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New York credit card fraud bust just ‘tip of the iceberg'

Last week, Queens District Attorney Richard Brown charged 111 individuals with operating a credit card fraud ring that involved the stealing of credit card numbers by bank tellers, restaurant workers, and other service employees, in what his office described as the “largest identify theft takedown in US history.”

Five groups were charged in 10 indictments with stealing more than $13 million over a 16-month period by cloning credit cards, according to Brown. Once they obtained the stolen identity information, the ring manufactured bogus credit-cards and IDs.

The counterfeit cards were given to teams of “shoppers” who were sent out on shopping sprees in New York, Florida, Massachusetts, California, and other areas of the United States to purchase high-end electronics and other merchandise – such as designer handbags, game consoles, and jewelry – which either had been requested or could easily be fenced and re-sold, typically over the internet, the district attorney said.

New York officials said 86 of the 111 suspects have been arrested and 25 remain fugitives. The charges, based on 784 alleged crimes recorded during the investigation, include enterprise corruption, identity theft, grand larceny, and possession of a forged instrument. The arrests were a result of a two-year investigation by the New York Police Department and Queens District Attorney's office and dubbed "Operation Swiper," Brown said.

Although New York law enforcement should be “applauded” for their excellent work, this ring is only a small part of the immense credit card fraud industry, said Vendorcom’s Rodgers.

“Sadly, this will have almost no effect [on credit card fraud] at all; 111 people seems like a lot of people, but in the overall global card fraud scene, that is a drop in the ocean”, Rodgers said. “It’s big in terms of the number of people involved in one activity, but in terms of global card fraud, there are many smaller operations. The sheer number of fraudsters out there is unquantifiable.”

Javelin Strategy and Research has tried to quantify the unquantifiable. According to its 2011 Identity Fraud Survey Report, identity theft fraud totaled $37 billion in 2010.

The New York-based credit card ring primarily targeted credit cards with magnetic stripes, from which data is much easier to steal than from the newer “chip and PIN” cards, said Rodgers. “Because we still have the magnetic stripe on the back of a card, that information can easily be cloned and then transmitted as easily as you can send an email”, he added.

The Vendorcom chief said that the “chip and PIN” credit cards, which are standard in Europe, rely on a computer chip and a PIN number to ensure the security of the data. He said that cloning the chip “is impossible in any meaningful sense.”

Rodgers said that credit cards that use magnetic stripes and signatures are using outdated technology. “Banks and retailers who have not deployed chip and PIN are actually, frankly, collaborating with the fraudster”, he opined.

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