Mass Network Compromise Cause of Most Online Fraud

Mass compromise of merchant networks and card processors is viewed as the main cause of payment-card fraud, according to a survey of 113 financial services firms, which was published Tuesday.

In contrast, online attacks -- such as phishing -- are seen as a far less-significant cause of card fraud by the survey's respondents, who are management executives and antifraud or security managers at financial institutions in the United States, Europe and Asia.

According to the survey, sponsored by security firm Actimize, 94% of the 113 financial-services firms could trace some percentage of payment-card fraud they experienced directly back to mass compromises of networks.

In the survey, several examples of mass compromise events were given, including those known to have occurred at Heartland Payment Systems, grocery retailer Hannaford Brothers, retail-store chain TJX, as well as HNRC. RBS, BJs, DSW and Countrywide.

When asked the question: "Do you believe you have seen stolen data from the mass-compromise events used in fraud attacks?", 55% of the respondents answered "none", but the remainder pointed most frequently to TJX and Heartland.About 85% of the respondents said they decided to reissue payment cards to between 1% to more than 20% of their cardholder population in response to news of a mass compromise although there was no immediate indication of fraud losses.In contrast, online scams are seen as having much more minimal impact in terms of card fraud. About 36% of the survey respondents said that less than 1% of card fraud they experienced was due to online scams such as phishing. About 40% blamed online card scams for 1% to 4% of card fraud they witnessed, and only 1.67% blamed online scams for more than 20% of the card fraud they experienced.

The survey also asked about ATM/debit card fraud claims specifically. More than 69% of survey respondents said their organizations had seen an increase in ATM/debit-card fraud last year in comparison to the prior year, with the majority citing between 5% to 49% increase.

In addition, more than 73% of the financial institutions indicated they had no technology in place to stop fraudulent transaction in real time. The amount of losses in 2008 due to ATM fraud cited by institutions ranged from $744,321 to $12 million.

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