According to a survey done by the American Bankers Association, respondents faced $18 million in card cracking attempts over about an 18-month period from January 2013 to July 2014, and over 2,600 card cracking cases, nearly $6 million was actually lost. To protect your customers and your financial institution from this threat, you need to understand how this scam works.
The main gist of card cracking is that scammers deposit fake checks or counterfeit bills into the victim’s account, and then, the scammers withdraw all the funds. By the time the financial institution discovers the issue, the scammer is long gone with their money. Like many other scams, this one takes advantage of the float time. As you know, legally, you have to credit a certain amount of every check right away, and you usually need to credit the remaining amount the next business day.
As a result, to avoid this scam, you need to have strong security software in place to spot fraudulent checks, and your tellers also need to know how to spot potentially fraudulent checks or counterfeit cash. In addition to looking at the deposits themselves, you should also have anti-fraud tools in place that detect unusual patterns.
Getting the Details
Often, to get an account holder’s details for card cracking, the scammer will create an ad on social media. The ad will promise a free gift certificate, a cash reward, or a similar benefit. Then, it will lead the victim through a variety of questions and forms, and somewhere in this process, the scammer will convince the victim to share their account details or their PIN.
In some cases, the scam starts when the card cracker steals the victim’s ATM card. Then, the scammer gets in touch with the victim over social media or through another venue, and they find some way to get the victim to share their PIN. Then, they deposit fake checks in the ATM and withdraw cash.
However, there’s often a twist in card cracking scams. Sometimes, the victim is told what is happening. The scam artist contacts the victim over text, email, social media, phone, or even in person. Then, the scam artist offers the victim a payment in exchange for letting them run checks through their account. To increase the chance that the victim will say yes, the cracking card scammers tend to focus on college students or young members or the military.
Scammers know that these individuals are often in need of cash, and they also know that these victims aren’t as financially savvy as many older people who have had bank accounts for years.
Responsibility for the Loss
If an account holder agrees to let a scam artist use their account, they (the account holder) are responsible for what happens. However, in most cases, after these unwitting victims let the scammer use their account, the scammer runs off with the money, leaving the victim with none of the payment that was promised in the beginning. At that point, the victim’s account is substantially overdrawn. Although the victim is legally responsible for that amount, your financial institution may end up bearing the long-term cost.
In contrast, in cases, where the victims had their debit cards stolen, your financial institution may be responsible for the losses that were incurred. However, the specifics vary based on when the victim reports the theft of their card.
To protect your bank, you need to educate your clients. Because this particular scam so often affects new banking customers, you may want to put together some educational or informational materials on scams that is expressly designed for new customers.
In particular, you may want to highlight the following tips:
- Do not believe online solicitations for easy money
- Never accept an offer to run a scam through your account — you will be personally liable
- Only share your account number with trusted entities such as cable and utility companies for online billing
- Don’t share your PIN with anyone
- Don’t file false claims with your bank
- Let the bank know about suspicious emails, texts, online ads, social media posts, etc.
Card cracking is just one of the many scams that thieves are doing these days, and scammers are always changing their approach. To protect your bank, you need fraud protection, and at SQN Banking Systems, we provide fraud solutions that make life easier and business safer for our clients. To learn more, contact us directly.