Fraud is on the cards
With the approach of Christmas there is increasing evidence disproving the talk of an economic crisis. Spending is on the rise, and along with it, the number of credit card transactions is growing. But what about the fear of credit card details being misappropriated and used fraudulently, or of identity theft and identity fraud in general?
Last year there were 11 million credit cards in Poland, showing that the initial forecast of a possible ceiling of three million was unrealistic, to say the least. PolCard is Poland's largest credit card transaction authorisation service with more than 65,000 retail outlets across the country belonging to its network. The company has, over the last few years, observed a fall in the number of frauds involving credit card transactions. The reasons for the decrease are manifold, according to PolCard, ranging from better trained and more reliable store staff to the increased awareness of the problem that has been achieved by improved cooperation between the police and retailers, brought about through seminars and training sessions.
According to PolCard data, cases of credit card fraud have, as a proportion of total transactions, been falling over the last few years and will soon reach the EU level of 0.07%. Poland currently enjoys the best statistics among the countries in the region.
Yet information from the police appears to contradict these claims. It suggests that the increase in credit card transaction turnover makes the figures unreliable. In 1999, according to the police, criminals got away with more than €1.6 million in 9,000 cases of reported credit card fraud, and the numbers have been on the rise ever since. Additionally, criminals made approximately €1.8 million through illegal transactions involving credit cards issued by foreign banks. Most fraud, about 75% of it, involves transactions made with stolen or lost credit cards. In 2000, of 55 million transactions with a total value of €2.4 billion, €3.1 million was "made" by criminals. According to police statistics, there are 10,000 crimes committed annually involving credit cards. Even more worrying is the growth trend, which exceeds 50% on an annual basis.
The police say that keeping tabs on Internet-related credit card fraud is difficult, as Polish banks do not always keep statistics on billed customers. It's a view that is confirmed by lawyers and consultants.
"There is no interest in preventing the threat of identity theft," said Arwid Mendis, an attorney at Wierzbowski and Partners law firm, who specializes in personal data protection law. "If I suspect that someone, or that a certain company is misusing my data, I can always personally go to the Inspector General for the Protection of Personal Data. I can always request to be allowed to look at the data pertaining to me that they would be using, and I have the right to amend it accordingly."
When asked whether Poland's current penal provisions are sufficient to protect charge card transactions, Mendis noted that small companies know very little about data protection law, while individuals are rarely aware of the problem of identity theft.
"There is an awareness of the problem in private companies, but as far as public institutions are concerned there is no awareness of the dangers," he said.
According to Mendis, the new law that will come into force in March will pertain to electronic services and transactions and will also refer to individual data rather than sets of data, so there will be a tighter mechanism protecting against identity theft.
The repercussions of identity fraud are amplified in online transactions, where a valid credit card number and expiry date are sufficient for the processing of a transaction. This also means that any liabilities rest with the merchant, not with the client. Therefore, the impact of online fraud on Internet businesses should also be considered.
In mid-October the European Commission issued its annual progress reports on the candidate countries. Poland attracted the most critical comments for fraud, singled out as a country that must "develop political, administrative and business cultures which can resist corruption." The problem is also acute in other countries with corruption and transparency problems, including most of Central and Eastern Europe. Fraud rings tend to operate not just in a single country, but in all of them simultaneously. A recently uncovered credit card gang has already been linked to organised crime groups in Italy, which employed the Poles to collect magnetic-tape data for credit card counterfeiting.
According to Wojciech Partyka, director of the electronic banking department at Nordea Bank, a fully blown problem with identity theft still lies ahead of us.
"I think Polish criminals are still looking for short-term gains, and the concept of stealing an identity for a longer period of time is yet to emerge," he said.
Interference and break-ins remain the biggest problem for online banking. Partyka said that since the launch of his bank's Internet service, they have registered a number of attempts to hack into the system.
"They were all unsuccessful, and after a period of monitoring we passed all the cases over to the relevant units within the police force," he said.
However, the police's co-operation with the banks is restricted by the banking law, which states that banking transactions are subject to secrecy. Partyka said that he would, nevertheless, hesitate to disclose all the information about his clients for fear that unauthorised persons might intercept it. He also said that break-ins into e-accounts are governed by different rules than credit card theft, since they are not as easy to trace.
"If an account was cleared but there were no signs of password breaking or outside interference, we would be forced to assume that everything happened as usual," he said. "Only once the client can prove that he or she has been physically unable to make a transaction will the bank act accordingly."
Since the new legislation on virtual crime won't come into force until March, the best advice for the present is to opt for a bank that guarantees credit card security and will assume the liability for any illegal transactions conducted using credit card data. Apart from this, the best precaution is to be careful who you give your credit card to.
Last year there were 11 million credit cards in Poland, showing that the initial forecast of a possible ceiling of three million was unrealistic, to say the least. PolCard is Poland's largest credit card transaction authorisation service with more than 65,000 retail outlets across the country belonging to its network. The company has, over the last few years, observed a fall in the number of frauds involving credit card transactions. The reasons for the decrease are manifold, according to PolCard, ranging from better trained and more reliable store staff to the increased awareness of the problem that has been achieved by improved cooperation between the police and retailers, brought about through seminars and training sessions.
According to PolCard data, cases of credit card fraud have, as a proportion of total transactions, been falling over the last few years and will soon reach the EU level of 0.07%. Poland currently enjoys the best statistics among the countries in the region.
Yet information from the police appears to contradict these claims. It suggests that the increase in credit card transaction turnover makes the figures unreliable. In 1999, according to the police, criminals got away with more than €1.6 million in 9,000 cases of reported credit card fraud, and the numbers have been on the rise ever since. Additionally, criminals made approximately €1.8 million through illegal transactions involving credit cards issued by foreign banks. Most fraud, about 75% of it, involves transactions made with stolen or lost credit cards. In 2000, of 55 million transactions with a total value of €2.4 billion, €3.1 million was "made" by criminals. According to police statistics, there are 10,000 crimes committed annually involving credit cards. Even more worrying is the growth trend, which exceeds 50% on an annual basis.
The police say that keeping tabs on Internet-related credit card fraud is difficult, as Polish banks do not always keep statistics on billed customers. It's a view that is confirmed by lawyers and consultants.
"There is no interest in preventing the threat of identity theft," said Arwid Mendis, an attorney at Wierzbowski and Partners law firm, who specializes in personal data protection law. "If I suspect that someone, or that a certain company is misusing my data, I can always personally go to the Inspector General for the Protection of Personal Data. I can always request to be allowed to look at the data pertaining to me that they would be using, and I have the right to amend it accordingly."
When asked whether Poland's current penal provisions are sufficient to protect charge card transactions, Mendis noted that small companies know very little about data protection law, while individuals are rarely aware of the problem of identity theft.
"There is an awareness of the problem in private companies, but as far as public institutions are concerned there is no awareness of the dangers," he said.
According to Mendis, the new law that will come into force in March will pertain to electronic services and transactions and will also refer to individual data rather than sets of data, so there will be a tighter mechanism protecting against identity theft.
The repercussions of identity fraud are amplified in online transactions, where a valid credit card number and expiry date are sufficient for the processing of a transaction. This also means that any liabilities rest with the merchant, not with the client. Therefore, the impact of online fraud on Internet businesses should also be considered.
In mid-October the European Commission issued its annual progress reports on the candidate countries. Poland attracted the most critical comments for fraud, singled out as a country that must "develop political, administrative and business cultures which can resist corruption." The problem is also acute in other countries with corruption and transparency problems, including most of Central and Eastern Europe. Fraud rings tend to operate not just in a single country, but in all of them simultaneously. A recently uncovered credit card gang has already been linked to organised crime groups in Italy, which employed the Poles to collect magnetic-tape data for credit card counterfeiting.
According to Wojciech Partyka, director of the electronic banking department at Nordea Bank, a fully blown problem with identity theft still lies ahead of us.
"I think Polish criminals are still looking for short-term gains, and the concept of stealing an identity for a longer period of time is yet to emerge," he said.
Interference and break-ins remain the biggest problem for online banking. Partyka said that since the launch of his bank's Internet service, they have registered a number of attempts to hack into the system.
"They were all unsuccessful, and after a period of monitoring we passed all the cases over to the relevant units within the police force," he said.
However, the police's co-operation with the banks is restricted by the banking law, which states that banking transactions are subject to secrecy. Partyka said that he would, nevertheless, hesitate to disclose all the information about his clients for fear that unauthorised persons might intercept it. He also said that break-ins into e-accounts are governed by different rules than credit card theft, since they are not as easy to trace.
"If an account was cleared but there were no signs of password breaking or outside interference, we would be forced to assume that everything happened as usual," he said. "Only once the client can prove that he or she has been physically unable to make a transaction will the bank act accordingly."
Since the new legislation on virtual crime won't come into force until March, the best advice for the present is to opt for a bank that guarantees credit card security and will assume the liability for any illegal transactions conducted using credit card data. Apart from this, the best precaution is to be careful who you give your credit card to.
