, and bistros. Mr. Martin had never set foot in the city of lights. His card had been counterfeited.

"I just about fell out of my chair when I saw it", recalls the 53-year-old, who lives about a half-hour north of Toronto. "They managed to do it all in one go, and we had no idea until we got the bill. Somewhere along the way my card was duplicated. . . It was a bit of a shock."

Mr. Martin has lots of company.

All told, crooks bilked major Canadian credit-card companies of $88-million in 1997.

Canadians are being swindled by international fraud artists in countries as far-flung as Japan, Mexico, and Dubai at a rate not seen since credit-card scams first emerged as major crimes in the early 1990s.

Increasingly, charges for Gucci bags, Chanel suits, Rolex watches, and satellite TVs are cropping up on the monthly bills of the nearly 77,000 Canadians who fall victim to credit-card fraud every year, from corners of the world to which they have probably never been. Indeed, new figures show while domestic credit-card fraud is declining, the dirty deeds of global embezzlers are on the rise.

"It's like trafficking drugs, only the commodity is different", said Corporal Gordon Jamieson, one of the RCMP's pre-eminent fraud investigators. "For the longest time, nearly all credit-card fraud in Canada was related to Asian organized crime. Now, for the first time, we're seeing some collusion between different ethnic, organized-crime groups in different parts of the world."

Visa Canada is one major credit-card issuer that has noted the trend. Figures for 1997 show international fraud rose to 40 per cent of all crimes committed against Visa's Canadian customers, up from 32 per cent a year earlier - a figure that has remained fairly constant since 1992, when credit-card fraud first registered as a significant problem for the company, said Alan Finn, director of risk management and security at Visa.

Mastercard Canada Inc. is also recording an increase in international fraud: it climbed 8 per cent to 35 per cent of overall fraud in 1997, according to Roland MacDonald, the company's director of security and risk management.

While most international fraud against Visa's Canadian customers takes place in the United States, credit-card companies are also recording a marked upswing in the number of crimes committed in Japan, Mexico, South America, and the Middle East.

It's a story that residents of Waterdown, Ont. know all too well. Many within the community of 8,000 near Hamilton were surprised late last fall to find charges on their cards in the order of $5,000 for jewels and shoes from Saudi Arabia.

The RCMP discovered scores of credit cards had been "skimmed" - a high-tech method of copying information from the magnetic stripe on a credit or debit card - at a local gas station.

Mayor Ted McMeekin was just one of about 50 residents who fell prey to the quarter-million-dollar sting. But he was luckier than most. A counterfeit copy of his credit card was found in the possession of a man arrested in the U.S. It had been used for a few minor purchases only.

"I think that's what makes everybody feel so violated - that you really don't expect something like this to happen in a town like ours", Mr. McMeekin says. "People don't expect to be murdered, and they'd don't expect to have people in their community ripping them off, either."

Credit-card issuers vary in their policies, but generally card-holders are not liable for more than $50 in phony purchases. As much as anything, it is the sense of personal violation that angers consumers.

No one seems to know exactly why Japan or Dubai have emerged in recent months as dens of credit-card thieves and counterfeiters. However, most experts agree these fraudsters are as intent on globalizing their business as the most respected of blue chip corporations.

"Credit-card fraud is very mobile because of its links to organized crime", Visa's Mr. Finn explains. "Right now, we're seeing increases in places like Japan. But if we have this conversation in six months, it'll probably be somewhere else. . . . When it gets hot in the kitchen, the criminals will move to somebody else's kitchen."

While it has been relatively easy in the past to trace the signature of each ethnic, organized-crime group, collusion among the groups has made it much more difficult to crack down on counterfeiting and other forms of credit-card fraud, said Susan Sylstra, executive director of the International Association of Financial Crimes Investigators, based in Novato, Calif.

With each group cribbing from the other, it becomes nearly impossible to pinpoint the origin of a counterfeiting operation, Ms. Sylstra added.

However, credit-card fraud most often begins at home with the collection of card-member data. Employees of restaurants, stores, and hotels are often hired by organized groups to "dumpster dive" for discarded slips from which the card numbers are copied.

Most counterfeit operations are set up in the back office of a store, in a sweat shop, or even within a home in an exclusive part of a foreign city. Technology - especially desktop publishing, electronic mail, and fax machines - has helped make fraud a global business, said Paul Facciol, director of security for the Canadian Bankers Association.

In another recent scheme, dozens of counterfeit Canadian cards showed up in a Dubai electronic store. The Dubai merchant had been working in collusion with Canadian thieves, ringing thousands of dollars of satellite TVs onto unsuspecting consumers' cards.

"The first purchase is usually a big bang. They try to hit pretty hard", explains the RCMP's Mr. Jamieson. "Then (the criminals) will try to keep hitting them with small purchases until the card is cancelled."

Typically, over a few hours crooks buy goods with high price tags that can be resold on the black market, according to the experts.

Differences in time zones makes catching the thieves all that much more difficult, adds Ruth Sutton, head of fraud monitoring for Canadian Imperial Bank of Commerce's Visa department.

However, banks and credit-card companies are clamping down hard on fraud. While many consumers find out their card number has been stolen only when the bill arrives, companies are being increasingly vigilant, and are catching criminals in mid-scam.

One approach is to flag purchases that are being made in countries that have become hotspots for fraud. Another is to build customer profiles that alert the card company every time an unusual purchase is being made by that client. If a red flag is raised, a computer switches over to a live authorization clerk, who will either try to speak to the customer making the purchase in a foreign land, asking personal questions, or call them at home to confirm that they are making the purchase.

Card companies employ a number of methods in attempts to thwart counterfeiting operations. Holograms, extremely difficult to copy for more than two decades, are being replicated more easily with the availability of new technology. Until "skimming" emerged in Canada last summer, it was very difficult for counterfeiters to copy information in a magnetic stripe. Card companies admit protecting consumers is much more difficult today.

However, the future holds the promise of technological advances. Card companies are looking at retinal scanning, high-tech signature-verification methods, or microchips that - at least so far - are impossible for thieves to copy.

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