Building our defence against credit card fraud: a strategic view
| Pages | 371-386 |
| Published date | 11 October 2011 |
| DOI | https://doi.org/10.1108/13685201111173848 |
| Date | 11 October 2011 |
| Author | Hendi Yogi Prabowo |
| Subject Matter | Accounting & finance |
Building our defence against
credit card fraud: a strategic view
Hendi Yogi Prabowo
Centre for Forensic Accounting Studies,
Islamic University of Indonesia, Yogyakarta, Indonesia
Abstract
Purpose – The purpose of this paper, which is based on author’s PhD study, is to analyze the trends
in credit card fraud prevention in the USA, the UK, Australia and Indonesia, particularly over the
period 2003-2007, with special focus on the fraud prevention practices in the payments systems.
Design/methodology/approach – This study uses primary and secondary data particularly from
the payments systems of the USA, the UK, Australia and Indonesia to conduct historical and
benchmarking analyses to highlight the trends in credit card fraud prevention in the four countries.
Findings – The study establishes that a common approach in preventing credit card fraud is
reducing offenders’ opportunities to commit their offences, which often require significant amount of
resources and thus sound strategy needs to be properly formulated and executed. Referring primarily
to the practices in the USA, the UK, Australia and Indonesia, resources are mainly allocated to six key
areas of fraud prevention: understanding of the real problems, fraud prevention policy, fraud
awareness, technology-based protection, identity management and legal deterrence. These are
supported in principle by four main groups in a payments system: user, institution, network and
government and industry.
Originality/value – The paper provides insights into the nature of credit card fraud, as well as a
framework for designing a sound credit card fraud prevention strategy in a country’s payments
system.
Keywords United States of America, United Kingdom,Australia, Indonesia, Credit cards,Fraud,
Fraud prevention,Payments system, Situationalcrime prevention, Crime displacement
Paper type Research paper
Introduction
As the world moves closer into becoming a global cashless society, fraud also evolves
into more sophisticated forms. In the past few years, credit card fraud has been on e of the
most sophisticated crimes in the world. Various prevention initiatives have been
employed to prevent this offence and yet global payments fraud statistics suggest that
more must be done to address the problem. From business point of view, banks and
financial institutions have seen this crime as a cost which reduces profitability and thus
must be minimized. A major challenge has been determining the appropriate amount of
resources to be spent on fraud prevention initiatives as well as how to allocate them.
Understanding the nature of crime and crime prevention may help decision makers in
addressing these issues.
Crime and crime prevention: the principles
Among the well-known models in criminology which offers explanation regard ing the
cause of crime is the “crime triangle”. The model proposes that three factors which
influence crime to occur are: motivated offender, suitable target and absence of capable
guardian. As stated by the New South Wales Attorney General’s Department (2008b):
The current issue and full text archive of this journal is available at
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Building our
defence against
credit card fraud
371
Journal of Money Laundering Control
Vol. 14 No. 4, 2011
pp. 371-386
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685201111173848
The theory states that a crime occurs when the following three elements come together in any
given space and time: an accessible target; the absence of capable guardians that could
intervene; and the presence of a motivated offender (Figure 1).
Applying the routine activity theory to explain the occurrence of credit card fraud can be
a challenging task because the offence is perpetrated in various ways, ranging from
simply physically stealing a credit card to hacking a merchant’s database to steal
customers’ credit card information. The triangle, for example, can be applied straight
forward to offence such as credit card theft but not card-not-present fraud. This is
because whereas the former occurs by convergence of victims and offenders in a place
where capable guardian is absent, the later often occurs in cyberspace with no
geographical boundaries and without the need for victim-offender direct interaction.
As Clark (2004, p. 55) proposes, the growth and development of technology have created
new crime opportunities for traditional crimes to evolve and yet it also delivers new
ways to mitigate them.
Yar (2005, p. 424), suggests that in an online crime, whereas the “motivated offenders”
can be considered as largely similar to those of terrestrial crime, the concept of “suitable
targets” is more complex as it is similar in terms of value but is significantly different in
inertia, visibility and accessibility. In traditional crime, the suitability of target for
offender may be measured using the concept of VIVA (value[1], inertia[2], visibility[3]
and accessibility[4]) (Yar, 2005, p. 419). As Cohen and Felson (1979, p. 591) proposed:
Target suitability is likely to reflect such things as value (i.e. the material or symbolic
desirability of a personal or property target for offenders), physical visibility, access and the
inertia of a target against illegal treatment by offenders (including the weight, size and
attached or locked features of property inhibiting its illegal removal and the physical capacity
of personal victims to resist attackers with or without weapons).
The changing environment, especially with the advent of cashless societies and
e-commerce which brings virtual world closer to the real world, there has been shifting
in the concept of “suitable targets” for online crime such as card not present fraud.
Newmanand Clarke (2002), propose thatthe efforts of crime offendersare driven by the
criminogenic attributes of information systems known as SCAREM (stealth, challenge,
anonymity, reconnaissance, escape and multiplicity). “Stealth” means that offenders
Figure 1.
Crime triangle
CRIME
TRIANGLE
Target/Victim
Offender
Crime Scene
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