Policing Plastic

Publication Date01 March 1999
AuthorW.A. Watts
SubjectAccounting & finance
Journal of Financial Crime Vol. 7 No. 1 Credit Card Fraud
Policing Plastic
W. A. Watts
The adage 'prevention is better than cure' has merit
in all areas of crime management after all, most
victims of crime would far rather not suffer from it
in the first place than see it detected or cleared up
after the event and is of especial relevance to
matters of fraud involving plastic money.
Consider first the scale of the issue. Cheque usage is
now in decline. Nationally 1990 saw the peak at 2.3
billion, this has fallen to below 1.9 billion in the cur-
rent year and is expected to halve again by 2005.
Cheque fraud has correspondingly fallen in line.
All growth lies in plastic. We are rapidly moving
towards a cashless society; 'plastic', in the guise of
'credit', 'debit' and 'charge' cards, dominates the
domestic financial world. There are today over 97
million such cards in circulation in the UK making
us one of the largest users per capita in the world.
1997 saw 3,700 million card transactions processed.
With the proliferation of store cards and new tech-
nology inevitably these figures will grow, especially
in areas of MOTO (mail order, telephone order)
and Internet shopping, to cite but two examples.
Potential for fraud is very substantial. Losses from
fraud associated with the use of plastic cards
amounted to £165.6m in 1991 alone. Serious coun-
termeasures taken by the finance industry halved
that level but recently the figures have steadily
begun to rise again.
The development of 'plastic' since its first intro-
duction to the UK in 1965 provides a clear illustration
of how new forms of commercial and social activity
also create potential for new crimes or new ways for
exploiting criminal opportunities. The development
and introduction of this new banking product also
brought with it fraudulent card crime, presumably
not identified or anticipated at the design and imple-
mentation stage or perhaps it was.
The finance industry tends to look at fraud as a
'family issue' regardless of who eats the cost
the issuer, the merchant acquirer (bank or other insti-
tution which has a contractual agreement with a mer-
chant/retailer), the merchant, retailer or the customer.
In the UK the customer does not pick up the tab
for fraud on lost or stolen cards. This is explained
by the nature of domestic market forces: the public's
appetite for banking products is dependent on the
convenient risk-free use of them. At the other end
of the scale, in Turkey for instance, the customer is
liable for all losses incurred up to the point of the
card being reported lost or stolen.
Despite appearances the finance industry is not the
sole victim of card fraud. One consideration is that
many other crimes are committed or at least facili-
tated by the fraudulent use of cards as false means
of identification. This banking product provides an
easy and readily available tool to the practised decei-
ver in various modi operandi relating to offences invol-
ving impersonation of another.
Another is that plastic cards provide lucrative and
attractive facilities for the casual, opportunist and
career criminal alike in all crimes involving trickery.
Consequently this underworld market for stolen (and
counterfeit) plastic makes every legitimate card
holder a vulnerable target for all kinds of conven-
tional crimes. Street robbery, burglary of homes
and offices, and theft from recreational areas and
motor vehicles are examples of crimes suffered
where the primary or secondary objective is to feed
this market. Research shows that between 10 per
cent and 15 per cent of all recorded crime involves
the theft or other illegal acquisition of banking pro-
Assuming the thief or cheat has the where-
withal to put these products to subsequent criminal
or at least the means to dispose of them on the
black market, it is not unreasonable to infer that the
same proportion of all crime is substantially moti-
vated by this object.
As a Home Office crime prevention paper on plas-
tic fraud points out, it is easy to justify prevention
initiatives if they are viewed as an unalloyed good.
However, commercial priorities are somewhat differ-
ent from those of the evangelist. For the finance
industry a business case needs to be made out balan-
cing the costs, both tangible and 'hidden', against
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