The Hamilton Spectator
Thursday, October 16, 1997

Police probe credit card scam

Locally stolen data used for counterfeit cards

by Barbara Brown, bbrown@ham.southam.ca

The RCMP is investigating a sophisticated fraud operation that produced counterfeit credit and debit cards from information stolen from scores of cardholders in this region.

Staff-Sergeant Brad Keddy said the commercial crime section is focusing on a Waterdown business as the "point of compromise", where information encoded in the black-magnetic stripe on the back of customers' cards was illegally downloaded and then used to create pirate credit cards and debit cards.

"The way it normally happens is that credit cards are swiped or double swiped to take encoded information off the card for the purpose of producing a counterfeit card."

"The second way is someone overseeing the PIN (personal identification number of a debit card) and then swiping the card's magnetic stripe to obtain the encoded information", Keddy said.

Constable Jim Ogden of the RCMP's Hamilton detachment confirmed three people had been arrested in connection with the fraud operation, and were later released on promises to appear in Ontario Court (provincial division) on Nov. 5.

But Ogden was tight-lipped about further details, saying he's still interviewing witnesses and didn't want to compromise his investigation.

Spokesperson Rob McLeod of the Canadian Imperial Bank of Commerce said more than two dozen CIBC clients in the Hamilton area have had the security of their credit or debit cards compromised as a result of the counterfeit operation.

He said the bank is contacting branches and customers affected and will be conducting audits.

"I can confirm the police and ourselves, along with other banks, are investigating a situation involving a Waterdown merchant. There were two dozen, or a handful more, of our clients whose cards were compromised, but that was about it for us. As for the rest of the banks, I don't know."

Bogus Charges

McLeod said the amounts racked up on individual counterfeit cards were generally small and the fraudulent debit-card transactions were local.

The frauds came to light when clients, who presumed their cards safe and secure inside their wallets, suddenly found bogus charges popping up on their monthly statements.

In the case of counterfeit credit cards, the records showed some transactions taking place in the United States and Europe.

The owner of the business under investigation told The Spectator that when he heard about the allegations, he immediately suspended his staff and began running the operation himself.

"Nobody really knows what's going on at this point, or who is involved or responsible. There are only allegations, nothing has been proven", he stressed.

The man said he first learned about the allegations when customers complained to him that their banks were suddenly cancelling or blocking their debit and credit cards.

The Spectator has chosen not to identify the owner at this time because no charges have been laid and the investigation is continuing.

Sergeant Glenn Samson of the RCMP's Newmarket detachment said his office has been investigating a card-fraud operation in that jurisdiction for many months.

"We want to get word out to the general public, "Keep a close eye on your credit card when making a purchase and don't let it out of your sight", Samson said.

Catherine Johnston, president of Advanced Card Technology, said credit card fraud last year topped $5 billion worldwide "and the majority of that was counterfeiting".

According to statistics from the Canadian Bankers Association, Visa and Mastercard's retail sales volume was $67.7 billion. Their combined losses from fraud were $83.6 million in the same fiscal period ending Oct. 31, 1996.

Protect your credit cards

Ten tips from the Canadian Bankers Association:
Never leave your cards unattended at work. There are more credit card thefts in the workplace than in any other single location.

If your credit card is programmed to access an automated banking machine, protect your personal identification number (PIN) or security code. Don't write it down, memorize it.

Don't leave your credit card in your vehicle. A high proportion of cards are stolen from automobiles.

Always check your card when returned to you after a purchase. Make sure it is your card.

When travelling, carry your cards with you or make sure they are in a secure location.

Report lost or stolen cards immediately. Most fraudulent use of cards takes place within days of being lost or stolen.

Sign the back of a new card as soon as you get it. Destroy unwanted cards so they don't fall into wrong hands.

Make a list of your cards and numbers. The information is helpful in reporting lost or stolen cards.

Always check your monthly statement. Make sure the charges are yours.

Never give your card number over the telephone unless you are dealing with a reputable company, and only give it out when you have called to place an order.

Copyright © 1997 by The Hamilton Spectator. All Rights Reserved. Reprinted with permission.