Mention the words ‘bank card fraud’ and chances are one conjures up images of distressed customers discovering unauthorized purchases or ATM cash withdrawals on their cards, wondering how it happened and whether the issuing bank or financial services provider will refund the lost amounts.
Card skimming or cloning is one of the most prevalent forms of credit card fraud in South Africa, with counterfeit card fraud (attributable to card skimming and other methods of counterfeiting) accounting for the majority of both debit and credit card fraud reported by the banking industry in 2010/11. This is according to a report by the South African Banking Risk Information Centre.
Skimming or cloning occurs when the magnetic strip at the back of a genuine credit/cheque/debit card is copied and placed on a duplicate card. It is this duplicate card that is then used by criminals to make purchases and withdraw money from ATMs.
Small businesses are impacted by bank card cloning in two ways.
Firstly, it is possible that the business’ employees may orchestrate a card cloning scheme, using card skimming devices when unsuspecting customers use their bank cards on the business’ card payment machines.
Secondly, a cloned bank card may be used by criminals for transactions with an innocent small business that is not party to the card fraud. Where the small business is the source of the fraud, the consequences could include penalties payable to the card issuing institution, termination of the business’ contract to accept cards for payments, and reputational damage resulting in customers avoiding the business. Where the small business unknowingly processes transactions involving the cloned card, the transactions may be reversed by the bank. The small business could, therefore, lose out, as it has effectively not received payment for goods or services that have been provided.
Small business owners can reduce the risk of getting caught up in card cloning by:
• Thoroughly screening their employees to ensure they do not have criminal backgrounds and are trustworthy.
• Observing whether employees are in possession of hand-held card skimming devices. For small business owners who have an ATM on-site, the ATM should be regularly inspected to ensure no card skimming devices have been installed. This also applies to ATMs if the small business owner has one on-site. Images of card skimming devices can be found on the SABRIC website ( SABRIC) so that small business owners know what to look out for.
• Taking note of the South African Banking Risk Information Centre’s observation in its 2010/11 report on card fraud, that Gauteng, KwaZulu-Natal and the Western Cape are the provinces with the highest frequency of card fraud in South Africa, and also account for the highest number of skimming devices recovered. Small business owners operating in these provinces therefore need to be particularly careful.
Post By: Fadzai Munyaradzi
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