Banking Law

Tracy Kitten of The Fraud Blog recently posted about ATM Skimming problems. Her post highlights a number of problems we've been following for a number of years with respect to all types of cybercrime, not merely ATM skimming. One of the most serious problems is that cybercrime is growing by leaps and bounds.

Over the last three to five years, skimming attacks have dramatically increased in the United States, as well as in New Zealand and Australia. Carl Schriber of ATM security provider Absolute Financial Services Inc. estimates the number of domestic ATM skimming attacks is five times higher today than even a year ago.

Another serious problem is that much of the crime originates outside the borders of the United States, and much of it in countries that used to comprise part of the Soviet Union.

Most of the perpetrators of these attacks are based in Eastern Europe, where the manufacture and sale of skimming devices is common.

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Joseph Menn, the author of "Fatal System Error: The Hunt for the New Crime Lords Who are Bringing Down the Internet," says watch out for Russia and China, where the governments protect some of the world's worst cybercriminals:

"These countries are deliberately supporting some of the worst criminals on the planet because they are useful for a competitive advantage and for military purposes," Menn says.

US government experts tasked with fighting this type of crime state that it will take a concerted diplomatic effort by the US government to negotiate agreements with these "kleptocracies" to give us a fighting chance of "winning" this war from a law enforcement perspective. Even then, I'm skeptical that the morally bankrupt thugs who run governments in Russia, China and similar criminal havens will ever honor those agreements to the point that they'll actually stem the growing tide of cybercrime.

Kitten also points her finger at the prevalence in the US of magnetic stripe technology on credit and debit cards, which makes their use subject to vulnerabilities that are substantially lessened by the use of "more advanced, fraud-resilient chip-and-PIN technology used in virtually every other global market." In other words, the fight may be more successfully waged on the technology front than the legal font. I think she's right, at least as far as magnetic stripe technology is concerned.

Whatever weapons prove most effective against these criminals, I continue to believe that this war will never end, and that banks have to be constantly on top of both the latest threats and countermeasures. It's tough for smaller banks which, because they have less resources to devote to cybersecurity, often tend to be singled out by sophisticated criminals for attack. After which, the reputational hit can often be more devastating than the legal liability.

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For those that are interested in learning more about some of the latest online banking risks, don't forget this Wednesday's webinar "Online Banking Security: Corporate Account Takeovers, Electronic Money Mules and How to Protect Your Customers."