UNIVERSITY OF MUMBAI PROJECT ON CYBER CRIME IN BANKING SECTOR
SUBMITTED BY ASHA VASHUMAL AHUJA
PROJECT GUIDE Prof. Mrs. MINAL GANDHI
BACHELOR OF MANAGEMENT STUDIES SEMESTER V (2009-10)
V.E.S. COLLEGE OF ARTS, SCIENCE & COMMERCE, SINDHI COLONY, CHEMBUR – 400071
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UNIVERSITY OF MUMBAI
PROJECT ON CYBER CRIME IN BANKING SECTOR
Submitted In Partial Fulfillment of the requirements For the Award of the Degree of Bachelor of Management By ASHA VASHUMAL AHUJA PROJECT GUIDE Prof. Mrs. MINAL GANDHI
BACHELOR OF MANAGEMENT STUDIES SEMESTER V (2009-10) V.E.S. COLLEGE OF ARTS, SCIENCE & COMMERCE, SINDHI COLONY, CHEMBUR – 400071
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Declaration I
student
of
BMS
–
Semester V (2009-10) hereby declare that I have completed this project on
. .
The information submitted is true & original to the best of my knowledge.
Student’s Signature
Name of Student (
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)
C E R T I F I C A T E This is to certify that Ms. ________________________ Of TYBMS has successfully completed the project on __________________________ _____________________ under the guidance of_________________ ___________
Project Guide Prof. MINAL GANDHI
Course Co-ordinator Mrs. A. MARTINA
External Examiner
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Principal Dr. (Mrs) J.K. PHADNIS
ACKNOWLEDGEMENT This is to express my earnest gratitude and extreme joy at being bestowed with an opportunity to get an opportunity to get an interesting and informative project on “CYBER CRIME IN BANKING SECTOR”. I would like to thank all the people who have helped me in completion of project, I would avail this opportunity to express my profound gratitude and indebtness to all those people. I am extremely grateful to my project guide Prof. Mrs. MINAL GANDHI who has given an opportunity to work on such an interesting project. She proved to be a constant source of inspiration to me and provided constructive comments on how to make this report better. Credit also goes to my friends whose constant encouragement kept me in good stead. Lastly without fail I would thank all my faculties for providing all explicit and implicit support to me during the course of my project.
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EXCECUTIVE SUMMARY Cyber crimes are any illegal activities committed using computer target of the criminal activity can be either a computer, network operations. Cyber crimes are genus of crimes, which use computers and networks for criminal activities. The difference between traditional crimes and cyber crimes is the cyber crimes can be transnational in nature. Cyber crime is a crime that is committed online in many areas using e-commerce. A computer can be the target of an offence when unauthorized access of computer network occurs and on other hand it affects ECOMMERCE. Cyber crimes can be of various types such as Telecommunications Piracy, Electronic Money Laundering and Tax Evasion, Sales and Investment Fraud, Electronic Funds Transfer Fraud and so on… The modern contemporary era has replaced these traditional monetary instruments from a paper and metal based currency to “plastic money” in the form of credit cards, debit cards, etc. This has resulted in the increasing use of ATM all over the world. The use of ATM is not only safe but is also convenient. This safety and convenience, unfortunately, has an evil side as well that do not originate from the use of plastic money rather by the misuse of the same. This evil side is reflected in the form of “ATM frauds” that is a global problem. Internet commerce has grown exponentially during the past few years and is still growing. But unfortunately the growth is not on the expected lines because the credit card fraud which has become common has retarded the e-commerce growth. Credit card fraud has become regular on internet which not only affects card holders but also online merchants. Credit card fraud can be done by taking over the account, skimming or if the card is stolen. Certain preventive measures can be taken to becoming a credit card victim. The term "Internet fraud" refers generally to any type of fraud scheme that uses one or more components of the Internet - such as chat rooms, e-mail, message boards, or Web sites - to present fraudulent solicitations to prospective victims, to conduct fraudulent transactions, or to transmit the proceeds of fraud to financial institutions or to other connected with the scheme.
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Some forms of Internet fraud, include: Spam ,Scams, Spyware ,Identity theft ,Phishing ,Internet banking fraud. "The modern thief can steal more with a computer than with a gun. Tomorrow's terrorist may be able to do more damage with a keyboard than with a bomb". – National Research Council, "Computers at Risk", 1991
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INDEX SRNO.
TOPICS
PAGE NO
1.
CYBER CRIME
01-08
2.
TYPES OF CYBER CRIME
09-25
3.
CLASSIFICATION OF CYBER CRIME
26-28
4.
REASONS FOR CYBER CRIME
29-30
5.
CYBER CRIMINALS
31
6.
MODE AND MANNER OF COMMITING CYBER CRIME
32-34
7
BANKING SECTOR
35-36
CYBER CRIME IN BANKING SECTOR A) ATM FRAUD B) MONEY LAUNDERING C) CREDIT CARD FRAUD
37-43 42-52 53-63
9
CASE STUDY
64-65
10
GENERAL TIPS ON AVOIDING POSSIBLE INTERNET FRAUD SCHEMES
66-67
11
RECENT CASES
68
12
CONCLUSION
69-70
13
BIBLOGRAPHY
71
8
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CYBER CRIME INTRODUCTION The usage of internet services in India is growing rapidly. It has given rise to new opportunities in every field we can think of – be it entertainment, business, sports or education.
There are many pros and cons of some new types of technology which are been invented or discovered. Similarly the new & profound technology i.e. using of INTERNET Service, has also got some pros & cons. These cons are named CYBER CRIME, the major disadvantages, illegal activity committed on the internet by certain individuals because of certain loop-holes. The internet, along with its advantages, has also exposed us to security risks that come with connecting to a large network. Computers today are being misused for illegal activities like email espionage, credit card fraud, spams, and software piracy and so on, which invade our privacy and offend our senses. Criminal activities in the cyberspace are on the rise. Computer crimes are criminal activities, which involve the use of information technology to gain an illegal or an unauthorized access to a computer system with intent of damaging, deleting or altering computer data. Computer crimes also include the activities such as electronic frauds, misuse of devices, identity theft and data as well as system interference. Computer crimes may not necessarily involve damage to physical property. They rather include the manipulation of confidential data and critical information. Computer crimes involve activities of
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software theft, wherein the privacy of the users is hampered. These criminal activities involve the breach of human and information privacy, as also the theft and illegal alteration of system critical information. The different types of computer crimes have necessitated the introduction and use of newer and more effective security measures. In recent years, the growth and penetration of internet across Asia Pacific has been phenomenal. Today, a large number of rural areas in India and a couple of other nations in the region have increasing access to the internet—particularly broadband. The challenges of information security have also grown manifold. This widespread nature of cyber crime is beginning to show negative impact on the economic growth opportunities in each of the countries. It is becoming imperative for organizations to take both preventive and corrective actions if their systems are to be protected from any kind of compromise by external malicious elements. According to the latest statistics, more than a fifth of the malicious activities in the world originate from the Asia Pacific region. The malicious attacks included denial-of-service attacks, spam, and phishing and bot attacks. Overall, spam made up 69% of all monitored e-mail traffic in the Asia Pacific region. As per the National Crime Records Bureau statistics, there has been a 255% increase in cyber crime in India alone. And mind you, these are just the reported cases. In view of this, various governmental and non-governmental agencies are working towards reducing cyber crime activities. Computer crime, cybercrime, e-crime, hi-tech crime or electronic crime generally refers to criminal activity where a computer or network is the source, tool, target, or place of a crime. These categories are not exclusive and many activities can be characterized as falling in one or more category. Additionally, although the terms computer crime and cybercrime are more properly restricted to describing criminal activity in which the computer or network is a necessary part of the crime, these terms are also sometimes used to include traditional crimes, such as fraud, theft, blackmail, forgery, and embezzlement, in which computers or networks are used. As the use of computers has grown, computer crime has become more important.
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Computer crime can broadly be defined as criminal activity involving an information technology infrastructure, including illegal access (unauthorized access), illegal interception (by technical means of non-public transmissions of computer data to, from or within a computer system), data interference (unauthorized damaging, deletion, deterioration, alteration or suppression of computer data), systems interference (interfering with the functioning of a computer system by inputting, transmitting, damaging, deleting, deteriorating, altering or suppressing computer data), misuse of devices, forgery (ID theft), and electronic fraud (Taylor, 1999) In 2002 the newly formed U.S. Internet Crime Complaint Center reported that more than $54 million dollars had been lost through a variety of fraud schemes; this represented a threefold increase over estimated losses of $17 million in 2001. The annual losses grew in subsequent years, reaching $125 million in 2003, about $200 million in 2006 and close to $250 million in 2008.
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CYBERCRIMES IN INDIA As India become the fourth highest number of Internet users in the world, cyber crimes in India has also increased 50 percent in 2007 over the previous year. According to the Information Technology (IT) Act, the majority of offenders were under 30 years of age. Around 46 percent of cyber crimes were related to incidents of cyber pornography, followed by hacking. According to recent published 'Crime in 2007 report', published by the National Crime Record Bureau (NCRB), in over 60 percent of these cases, offenders were between 18 and 30. These cyber-crimes are punishable under two categories; the IT Act 2000 and the Indian Penal Code (IPC). According to the report, 217 cases of cyber-crime were registered under the IT Act in 2007, which is an increase of 50 percent from the previous year. Under the IPC section, 339 cases were recorded in 2007 compared to 311 cases in 2006. Out of 35 mega cities, 17 cities have reported around 300 cases of cyber-crimes under both categories that is an increase of 32.6 percent in a year. The report also shows that cyber crime is not only limited to metro cities but it also moved to small cities like Bhopal. According to the report, Bhopal, the capital of Madhya Pradesh has reported the highest incidence of cyber crimes in the country. In order to tackle with cyber crime, Delhi Police have trained 100 of its officers in handling cyber crime and placed them in its Economic Offences Wing. These officers were trained for six weeks in computer hardware and software, computer networks comprising data communication networks, network protocols, wireless networks and network security. Faculty at Guru Gobind Singh Indraprastha University (GGSIPU) were the trainers.
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CRIME STATISTICS As per the National Crime Records Bureau statistics, during the year 2005, 179 cases were registered under the IT Act as compared to 68 cases during the previous year, thereby reporting a significant increase of 163.2% in 2005 over 2004. During 2005, a total of 302 cases were registered under IPC sections as compared to 279 such cases during 2004, thereby reporting an increase of 8.2% in 2005 over 2004. NCRB is yet to release the statistics for 2006. In 2006, 206 complaints were received in comparison with only 58 in 2005, a 255% increase in the total number of complaints received in the Cyber Cell/EOW over the last year. In terms of cases registered and investigated in 2006 (up to 22.12.06), a total of 17 cases, where the computer was the victim, a tool or a repository of evidence, have been registered in the Cyber Cell/EOW as compared to 12 cases registered in 2005. And mind you, these are just the reported cases. While the number of cyber crime instances has been constantly growing over the last few years, the past year and a half, in particular, has seen a rapid spurt in the pace of cyber crime activities. Cyber lawyers, Pavan Duggal, advocate with the Supreme Court of India and Karnika Seth, partner, Seth Associates, Advocates and Legal Consultants, testify to this, pointing out that they have seen a jump in the number of cyber crime cases that they've been handling in the last one year. One also should remember that the term 'Cyber Crime' should be applied to all offences committed with the use of 'Electronic Documents'. Hence, cyber crimes must grow at the same rate as the use of the Internet, mobile phone, ATM, credit cards or perhaps even faster. "With the little offences came the larger ones involving huge money, and one has seen this sudden
jump
from
smaller
crimes
to
financial
crimes
in
the
last
one
year"
According to Captain Raghu Raman, CEO, Mahindra Special Services Group (SSG), the contributing factors are high volume of data processing, rapid growth and major migration into the online space, especially of financial institutions and their customer transactions. However, actual numbers continue to include, considering the fact that a majority of the Page 13 of 79
cases go unreported. Most victims, especially the corporate, continue to downplay on account of the fear of negative publicity thereby failing to give a correct picture of the cyber crime scene in the country. According to Cyber law expert Na Vijayashankar (popularly known as Naavi); it is difficult to measure the growth of Cyber Crimes by any statistics, the reason being that a majority of cyber crimes don't get reported. "If we, therefore, focus on the number of cases registered or number of convictions achieved, we only get diverted from real facts," he adds. Duggal points out to the results of a survey he conducted in early 2006 on the extent of underreporting. For every 500 instances of cyber crimes that take place in India, only fifty are reported and out of that fifty, only one is registered as an FIR or criminal case. So, the ratio effectively is 1:500 and this, he points out, are conservative estimates. Giving an insight into the reasons for low reporting, Nandkumar Sarvade, director, Cyber Security and Compliance at Nasscom, points out that very often, people are not aware whether an incident is a cyber crime; there is also lack of awareness on where to lodge a complaint or whether the police will be able to understand. "Added to this is the fear of losing business and hence, many cases don't come to light," he adds.
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CHANGING FACE OF CRIME The last year has seen a quantum jump not only in the quantity and quality but also the very nature of cyber crime activities. According to Naavi, a perceptible trend being observed is that cyber crimes are moving from 'Personal Victimization' to 'Economic Offences'. SD Mishra, ACP, IPR and Cyber Cell, Economic Offences Wing, Delhi Police concurs that the cases that are now coming up are more related to financial frauds. As opposed to obscenity, pornography, malicious emails that were more prevalent in the past, now credit card frauds, phishing attacks, online share trading, etc. are becoming more widespread. As Seth points out, initially, when the Internet boom began, certain crimes were noticeable and cyber stalking was one of the first ones. "However, with the little offences came the larger ones involving huge money and one has seen this sudden jump from smaller crimes to financial crimes in the last one year," she adds.
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CYBERSPACE As the cases of cybercrime grow; there is a growing need to prevent them. Cyberspace belongs to everyone. There should be electronic surveillance which means investigators tracking down hackers often want to monitor a cracker as he breaks into a victim's computer system. The two basic laws governing real-time electronic surveillance in other criminal investigations also apply in this context, search warrants which means that search warrants may be obtained to gain access to the premises where the cracker is believed to have evidence of the crime. Such evidence would include the computer used to commit the crime, as well as the software used to gain unauthorized access and other evidence of the crime. Researchers must explore the problems in greater detail to learn the origins, methods, and motivations of this growing criminal group. Decision-makers in business, government, and law enforcement must react to this emerging body of knowledge. They must develop policies, methods, and regulations to detect incursions, investigate and prosecute the perpetrators, and prevent future crimes. In addition, Police Departments should immediately take steps to protect their own information systems from intrusions (Any entry into an area not previously occupied). Internet provides anonymity: This is one of the reasons why criminals try to get away easily when caught and also give them a chance to commit the crime again. Therefore, we users should be careful. We should not disclose any personal information on the internet or use credit cards and if we find anything suspicious in e-mails or if the system is hacked, it should be immediately reported to the Police officials who investigate cyber-crimes rather than trying to fix the problem by ourselves. Computer crime is a multi-billion dollar problem. Law enforcement must seek ways to keep the drawbacks from overshadowing the great promise of the computer age. Cybercrime is a menace that has to be tackled effectively not only by the official but also by the users by cooperating with the law. The founding fathers of internet wanted it to be a boon to the whole world and it is upon us to keep this tool of modernization as a boon and not make it a bane to the society.
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TYPES OF CYBER CRIME 1. Theft of Telecommunications Services The "phone phreakers" of three decades ago set a precedent for what has become a major criminal industry. By gaining access to an organization’s telephone switchboard (PBX) individuals or criminal organizations can obtain access to dial-in/dial-out circuits and then make their own calls or sell call time to third parties (Gold 1999). Offenders may gain access to the switchboard by impersonating a technician, by fraudulently obtaining an employee's access code, or by using software available on the internet. Some sophisticated offenders loop between PBX systems to evade detection. Additional forms of service theft include capturing "calling card" details and on-selling calls charged to the calling card account, and counterfeiting or illicit reprogramming of stored value telephone cards. It has been suggested that as long ago as 1990, security failures at one major telecommunications carrier cost approximately £290 million, and that more recently, up to 5% of total industry turnover has been lost to fraud (Schieck 1995: 2-5). Costs to individual subscribers can also be significant in one case; computer hackers in the United States illegally obtained access to Scotland Yard's telephone network and made £620,000 worth of international calls for which Scotland Yard was responsible (Tendler and Nuttall 1996).
2. Communications in Furtherance of Criminal Conspiracies Just as legitimate organizations in the private and public sectors rely upon information systems for communications and record keeping, so too are the activities of criminal organizations enhanced by technology. There is evidence of telecommunications equipment being used to facilitate organized drug trafficking, gambling, prostitution, money laundering, child pornography and trade in weapons (in those jurisdictions where such activities are illegal). The use of encryption technology may place criminal communications beyond the reach of law enforcement. The use of computer networks to produce and distribute child pornography has become the subject of increasing attention. Today, these materials can be imported across national
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borders at the speed of light. The more overt manifestations of internet child pornography entail a modest degree of organization, as required by the infrastructure of IRC and WWW, but the activity appears largely confined to individuals. By contrast, some of the less publicly visible traffic in child pornography activity appears to entail a greater degree of organization. Although knowledge is confined to that conduct which has been the target of successful police investigation, there appear to have been a number of networks which extend cross-nationally, use sophisticated technologies of concealment, and entail a significant degree of coordination. Illustrative of such activity was the Wonderland Club, an international network with members in at least 14 nations ranging from Europe, to North America, to Australia. Access to the group was password protected, and content was encrypted. Police investigation of the activity, codenamed "Operation Cathedral" resulted in approximately 100 arrests around the world, and the seizure of over 100,000 images in September, 1998.
3. Telecommunications Piracy Digital technology permits perfect reproduction and easy dissemination of print, graphics, sound, and multimedia combinations. The temptation to reproduce copyrighted material for personal use, for sale at a lower price, or indeed, for free distribution, has proven irresistible to many. This has caused considerable concern to owners of copyrighted material. Each year, it has been estimated that losses of between US$15 and US$17 billion are sustained by industry by reason of copyright infringement (United States, Information Infrastructure Task Force 1995, 131). The Software Publishers Association has estimated that $7.4 billion worth of software was lost to piracy in 1993 with $2 billion of that being stolen from the Internet (Meyer and Underwood 1994). Ryan (1998) puts the cost of foreign piracy to American industry at more than $10 billion in 1996, including $1.8 billion in the film industry, $1.2 billion in music, $3.8 billion in business application software, and $690 million in book publishing. Page 18 of 79
According to the Straits Times (8/11/99) A copy of the most recent James Bond Film The World is Not Enough, was available free on the internet before its official release. When creators of a work, in whatever medium, are unable to profit from their creations, there can be a chilling effect on creative effort generally, in addition to financial loss.
4. Dissemination of Offensive Materials Content considered by some to be objectionable exists in abundance in cyberspace. This includes, among much else, sexually explicit materials, racist propaganda, and instructions for the fabrication of incendiary and explosive devices. Telecommunications systems can also be used for harassing, threatening or intrusive communications, from the traditional obscene telephone call to its contemporary manifestation in "cyber-stalking", in which persistent messages are sent to an unwilling recipient. One man allegedly stole nude photographs of his former girlfriend and her new boyfriend and posted them on the Internet, along with her name, address and telephone number. The unfortunate couple, residents of Kenosha, Wisconsin, received phone calls and e-mails from strangers as far away as Denmark who said they had seen the photos on the Internet. Investigations also revealed that the suspect was maintaining records about the woman's movements and compiling information about her family (Spice and Sink 1999). In another case a rejected suitor posted invitations on the Internet under the name of a 28year-old woman, the would-be object of his affections that said that she had fantasies of rape and gang rape. He then communicated via email with men who replied to the solicitations and gave out personal information about the woman, including her address, phone number, details of her physical appearance and how to bypass her home security system. Strange men turned up at her home on six different occasions and she received many obscene phone calls. While the woman was not physically assaulted, she would not answer the phone, was afraid to leave her home, and lost her job (Miller 1999; Miller and Maharaj 1999). One former university student in California used email to harass 5 female students in 1998. He bought information on the Internet about the women using a professor's credit card and then sent 100 messages including death threats, graphic sexual descriptions and references to
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their daily activities. He apparently made the threats in response to perceived teasing about his appearance (Associated Press 1999a). Computer networks may also be used in furtherance of extortion. The Sunday Times (London) reported in 1996 that over 40 financial institutions in Britain and the United States had been attacked electronically over the previous three years. In England, financial institutions were reported to have paid significant amounts to sophisticated computer criminals who threatened to wipe out computer systems. (The Sunday Times, June 2, 1996). The article cited four incidents between 1993 and 1995 in which a total of 42.5 million Pounds Sterling were paid by senior executives of the organizations concerned, who were convinced of the extortionists' capacity to crash their computer systems (Denning 1999 233-4).
5. Electronic Money Laundering and Tax Evasion For some time now, electronic funds transfers have assisted in concealing and in moving the proceeds of crime. Emerging technologies will greatly assist in concealing the origin of illgotten gains. Legitimately derived income may also be more easily concealed from taxation authorities. Large financial institutions will no longer be the only ones with the ability to achieve electronic funds transfers transiting numerous jurisdictions at the speed of light. The development of informal banking institutions and parallel banking systems may permit central bank supervision to be bypassed, but can also facilitate the evasion of cash transaction reporting requirements in those nations which have them. Traditional underground banks, which have flourished in Asian countries for centuries, will enjoy even greater capacity through the use of telecommunications. With the emergence and proliferation of various technologies of electronic commerce, one can easily envisage how traditional countermeasures against money laundering and tax evasion may soon be of limited value. I may soon be able to sell you a quantity of heroin, in return for an untraceable transfer of stored value to my "smart-card", which I then download anonymously to my account in a financial institution situated in an overseas jurisdiction which protects the privacy of banking clients. I can discreetly draw upon these funds as and when I may require, downloading them back to my stored value card (Wahlert 1996).
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6. Electronic Vandalism, Terrorism and Extortion As never before, western industrial society is dependent upon complex data processing and telecommunications systems. Damage to, or interference with, any of these systems can lead to catastrophic consequences. Whether motivated by curiosity or vindictiveness electronic intruders cause inconvenience at best, and have the potential for inflicting massive harm While this potential has yet to be realised, a number of individuals and protest groups have hacked the official web pages of various governmental and commercial organizations for e.g.:(Rathmell 1997). http://www.2600.com/hacked_pages/ (visited 4 January 2000). This may also operate in reverse: early in 1999 an organized hacking incident was apparently directed at a server which hosted the Internet domain for East Timor, which at the time was seeking its independence from Indonesia (Creed 1999). Defence planners around the world are investing substantially in information warfare means of disrupting the information technology infrastructure of defence systems (Stix 1995). Attempts were made to disrupt the computer systems of the Sri Lankan Government (Associated Press 1998), and of the North Atlantic Treaty Organization during the 1999 bombing of Belgrade (BBC 1999). One case, which illustrates the transnational reach of extortionists, involved a number of German hackers who compromised the system of an Internet service provider in South Florida, disabling eight of the ISPs ten servers. The offenders obtained personal information and credit card details of 10,000 subscribers, and, communicating via electronic mail through one of the compromised accounts, demanded that US$30,000 be delivered to a mail drop in Germany. Co-operation between US and German authorities resulted in the arrest of the extortionists (Bauer 1998). More recently, an extortionist in Eastern Europe obtained the credit card details of customers of a North American based on-line music retailer, and published some on the Internet when the retailer refused to comply with his demands (Markoff 2000).
7. Sales and Investment Fraud As electronic commerce becomes more prevalent, the application of digital technology to fraudulent endeavours will be that much greater. The use of the telephone for fraudulent sales
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pitches, deceptive charitable solicitations, or bogus investment overtures is increasingly common. Cyberspace now abounds with a wide variety of investment opportunities, from traditional securities such as stocks and bonds, to more exotic opportunities such as coconut farming, the sale and leaseback of automatic teller machines, and worldwide telephone lotteries (Cella and Stark 1997 837-844). Indeed, the digital age has been accompanied by unprecedented opportunities for misinformation. Fraudsters now enjoy direct access to millions of prospective victims around the world, instantaneously and at minimal cost. Classic pyramid schemes and "Exciting, Low-Risk Investment Opportunities" are not uncommon. The technology of the World Wide Web is ideally suited to investment solicitations. In the words of two SEC staff "At very little cost, and from the privacy of a basement office or living room, the fraudster can produce a home page that looks better and more sophisticated than that of a Fortune 500 company" (Cella and Stark 1997, 822).
8. Illegal Interception of Telecommunications Developments in telecommunications provide new opportunities for electronic eavesdropping. From activities as time-honoured as surveillance of an unfaithful spouse, to the newest forms of political and industrial espionage, telecommunications interception has increasing applications. Here again, technological developments create new vulnerabilities. The electromagnetic signals emitted by a computer may themselves be intercepted. Cables may act as broadcast antennas. Existing law does not prevent the remote monitoring of computer radiation. It has been reported that the notorious American hacker Kevin Poulsen was able to gain access to law enforcement and national security wiretap data prior to his arrest in 1991 (Littman 1997). In 1995, hackers employed by a criminal organization attacked the communications system of the Amsterdam Police. The hackers succeeded in gaining police operational intelligence, and in disrupting police communications (Rathmell 1997).
9. Electronic Funds Transfer Fraud Electronic funds transfer systems have begun to proliferate, and so has the risk that such transactions may be intercepted and diverted. Valid credit card numbers can be intercepted
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electronically, as well as physically; the digital information stored on a card can be counterfeited. Of course, we don't need Willie Sutton to remind us that banks are where they keep the money. In 1994, a Russian hacker Vladimir Levin, operating from St Petersburg, accessed the computers of Citibank's central wire transfer department, and transferred funds from large corporate accounts to other accounts which had been opened by his accomplices in The United States, the Netherlands, Finland, Germany, and Israel. Officials from one of the corporate victims, located in Argentina, notified the bank, and the suspect accounts, located in San Francisco, were frozen. The accomplice was arrested. Another accomplice was caught attempting to withdraw funds from an account in Rotterdam. Although Russian law precluded Levin's extradition, he was arrested during a visit to the United States and subsequently imprisoned. (Denning 1999, 55). The above forms of computer-related crime are not necessarily mutually exclusive, and need not occur in isolation. Just as an armed robber might steal an automobile to facilitate a quick getaway, so too can one steal telecommunications services and use them for purposes of vandalism, fraud, or in furtherance of a criminal conspiracy.1 Computer-related crime may be compound in nature, combining two or more of the generic forms outlined above.
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OTHER TYPES OF CYBER CRIME
1. HACKING Hacking in simple terms means an illegal intrusion into a computer system and/or network. There is an equivalent term to hacking i.e. cracking, but from Indian Laws perspective there is no difference between the term hacking and cracking. Every act committed towards breaking into a computer and/or network is hacking. Hackers write or use ready-made computer programs to attack the target computer. They possess the desire to destruct and they get the kick out of such destruction. Some hackers hack for personal monetary gains, such as to stealing the credit card information, transferring money from various bank accounts to their own account followed by withdrawal of money. They extort money from some corporate giant threatening him to publish the stolen information which is critical in nature. Government websites are the hot targets of the hackers due to the press coverage, it receives. Hackers enjoy the media coverage.
Motive Behind The Crime a.
Greed
b.
Power
c.
Publicity
d.
Revenge
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e.
Adventure
f.
Desire to access forbidden information
g.
Destructive mindset
h.
Wants to sell n/w security services
2. Child Pornography The Internet is being highly used by its abusers to reach and abuse children sexually, worldwide. The internet is very fast becoming a household commodity in India. Its explosion has made the children a viable victim to the cyber crime. As more homes have access to internet, more children would be using the internet and more are the chances of falling victim to the aggression of pedophiles. The easy access to the pornographic contents readily and freely available over the internet lower the inhibitions of the children. Pedophiles lure the children by distributing pornographic material, and then they try to meet them for sex or to take their nude photographs including their engagement in sexual positions. Sometimes Pedophiles contact children in the chat rooms posing as teenagers or a child of similar age, then they start becoming friendlier with them and win their confidence. Then slowly pedophiles start sexual chat to help children shed their inhibitions about sex and then call them out for personal interaction. Then starts actual exploitation of the children by offering them some money or falsely promising them good opportunities in life. The pedophiles then sexually exploit the children either by using them as sexual objects or by taking their pornographic pictures in order to sell those over the internet. In physical world, parents know the face of dangers and they know how to avoid & face the problems by following simple rules and accordingly they advice their children to keep away from dangerous things and ways. But in case of cyber world, most of the parents do not themselves know about the basics in internet and dangers posed by various services offered over the internet. Hence the children are left unprotected in the cyber world. Pedophiles take
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advantage of this situation and lure the children, who are not advised by their parents or by their teachers about what is wrong and what is right for them while browsing the internet.
How Do They Operate a. Pedophiles use false identity to trap the children/teenagers.
b. Pedophiles contact children/teens in various chat rooms which are used by children/teen to interact with other children/teen. c. Befriend the child/teen. d. Extract personal information from the child/teen by winning his confidence. e. Gets the e-mail address of the child/teen and starts making contacts on the victim e-mail
address as well. f. Starts sending pornographic images/text to the victim including child pornographic images in order to help child/teen shed his inhibitions so that a feeling is created in the mind of the victim that what is being fed to him is normal and that everybody does it. g. Extract personal information from child/teen. h. At the end of it, the pedophile set up a meeting with the child/teen out of the house and then drag him into the net to further sexually assault him or to use him as a sex object. In order to prevent your child/teen from falling into the trap of pedophile, read the tips under Tips & Tricks heading.
3. Cyber Stalking Cyber Stalking can be defined as the repeated acts harassment or threatening behavior of the cyber criminal towards the victim by using internet services. Stalking in General terms can be referred to as the repeated acts of harassment targeting the victim such as following the
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victim, making harassing phone calls, killing the victims pet, vandalizing victims property, leaving written messages or objects. Stalking may be followed by serious violent acts such as physical harm to the victim and the same has to be treated and viewed seriously. It all depends on the course of conduct of the stalker. Both kind of Stalkers Online & Offline – have desire to control the victims life. Majority of the stalkers are the dejected lovers or ex-lovers, who then want to harass the victim because they failed to satisfy their secret desires. Most of the stalkers are men and victim female.
How Do They Operate a. Collect all personal information about the victim such as name, family background, Telephone Numbers of residence and work place, daily routine of the victim, address of residence and place of work, date of birth etc. If the stalker is one of the acquaintances of the victim he can easily get this information. If stalker is a stranger to victim, he collects the information from the internet resources such as various profiles, the victim may have filled in while opening the chat or e-mail account or while signing an account with some website. b. The stalker may post this information on any website related to sex-services or dating services, posing as if the victim is posting this information and invite the people to call the victim on her telephone numbers to have sexual services. Stalker even uses very filthy and obscene language to invite the interested persons. c. People of all kind from nook and corner of the World, who come across this information, start calling the victim at her residence and/or work place, asking for sexual services or relationships. d. Some stalkers subscribe the e-mail account of the victim to innumerable pornographic and sex sites, because of which victim starts receiving such kind of unsolicited e-mails. e. Some stalkers keep on sending repeated e-mails asking for various kinds of favors or threaten the victim.
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f. In online stalking the stalker can make third party to harass the victim. g. Follow their victim from board to board. They “hangout” on the same BB’s as their victim, many times posting notes to the victim, making sure the victim is aware that he/she is being followed. Many times they will “flame” their victim (becoming argumentative, insulting) to get their attention. h. Stalkers will almost always make contact with their victims through email. The letters may be loving, threatening, or sexually explicit. He will many times use multiple names when contacting the victim. i.
Contact victim via telephone. If the stalker is able to access the victim’s telephone, he will many times make calls to the victim to threaten, harass, or intimidate them.
j. Track the victim to his/her home.
Definition of Cyber stalking Although there is no universally accepted definition of cyber stalking, the term is used in this report to refer to the use of the Internet, e-mail, or other electronic communications devices to stalk another person. Stalking generally involves harassing or threatening behavior that an individual engages in repeatedly, such as following a person, appearing at a person’s home or place of business, making harassing phone calls, leaving written messages or objects, or vandalizing a person’s property. Most stalking laws require that the perpetrator make a credible threat of violence against the victim; others include threats against the victim’s immediate family; and still others require only that the alleged stalker’s course of conduct constitute an implied threat. (1) While some conduct involving annoying or menacing behavior might fall short of illegal stalking, such behavior may be a prelude to stalking and violence and should be treated seriously.
Nature and Extent of Cyber stalking
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An existing problem aggravated by new technology. Although online harassment and threats can take many forms, cyber stalking shares important characteristics with offline stalking. Many stalkers – online or offline – are motivated by a desire to exert control over their victims and engage in similar types of behavior to accomplish this end. As with offline stalking, the available evidence (which is largely anecdotal) suggests that the majority of cyber stalkers are men and the majority of their victims are women, although there have been reported cases of women cyber stalking men and of same-sex cyber stalking. In many cases, the cyber stalker and the victim had a prior relationship, and the cyber stalking begins when the victim attempts to break off the relationship. However, there also have been many instances of cyber stalking by strangers. Given the enormous amount of personal information available through the Internet, a cyber stalker can easily locate private information about a potential victim with a few mouse clicks or key strokes. The fact that cyber stalking does not involve physical contact may create the misperception that it is more benign than physical stalking. This is not necessarily true. As the Internet becomes an ever more integral part of our personal and professional lives, stalkers can take advantage of the ease of communications as well as increased access to personal information. In addition, the ease of use and non-confrontational, impersonal, and sometimes anonymous nature of Internet communications may remove disincentives to cyber stalking. Put another way, whereas a potential stalker may be unwilling or unable to confront a victim in person or on the telephone, he or she may have little hesitation sending harassing or threatening electronic communications to a victim. Finally, as with physical stalking, online harassment and threats may be a prelude to more serious behavior, including physical violence.
Phishing In the field of computer security, phishing is the criminally fraudulent process of attempting to acquire sensitive information such as usernames, passwords and credit card details by masquerading as a trustworthy entity in an electronic communication. Communications purporting to be from popular social web sites, auction sites, online payment processors or IT Administrators are commonly used to lure the unsuspecting public. Phishing is typically carried out by e-mail or instant messaging, and it often directs users to enter details at a fake website
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whose look and feel are almost identical to the legitimate one. Even when using server authentication, it may require tremendous skill to detect that the website is fake. Phishing is an example of social engineering techniques used to fool users, and exploits the poor usability of current web security technologies. Attempts to deal with the growing number of reported phishing incidents include legislation, user training, public awareness, and technical security measures. Phishing, also referred to as brand spoofing or carding, is a variation on "fishing," the idea being that bait is thrown out with the hopes that while most will ignore the bait, some will be tempted into biting. A phishing technique was described in detail in 1987, and the first recorded use of the term "phishing" was made in 1996.
Phishing email From: *****Bank [mailto:support@****Bank.com] Sent: 08 June 2004 03:25 To: India Subject: Official information from ***** Bank Dear valued ***** Bank Customer! For security purposes your account has been randomly chosen for verification. To verify your account information we are asking you to provide us with all the data we are requesting. Otherwise we will not be able to verify your identity and access to your account will be denied. Please click on the link below to get to the bank secure page and verify your account details. Thank you. https://infinity.*****bank.co.in/Verify.jsp
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****** Bank Limited
Spam Spam is a generic term used to describe electronic 'junk mail' or unwanted messages sent to your email account or mobile phone. These messages vary, but are essentially commercial and often annoying in their sheer volume. They may try to persuade you to buy a product or service, or visit a website where you can make purchases; or they may attempt to trick you into divulging your bank account or credit card details. More information about spam is available from the Australian Communications and Media Authority (ACMA website).
Scams The power of the Internet and email communication has made it all too easy for email scams to flourish. These schemes often arrive uninvited by email. Many are related to the welldocumented Nigerian Scam or Lotto Scams and use similar tactics in one form or another. While the actual amount of money lost by businesses and the community is unknown, the number of people claiming to have been defrauded by these scams is relatively low. More information about scams is available from the Australian Competition and Consumer Commission (ACCC) SCAM watch website and the Australian Securities and Investments Commission FIDO website.
Spyware Spyware is generally considered to be software that is secretly installed on a computer and takes things from it without the permission or knowledge of the user. Spyware may take personal information, business information, bandwidth; or processing capacity and secretly gives it to someone else. It is recognized as a growing problem. More information about taking care of spyware is available from the Department of Broadband, Communication, and the Digital Economy (DBCDE) website.
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4. Denial Of Service Attack This is an act by the criminal, who floods the bandwidth of the victim’s network or fills his email box with spam mail depriving him of the services he is entitled to access or provide.
5. Virus Dissemination Malicious software that attaches itself to other software. (Virus,, worms,, Trojan Horse,, Time bomb,, Logic Bomb,, Rabbit and Bacterium are the malicious software’s).
Software Piracy
6.
Theft of software through the illegal copying of genuine programs or the counterfeiting and distribution of products intended to pass for the original. Retail revenue losses worldwide are ever increasing due to this crime. It can be done in various ways- End user copying, Hard disk loading,, Counterfeiting,, Illegal downloads from the internet etc
Spoofing
7.
Getting one computer on a network to pretend to have the identity of another computer, usually one with special access privileges, so as to obtain access to the other computers on the network..
Net Extortion
8.
Copying the company’s confidential data in order to extort said company for huge amount.
9. SALAMI ATTACK In such crime criminal makes insignificant changes in such a manner that such changes would go unnoticed. Criminal makes such program that deducts small amount like Rs. 2.50 per
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month from the account of all the customer of the Bank and deposit the same in his account. In this case no account holder will approach the bank for such small amount but criminal gains huge amount.
10.SALE OF NARCOTICS • Sale & Purchase through net. • There are web sites which offer sale and shipment off contrabands drugs. • They may use the techniques off stenography for hiding the messages.
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CLASSIFICATION OF CYBER CRIME Mr. Pavan Duggal, who is the President of cyber laws, net and consultant, in a report has clearly defined the various categories and types of cybercrimes. Cybercrimes can be basically divided into 3 major categories:
1. Cybercrimes Against Persons Cybercrimes committed against persons include various crimes like transmission of child-pornography, harassment of any one with the use of a computer such as e-mail. The trafficking, distribution, posting, and dissemination of obscene material including pornography and indecent exposure, constitutes one of the most important Cybercrimes known today. The potential harm of such a crime to humanity can hardly be amplified. This is one Cybercrime which threatens to undermine the growth of the younger generation as also leave irreparable scars and injury on the younger generation, if not controlled. A minor girl in Ahmadabad was lured to a private place through cyber chat by a man, who, along with his friends, attempted to gang-rape her. As some passersby heard her cry, she was rescued. Another example wherein the damage was not done to a person but to the masses is the case of the Melissa virus. The Melissa virus first appeared on the internet in March of 1999. It spread rapidly throughout computer systems in the United States and Europe. It is estimated that the virus caused 80 million dollars in damages to computers worldwide. Page 34 of 79
In the United States alone, the virus made its way through 1.2 million computers in onefifth of the country's largest businesses. David Smith pleaded guilty on Dec. 9, 1999 to state and federal charges associated with his creation of the Melissa virus. There are numerous examples of such computer viruses few of them being "Melissa" and "love bug".
2. Cybercrimes Against Property The second category of Cybercrimes is that of Cybercrimes against all forms of property. These crimes include computer vandalism (destruction of others' property), transmission of harmful programmes. A Mumbai-based upstart engineering company lost a say and much money in the business when the rival company, an industry major, stole the technical database from their computers with the help of a corporate cyber spy.
3. Cybercrimes Against Government The third category of Cybercrimes relate to Cybercrimes against Government. Cyber terrorism is one distinct kind of crime in this category. The growth of internet has shown that the medium of Cyberspace is being used by individuals and groups to threaten the international governments as also to terrorize the citizens of a country. This crime manifests itself into terrorism when an individual "cracks" into a government or military maintained website. The Parliament of India passed its first Cyber law, the Information Technology Act in 2000. It not only provides the legal infrastructure for E-commerce in India but also at the same time, gives draconian powers to the Police to enter and search, without any warrant, any public place for the purpose of nabbing cybercriminals and preventing cybercrime. Also, the Indian Cyber law talks of the arrest of any person who is about to commit a cybercrime. The Act defines five cybercrimes damage to computer source code, hacking, publishing electronic information which is lascivious or prurient, breach of confidentiality and publishing false digital signatures. The Act also specifies that cybercrimes can only be investigated by an official holding no less a rank than that of Dy. Superintendent of Police (Dy.SP).
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It is common that many systems operators do not share information when they are victimized by crackers. They don't contact law enforcement officers when their computer systems are invaded, preferring instead to fix the damage and take action to keep crackers from gaining access again with as little public attention as possible. According to Sundari Nanda, SP, CBI, "most of the times the victims do not complain, may be because they are aware of the extent of the crime committed against them, or as in the case of business houses, they don't want to confess their system is not secure". As the research shows, computer crime poses a real threat. Those who believe otherwise simply have not been awakened by the massive losses and setbacks experienced by companies worldwide. Money and intellectual property have been stolen, corporate operations impeded, and jobs lost as a result of computer crime. Similarly, information systems in government and business alike have been compromised. The economic impact of computer crime is staggering (great difficulty).
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REASONS FOR CYBER CRIME Hart in his work “The Concept of Law” has said ‘human beings are vulnerable so rule of law is required to protect them’. Applying this to the cyberspace we may say that computers are vulnerable (capable of attack) so rule of law is required to protect and safeguard them against cyber crime. The reasons for the vulnerability of computers may be said to be:
1.
Capacity To Store Data In Comparatively Small Space-
The computer has unique characteristic of storing data in a very small space. This affords to remove or derive information either through physical or virtual medium makes it much easier.
2. Easy To Access The problem encountered in guarding a computer system from unauthorised access is that there is every possibility of breach not due to human error but due to the complex technology. By secretly implanted logic bomb, key loggers that can steal access codes, advanced voice recorders; retina imagers etc. that can fool biometric systems and bypass firewalls can be utilized to get past many a security system.
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3. Complex The computers work on operating systems and these operating systems in turn are composed of millions of codes. Human mind is fallible and it is not possible that there might not be a lapse at any stage. The cyber criminals take advantage of these lacunas and penetrate into the computer system.
4. Negligence Negligence is very closely connected with human conduct. It is therefore very probable that while protecting the computer system there might be any negligence, which in turn provides a cyber criminal to gain access and control over the computer system.
5. Loss Of Evidence Loss of evidence is a very common & obvious problem as all the data are routinely destroyed. Further collection of data outside the territorial extent also paralyses this system of crime investigation.
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CYBER CRIMINALS The cyber criminals constitute of various groups/ category. This division may be justified on the basis of the object that they have in their mind. The following are the category of cyber criminals1.
Children And Adolescents Between The Age Group Of 6 – 18 Years
The simple reason for this type of delinquent (A young offender) behaviour pattern in children is seen mostly due to the inquisitiveness to know and explore the things. Other cognate reason may be to prove themselves to be outstanding amongst other children in their group. Further the reasons may be psychological even. E.g. the Bal Bharati (Delhi) case was the outcome of harassment of the delinquent by his friends.
2. Organised Hackers These kinds of hackers are mostly organised together to fulfil certain objective. The reason may be to fulfil their political bias, fundamentalism, etc. The Pakistanis are said to be one of the best quality hackers in the world. They mainly target the Indian government sites with the purpose to fulfil their political objectives. Further the NASA as well as the Microsoft sites is always under attack by the hackers.
3. Professional Hackers / Crackers Their work is motivated by the colour of money. These kinds of hackers are mostly employed to hack the site of the rivals and get credible, reliable and valuable information. Further they are even employed to crack the system of the employer basically as a measure to make it safer by detecting the loopholes.
4. Discontented Employees This group include those people who have been either sacked by their employer or are dissatisfied with their employer. To avenge they normally hack the system of their employee.
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MODE AND MANNER OF COMMITING CYBER CRIME 1. Unauthorized Access To Computer Systems Or Networks / Hacking This kind of offence is normally referred as hacking in the generic sense. However the framers of the Information Technology Act 2000 have no where used this term so to avoid any confusion we would not interchangeably use the word hacking for ‘unauthorized access’ as the latter has wide connotation.
2. Theft Of Information Contained In Electronic Form This includes information stored in computer hard disks, removable storage media etc. Theft may be either by appropriating the data physically or by tampering them through the virtual medium.
3. Email Bombing This kind of activity refers to sending large numbers of mail to the victim, which may be an individual or a company or even mail servers there by ultimately resulting into crashing.
4. Data Diddling This kind of an attack involves altering raw data just before a computer processes it and then changing it back after the processing is completed. The electricity board faced similar problem of data diddling while the department was being computerised.
5. Salami Attacks This kind of crime is normally prevalent in the financial institutions or for the purpose of committing financial crimes. An important feature of this type of offence is that the alteration is so small that it would normally go unnoticed. E.g. the Ziegler case wherein a logic bomb was introduced in the bank’s system, which deducted 10 cents from every account and deposited it in a particular account.
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6. Denial Of Service AttackThe computer of the victim is flooded with more requests than it can handle which cause it to crash. Distributed Denial of Service (DDS) attack is also a type of denial of service attack, in which the offenders are wide in number and widespread. E.g. Amazon, Yahoo.
7. Virus / Worm Attacks Viruses are programs that attach themselves to a computer or a file and then circulate themselves to other files and to other computers on a network. They usually affect the data on a computer, either by altering or deleting it. Worms, unlike viruses do not need the host to attach themselves to. They merely make functional copies of themselves and do this repeatedly till they eat up all the available space on a computer's memory. E.g. love bug virus, which affected at least 5 % of the computers of the globe. The losses were accounted to be $ 10 million. The world's most famous worm was the Internet worm let loose on the Internet by Robert Morris sometime in 1988. Almost brought development of Internet to a complete halt.
8. Logic Bombs These are event dependent programs. This implies that these programs are created to do something only when a certain event (known as a trigger event) occurs. E.g. even some viruses may be termed logic bombs because they lie dormant all through the year and become active only on a particular date (like the Chernobyl virus).
9. Trojan Attacks This term has its origin in the word ‘Trojan horse’. In software field this means an unauthorized programme, which passively gains control over another’s system by representing itself as an authorised programme. The most common form of installing a Trojan is through e-mail. E.g. a Trojan was installed in the computer of a lady film director in the U.S. while chatting. The cyber criminal through the web cam installed in the computer obtained her nude photographs. He further harassed this lady.
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10. Internet Time Thefts Normally in these kinds of thefts the Internet surfing hours of the victim are used up by another person. This is done by gaining access to the login ID and the password. E.g. Colonel Bajwa’s case- the Internet hours were used up by any other person. This was perhaps one of the first reported cases related to cyber crime in India. However this case made the police infamous as to their lack of understanding of the nature of cyber crime.
11. Web Jacking This term is derived from the term hi jacking. In these kinds of offences the hacker gains access and control over the web site of another. He may even mutilate or change the information on the site. This may be done for fulfilling political objectives or for money. E.g. recently the site of MIT (Ministry of Information Technology) was hacked by the Pakistani hackers and some obscene matter was placed therein. Further the site of Bombay crime branch was also web jacked. Another case of web jacking is that of the ‘gold fish’ case. In this case the site was hacked and the information pertaining to gold fish was changed. Further a ransom of US $ 1 million was demanded as ransom. Thus web jacking is a process where by control over the site of another is made backed by some consideration for it.
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BANKING SECTOR The Banking Industry was once a simple and reliable business that took deposits from investors at a lower interest rate and loaned it out to borrowers at a higher rate. However deregulation and technology led to a revolution in the Banking Industry that saw it transformed. Banks have become global industrial powerhouses that have created ever more complex products that use risk. Through technology development, banking services have become available 24 hours a day, 365 days a week, through ATMs, at online banking, and in electronically enabled exchanges where everything from stocks to currency futures contracts can be traded.
The Banking Industry at its core provides access to credit. In the lenders case, this includes access to their own savings and investments, and interest payments on those amounts. In the case of borrowers, it includes access to loans for the creditworthy, at a competitive interest rate. Banking services include transactional services, such as verification of account details, account balance details and the transfer of funds, as well as advisory services that help individuals and institutions to properly plan and manage their finances. Online banking channels have become a key in the last 10 years.
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The collapse of the Banking Industry in the Financial Crisis, however, means that some of the more extreme risk-taking and complex securitization activities that banks increasingly engaged in since 2000 will be limited and carefully watched, to ensure that there is not another banking system meltdown in the future. Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 88 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
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CYBER CRIME IN BANKING SECTOR AUTOMATED TELLER MACHINE
The traditional and ancient society was devoid of any monetary instruments and the entire exchange of goods and merchandise was managed by the “barter system”. The use of monetary instruments as a unit of exchange replaced the barter system and money in various denominations was used as the sole purchasing power. The modern contemporary era has replaced these traditional monetary instruments from a paper and metal based currency to “plastic money” in the form of credit cards, debit cards, etc. This has resulted in the increasing use of ATM all over the world. The use of ATM is not only safe but is also convenient. This safety and convenience, unfortunately, has an evil side as well that do not originate from the use of plastic money rather by the misuse of the same. This evil side is reflected in the form of “ATM FRAUDS” that is a global problem. The use of plastic money is increasing day by day for payment of shopping bills, electricity bills, school fees, phone bills, insurance premium, travelling bills and even petrol bills. The convenience and safety that credit cards carry with its use has been instrumental in increasing both credit card volumes and usage. This growth is not only in positive use of the same but as well as the negative use of the same. The world at large is struggling to increase the convenience and safety on the one hand and to reduce it misuse on the other.
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WAYS TO CARD FRAUDS Some of the popular techniques used to carry out ATM crime are: 1. Through Card Jamming ATM’s card reader is tampered with in order to trap a
customer’s card. Later on the criminal removes the card. 2. Card Skimming, is the illegal way of stealing the card’s security information from the card’s magnetic stripe. 3. Card Swapping, through this customer’s card is swapped for another card without the knowledge of cardholder. 4. Website Spoofing, here a new fictitious site is made which looks authentic to the user and customers are asked to give their card number. PIN and other information, which are used to reproduce the card for use at an ATM. 5. Physical Attack. ATM machine is physical attacked for removing the cash.
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HOW TO USE CASH MACHINE
Be aware of others around you. If someone close by the cash machine is behaving suspiciously or makes you feel uncomfortable, choose another .Make sure you check the machine before you use it for any signs of tampering. Examine the machine for stick on boxes, stick on card entry slots etc. If you find it difficult to get your card into the slot, do not use it, go to another machine.
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If there is
anything unusual about the cash machine report it to the bank and police or the owner of the premises immediately. Under no circumstances should members of the public attempt to remove a device as it’s possible the offender may be nearby.
HOW TO USE A CASH MACHINE
1. Give other users space to enter their personal identity number (PIN) in private. 2. Be aware of your surroundings. If someone is crowding or watching you, cancel the transaction and go to another machine. Take your card with you. 3. Do not accept help from "well meaning" strangers and never allow yourself to be distracted. 4. Stand close to the cash machine and always shield the keypad to avoid anyone seeing you enter your PIN.
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What Precaution Should Be Taken While Leaving Cash Machine Once you have completed a transaction, discreetly put your money and card away before leaving the cash machine. If you lose your card in a cash machine, cancel the card immediately with the card issuer’s 24-hour emergency line, which can be found on your last bank statement. Do not assume that your bank automatically knows that the machine has withheld your card. Again, beware of help offered by "well meaning strangers". Dispose of your cash machine receipt, mini-statement or balance enquiry slip with care. Tear up or preferably shred these items before discarding them.
Card Fraud Also Happens In The Home: Cardholders should also be warned of the risks of verifying bank details at home in unsolicited telephone conversations. Always call the person back using the advertised customer telephone number, not the telephone number they may give you. 1. Do Not Click On Hyperlinks Sent To You By Email Asking You To
Confirm Your Bank Details Online: Hyperlinks are links to web pages that have been sent to you by email and may open a dummy website designed to steal your personal details. Phone your bank instead on their main customer number or access your account using the bank's main website address. Use good antivirus and firewall protection.
NEVER Write Down Your Pin: People make life very easy for pickpockets if they write down their PIN and keep it in their purse or wallet. Do not write down your PIN. If you have been given a number that you find difficult to remember, take your card along to a cash machine and change the number to one that you will be able to remember without writing it down.
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PREVENTION FOR ATM CARDS Most ATM frauds happen due to the negligence of customers in using, and more importantly, negligence of banks in educating their customers about the matters that should be taken care of while at an ATM. The number of ATM frauds in India is more in regard to negligence of the Personal Identification Number (PIN), than by sophisticated crimes like skimming. Banks need to develop a fraud policy – the policy should be written and distributed to all employees, borrowers and depositors. The most important aspect for reducing ATM related fraud is to educate the customer. Here is a compiled list of guidelines to help your customer from being an ATM fraud victim: 1. Look for suspicious attachments. Criminals often capture information through ATM skimming – using devices that steal magnetic strip information. At a glance, the skimmer looks just like a regular ATM slot, but it‘s an attachment that captures ATM card numbers. To spot one, the attachment slightly protrudes from the machine and may not be parallel with the inherent grooves. Sometimes, the equipment will even cut off the printed labels on the ATM. The skimmer will not obtain PIN numbers, however. To get that, fraudsters place hidden cameras facing the ATM screen. There‘s also the helpful bystander (the criminal) who may be standing by to kindly inform you the machine has had problems and offer to help. If you do not feel safe at any time, press the ATM cancel button, remove your card and leave the area immediately. 2. Minimize your time at the ATM. The more time you spend at the ATM, the more
vulnerable you are. If you need to update your records after a transaction, one is advised do it at home or office, but not while at the ATM. Even when depositing a cheque at the ATM, on should not make/sign the cheque at the ATM. After the transaction, if you think you are being followed, go to an area with a lot of people and call the police. 3. Make smart deposits. Some ATMs allow you to directly deposit checks and cash into
your accounts without stuffing envelopes. As for the envelope-based deposits, make sure they go through – if it gets jammed and it doesn‘t fully go into the machine, the next
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person can walk up and take it out. After having made the ATM deposit, compare your records with the account statements or online banking records.
INDIAN SCENARIO In India, where total number of installed ATM’s base is far less than many developed countries. ATM-related frauds are very less. But they could increase as more and more ATM’s will penetrate in the country, the bank should create awareness among customers about the cardrelated frauds to reduce the number of frauds in future. In India, Indian Banks Association (IBA) can take lead to kick started. The ATM fraud is not the sole problem of banks alone. It is a big threat and it requires a coordinated and cooperative action on the part of the bank, customers and the law enforcement machinery. The ATM frauds not only cause financial loss to banks but they also undermine customers’ confidence in the use of ATMs. This would deter a greater use of ATM for monetary transactions. It is therefore in the interest of banks to prevent ATM frauds. There is thus a need to take precautionary and insurance measures that give greater “protection” to the ATMs, particularly those located in less secure areas. The nature and the extent of precautionary measures to be adopted will, however, depend upon the requirements of the respective banks.
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CYBER MONEY LAUNDERING During the past two decades, IT and Internet technologies have reached every nook and corner of the world. E-commerce has come into existence due to the attributes of Internet like ease of use, speed, anonymity and its International nature. Internet has converted the world into a boundary less market place that never sleeps. Drug peddlers and organized criminals found a natural and much sought after ally in Internet. Computer networks and Internet, in particular, permit transfer of funds electronically between trading partners, businesses and consumers. This transfer can be done in many ways. They include use of credit cards, Internet banking, e-cash, ewallet etc. for example, smart cards like Visa Cash, Mondex card, whose use is growing can store billions of dollars. At present, there is an upper limit imposed by the card issuers but technically there is no limit. In some other forms of computer-based e-money, there is no upper limit. Mobile banking and mobile commerce are growing and these technologies have the capability to transfer any amount of money at the touch of a bottom or click of a mouse. They can be effective tools in the hands of money launderers. First and foremost, the anonymity offered by internet and cyber payment systems is being exploited to the hilt by the criminal elements. As cyber payment systems eliminate the need for face to face interactions, transfer of funds can be done between two trading partners directly. Two individuals also can transfer funds directly using e- wallets. This problem is further compounded by the fact that, in many countries, non-financial institutions are also permitted to issue e-money. Monitoring the activities of these institutions in a traditional manner is not possible. Earlier, cross-border transactions were controlled by the central banks of respective countries. With the entry of Internet commerce, the jurisdictional technicalities come into play and it is another area that is being exploited by the money launderers. The capacity to transfer unlimited amounts of money without having to go through strict checks makes cyber money laundering an attractive proposition. From the point of view of law enforcing agencies, all the above advantages cyber payments provide to consumers and trading partners, turn out to be great disadvantages while investigating the crimes.
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WHY MONEY LAUNDERING? The most important aim of money laundering is to conceal the origin of the money, which, in almost all cases, is from illegal activity. Criminal resort to this practice to avoid detection of the money by law enforcement which will lead to its confiscation and also may provide leads to the illegal activity. By laundering the money the criminals are trying to close their tracks. Further, their aims could be to increase the profits by resorting to illegal money transfer etc. and also of course, to support new criminal ventures. Money laundering from the point of view of the criminal increases the profits and, at the same time, reduces the risk. While indulging in money laundering process, the launderers also attempt to safeguard their interests. They conceal the origin and ownership of the proceeds, maintain control over proceeds and change the form of proceeds.
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MONEY LAUNDERING PROCESS Money laundering is normally accomplished by using a three-stage process. The three steps involved are Placement, Layering and Integration. E-money and cyber payment systems come in handy in all the three stages of the process.
1. PLACEMENT The first activity is placement. Illegal activities like drug trafficking, extortion, generate very volumes of money. People involved in these activities cannot explain the origin and source of these funds to the authorities. There is a constant fear of getting caught. So the immediate requirement is to send this money to a different location using all available means. This stage is characterized by facilitating the process of inducting the criminal money into the legal financial system. Normally, this is done by opening up bank accounts in the names of non-existent people or commercial organizations and depositing the money. Online banking and Internet banking make it very easy for a launderer to open and operate a bank account. Placement in cyber space occurs by depositing the illegal money with some legitimate financial institutions or businesses. This is done by breaking up the huge cash into smaller chunks. Launderers are very careful at this stage because the chances of getting caught are considerable here. Cyber payment systems can come in handy during this process.
2. LAYERING Layering is the second sub process. In this complex layers of financial transaction are created to disguise the audit trail and provide anonymity. This is used to distance the money from the sources. This is achieved by moving the names from and to offshore bank accounts in the names of shell companies or front companies by using Electronic Funds Transfer (EFT) or by other electronic means. Every day trillions of dollars are transferred all over the world by other legitimate business and thus it is almost impossible ton as certain whether some money is legal or illegal. Launderers normally make use of commodity brokers, stock brokers in the layering process. Launderers were also found to purchase high value commodities like diamonds etc. and exporting them to a different jurisdiction. During this process, they make use of the banks wherever possible as in the legal commercial activity.
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3. INTEGRATION Integration is the third sub process. This is the stage in which the ‘cleaned’ money is ploughed back. This is achieved by making it appear as legally earned. This is normally accomplished by the launderers by establishing anonymous companies in countries where secrecy is guaranteed. Anyone with access to Internet can start an e-business. This can look and function like any other e-business as far as the outside world is concerned. This anonymity is what makes Internet very attractive for the launderers. They can then take loans from these companies and bring back the money. This way they not only convert their money this way but also can take advantages associated with loan servicing in terms of tax relief. Another way can be by placing false export import invoices and over valuing goods. The entire process can be explained with the help of an example . The money launderers first activity is to set up an online commerce company which is legal. Normally, the launderer sets up the website for his company and accepts online payments using credit cards for the purchases made from his company’s website. As a part of the whole scheme, launderers obtain credit cards from some banks or financial institutions located in countries with lax rules, which are known as safe havens. The launderer sitting at home, then, ‘makes purchases’ using this credit card from his own website. As in normal transactions, the Web-based system then sends an invoice to the customer’s (who happens to the launderer himself) bank, in the safe haven. The bank then pays the money into the account of the company. Cyber space provides a secure and anonymous opportunity to the criminals in money laundering operations. It has come to light that many gangs are opening up the front companies and hiring information technology specialists for nefarious activities. Incidents have also come to light where the criminals are using cryptography for hiding their transaction.
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BUSINESS AREAS THAT SUPPORT OR ARE PRONE TO MONEY LAUNDERING The banks and other financial institution are the most important intermediaries in the money laundering chain. As far as the banks are concerned the countries that are considered safe for launderers are Cayman Islands, Cyprus, Luxembourg, and Switzerland. The offshore accounts of these banks are popular because they offer anonymity and also help in tax evasion. Other financial institution like fund managers and those facilitating Electronic Fund Transfer are also being manipulated by the launderers. Banking obviously is the most affected sector by the money laundering operations. In fact, Berltlot Brecht said, ‘If you want to steal, then buy a bank.’ Multinational banks are more vulnerable to money laundering operations. When BCCI bank was investigated it came to light that there were 3,000 criminal customers and they were involved in offenses ranging from financing nuclear weapon programs to narcotics. The second area is underground banking or parallel banking. This is practiced by different countries by different names. China follows a system called ‘Fic Chin’. Under this system, money is deposited in one country and the depositor is handed a chit or chop. The money is paid back in another place on production of the chit. Similar systems known as Hundi, Hawallah are practiced in India. It is much easier to launder the money using these methods as there is no physical movement of money. These practices mostly work on trust and mostly controlled by mafia in many countries. Futures and commodity markets are another area which is found to be facilitating the money laundering. The other areas include professional advisers, financing housing schemes, casinos, antique dealers and jewelers. Casinos are another business areas that is actively involved in money laundering process. In all the cases the underlying factor is paperless transactions. It was also found that launderers do take advantages of privatization in various countries by investing in them. This was observed in UK, India and Columbia. In Columbia, when the banks were privatized the ‘Carli Cartel’ was reported to have invested heavily and Italian mafia reportedly purchased shares in Italian banks. This only shows the extent of the problem and also that the banks and financial institutions are the primary target of the launderers. In some countries, even political parties organizations are known to be using laundered money for their campaigns. Page 56 of 79
EFFECTS ON BANKS Almost all the banks trade in foreign exchange Money laundering in any country or economy affects the foreign exchange market directly. The money laundering reduces the legal volume of the banks business. It also causes fluctuations in the exchange rate. Further, money laundering can undermine the credibility of the banking system. Facilitating the activities of launderers even inadvertently can push the banks into problems with law enforcement agencies and also governments. In some reported cases, the banks survival has come under threat. It is not difficult to see what effect it has on the profitability of banks.
OTHER EFFECTS In one incident, an Indian national in one year handled US 81.5 bn illegal transactions, before his arrest during 1993. This incident also shows how the national economy gets affected. A few years before that, the Indian Government was so short of foreign exchange that it had to pledge gold in the London bank. One needs not be an economist understand the impact of money laundering on economies of developing countries. The low regulation by central banks will become difficult and consequently, there will be rise in inflation. Further, overall income distribution in an economy is likely to get affected. Money laundering can help in spread of parallel economy, which will result in loss to national income due to reduced tax collections and lost jobs. On the social plane, this can result in increased crime rate, violence in society. There may be attempts to gain political power either directly or indirectly like Coli Cocoine Cartel’s attempt in supporting Columbian President, Samper in 1996 elections. Because cyber money laundering can be done from anywhere in the world without any jurisdiction, the effects are much severe.
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PREVENTION Because of the nature of Cyber money laundering, no country can effectively deal with it in isolation. Cyber money laundering has to be dealt with at organizational [Bank or Financial Institution], national and international levels.
AT ORGANIZATIONAL [BANK] LEVEL The banking and other financial organizations can reduce the quantum of money laundering by following the guidelines issued by central banks of respective countries in letter and spirit. The old principle of ‘Knowing the customer’ well will help a great deal. It is very important to keep the records of the customer for a sufficient time, at least for 8 to 10 years. Having an eye on suspicious deals can give early warnings on the impending trouble. Any suspicious activities must be reported to law enforcement authorities. Developing internal control mechanisms is very essential in this regard. Further, working in close association with other banks and exchange of information and intelligence in this regard will be definitely helpful. Law enforcement agencies have details of criminal elements and their transactions. By working in close conjunction with them, bank can have early warning on such activities. However, banks must keep in mind the legal provisions regarding privacy of individuals.
AT NATIONAL LEVEL Some countries liken UK have taken proactive steps to control this crime, which could be cumulated by others. In UK, deposit taking institutions (including banks) are expected to report suspicious transactions to the law enforcement authorities. The legal provisions regarding ‘knowing the customer’ brought down the crime to a great extent. They empowered their customs officials to seize cash consignments of 10,000 pounds or more. Courts also permit confiscation of cash, if the investigating authorities have strong evidence that the money has come from illegal activities of drug trafficking. Issue of electronic money by private parties is another factor, as in some countries regulation of these people is not effective. Slowly, different
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countries are realizing the importance of this issue and enacting suitable rules aimed at providing transparency in transactions carried out by these institutions. The most important issues at national level are establishing legal framework and training law enforcing officials. The major weapon to combat this crime is controlling financial transactions including e-transactions, through legislation. Many countries have enacted some stringent laws to control this crime. UK, US have stringent laws in dealing with Cyber money laundering. Many other countries are following suit. The Council of Europe has passed Criminal Justice Act. Hong Kong has passed similar laws. The single most important issue is harmonizing the terrestrial laws with cyber laws.
AT INTERNATIONAL LEVEL The UN has taken the lead and during 1995 international community meeting signed a convention known as ‘UN Convention Against Illict Traffic in Narcotic Drugs and Psychotropic Substances’. Further, this convention made money laundering a crime and provided a model. During 2000, the UN also organized another convention against transnational organized crime. As a result of UN the efforts, the group of seven industrialized nations established ‘Financial Action Task Force’ (FATF). The biggest source of money laundering funds comes from drug trade and the volume of money is large. In order to cover this vast amount of money they need financial services industry. They eye financial institutions that are in the business of accepting deposits from customers. After studying this phenomenon, Financial Action Task Force (FATF) had noticed some critical points in the modus operandi of criminals which are difficult for the launderers to avoid. They are points of entry of cash into financial system, transfers to and from financial system and cross-border flows of cash. Paying attention to these issues can help in controlling cyber laundering to a considerable extent. According to financial crimes enforcement network of US, less than 1% money laundered in cyber space is ever detected or criminals prosecuted. Prevention of money laundering in cyber space is proving to be really a daunting task. Some of the suggested measures are putting an upper limit on the amount of payment and frequency of using e-money in peer to peer transfers. The second is making it mandatory for emoney organization to identify their clients and also to keep a track of money movement. The third is ensuring that Internet service providers keep a log of files involving finances for a
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number of years. The fourth is making audit compulsory for all electronic merchants and ensuring that they keep transaction records for a certain period of time. The fifth is training law enforcement agencies in dealing effectively with this crime. Last but not the least, is international co-operation and harmonizing the national cyber and terrestrial laws with international can help in dealing with this crime effectively.
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CREDIT CARDS FRAUDS INTRODUCTION TO CREDIT CARDS Credit was first used in Assyria, Babylon and Egypt 3000 years ago. The bill of exchange - the forerunner of banknotes - was established in the 14th century. Debts were settled by onethird cash and two-thirds bill of exchange. Paper money followed only in the 17th century. The first advertisement for credit was placed in 1730 by Christopher Thornton, who offered furniture that could be paid off weekly. From the 18th century until the early part of the 20th, tallymen sold clothes in return for small weekly payments. They were called "tallymen" because they kept a record or tally of what people had bought on a wooden stick. One side of the stick was marked with notches to represent the amount of debt and the other side was a record of payments. In the 1920s, a shopper's plate - a "buy now, pay later" system - was introduced in the USA. It could only be used in the shops which issued it.
In 1950, Diners Club and American Express launched their charge cards in the USA, the first "plastic money". In 1951, Diners Club issued the first credit card to 200 customers who could use it at 27 restaurants in New York. But it was only until the establishment of standards for the magnetic strip in 1970 that the credit card became part of the information age.The first use of magnetic stripes on cards was in the early 1960's, when the London Transit Authority installed a magnetic stripe system. San Francisco Bay Area Rapid Transit installed a paper based ticket the same size as the credit cards in the late 1960's. The word credit comes from Latin, meaning “TRUST”. Page 61 of 79
CREDIT CARD FRAUD INTRODUCTION Credit card fraud is a wide-ranging term for theft and fraud committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Credit card fraud is also an adjunct to identity theft. According to the Federal Trade Commission, while identity theft had been holding steady for the last few years, it saw a 21 percent increase in 2008. However, credit card fraud, that crime which most people associate with ID theft, decreased as a percentage of all ID theft complaints for the sixth year in a row. The cost of credit card fraud reaches into billions of dollars annually. In 2006, fraud in the United Kingdom alone was estimated at £535 million, or US$750-830 million at prevailing 2006 exchange rates.
The fraud begins with either the theft of the physical card or the compromise of data associated with the account, including the card account number or other information that would routinely and necessarily be available to a merchant during a legitimate transaction. The compromise can occur by many common routes and can usually be conducted without tipping off the card holder, the merchant or the bank, at least until the account is ultimately used for fraud. A simple example is that of a store clerk copying sales receipts for later use. The rapid
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growth of credit card use on the Internet has made database security lapses particularly costly; in some cases, millions of accounts have been compromised.
IF CARD IS STOLEN When a credit card is lost or stolen, it remains usable until the holder notifies the bank that the card is lost; most banks have toll-free telephone numbers with 24-hour support to encourage prompt reporting. Still, it is possible for a thief to make unauthorized purchases on that card up until the card is cancelled. In the absence of other security measures, a thief could potentially purchase thousands of dollars in merchandise or services before the card holder or the bank realize that the card is in the wrong hands. In the United States, federal law limits the liability of card holders to $50 in the event of theft, regardless of the amount charged on the card; in practice, many banks will waive even this small payment and simply remove the fraudulent charges from the customer's account if the customer signs an affidavit confirming that the charges are indeed fraudulent. Other countries generally have similar laws aimed at protecting consumers from physical theft of the card.
The only common security measure on all cards is a signature panel, but signatures are relatively easy to forge. Many merchants will demand to see a picture ID, such as a driver's Page 63 of 79
license, to verify the identity of the purchaser, and some credit cards include the holder's picture on the card itself. However, the card holder has a right to refuse to show additional verification, and asking for such verification may be a violation of the merchant's agreement with the credit card companies. Self-serve payment systems (gas stations, kiosks, etc.) are common targets for stolen cards, as there is no way to verify the card holder's identity. A common countermeasure is to require the user to key in some identifying information, such as the user's ZIP or postal code. This method may deter casual theft of a card found alone, but if the card holder's wallet is stolen, it may be trivial for the thief to deduce the information by looking at other items in the wallet. For instance, a U.S. driver license commonly has the holder's home address and ZIP code printed on it. Banks have a number of countermeasures at the network level, including sophisticated real-time analysis that can estimate the probability of fraud based on a number of factors. For example, a large transaction occurring a great distance from the card holder's home might be flagged as suspicious. The merchant may be instructed to call the bank for verification, to decline the transaction, or even to hold the card and refuse to return it to the customer. Stolen cards can be reported quickly by card holders, but a compromised account can be hoarded by a thief for weeks or months before any fraudulent use, making it difficult to identify the source of the compromise. The card holder may not discover fraudulent use until receiving a billing statement, which may be delivered infrequently.
Compromised Accounts Card account information is stored in a number of formats. Account numbers are often embossed or imprinted on the card, and a magnetic stripe on the back contains the data in machine readable format. Fields can vary, but the most common include: •
Name of card holder
•
Account number
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•
Expiration date
•
Verification Many Web sites have been compromised in the past and theft of credit card data is a
major concern for banks. Data obtained in a theft, like addresses or phone numbers, can be highly useful to a thief as additional card holder verification.
Mail/Internet Order Fraud The mail and the Internet are major routes for fraud against merchants who sell and ship products, as well Internet merchants who provide online services. The industry term for catalog order and similar transactions is "Card Not Present" (CNP), meaning that the card is not physically available for the merchant to inspect. The merchant must rely on the holder (or someone purporting to be the holder) to present the information on the card by indirect means, whether by mail, telephone or over the Internet when the cardholder is not present at the point of sale. It is difficult for a merchant to verify that the actual card holder is indeed authorizing the purchase. Shipping companies can guarantee delivery to a location, but they are not required to check identification and they are usually are not involved in processing payments for the merchandise. A common preventive measure for merchants is to allow shipment only to an address approved by the cardholder, and merchant banking systems offer simple methods of verifying this information. Additionally, smaller transactions generally undergo less scrutiny, and are less likely to be investigated by either the bank or the merchant, since the cost of research and prosecution usually far outweighs the loss due to fraud. CNP merchants must take extra precaution against fraud exposure and associated losses, and they pay higher rates to merchant banks for the privilege of accepting cards. Anonymous scam artists bet on the fact that many fraud prevention features do not apply in this environment.
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Merchant associations have developed some prevention measures, such as single use card numbers, but these have not met with much success. Customers expect to be able to use their credit card without any hassles, and have little incentive to pursue additional security due to laws limiting customer liability in the event of fraud. Merchants can implement these prevention measures but risk losing business if the customer chooses not to use the measures.
Account Takeover There are two types of fraud within the identity theft category: 1. Application Fraud 2. Account Takeover.
1. Application Fraud Application fraud occurs when criminals use stolen or fake documents to open an account in someone else's name. Criminals may try to steal documents such as utility bills and bank statements to build up useful personal information. Alternatively, they may create counterfeit documents.
2. Account Takeover Account takeover involves a criminal trying to take over another person's account, first by gathering information about the intended victim, then contacting their bank or credit issuer — masquerading as the genuine cardholder — asking for mail to be redirected to a new address. The criminal then reports the card lost and asks for a replacement to be sent. The replacement card is then used fraudulently. Some merchants added a new practice to protect consumers and self reputation, where they ask the buyer to send a copy of the physical card and statement to ensure the legitimate usage of a card.
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Skimming
Skimming is the theft of credit card information used in an otherwise legitimate transaction. It is typically an "inside job" by a dishonest employee of a legitimate merchant, and can be as simple as photocopying of receipts. Common scenarios for skimming are restaurants or bars where the skimmer has possession of the victim's credit card out of their immediate view. The skimmer will typically use a small keypad to unobtrusively transcribe the 3 or 4 digits Card Security Code which is not present on the magnetic strip. Instances of skimming have been reported where the perpetrator has put a device over the card slot of a public cash machine (Automated Teller Machine), which reads the magnetic strip as the user unknowingly passes their card through it. These devices are often used in conjunction with a pinhole camera to read the user's PIN at the same time. Skimming is difficult for the typical card holder to detect, but given a large enough sample, it is fairly easy for the bank to detect. The bank collects a list of all the card holders who have complained about fraudulent transactions, and then uses data mining to discover relationships among the card holders and the merchants they use. For example, if many of the
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customers used one particular merchant, that merchant's terminals (devices used to authorize transactions) can be directly investigated.
SKIMMER
Sophisticated algorithms can also search for known patterns of fraud. Merchants must ensure the physical security of their terminals, and penalties for merchants can be severe in cases of compromise, ranging from large fines to complete exclusion from the merchant banking system, which can be a death blow to businesses such as restaurants which rely on credit card processing.
CARDING Carding is a term used for a process to verify the validity of stolen card data. The thief presents the card information on a website that has real-time transaction processing. If the card is processed successfully, the thief knows that the card is still good. The specific item purchased is immaterial, and the thief does not need to purchase an actual product; a Web site subscription or charitable donation would be sufficient. The purchase is usually for a small monetary amount, both to avoid using the card's credit limit, and also to avoid attracting the bank's attention. A website known to be susceptible to carding is known as a cardable website.
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In the past, carders used computer programs called "generators" to produce a sequence of credit card numbers, and then test them to see which were valid accounts. Another variation would be to take false card numbers to a location that does not immediately process card numbers, such as a trade show or special event. However, this process is no longer viable due to widespread requirement by internet credit card processing systems for additional data such as the billing address, the 3 to 4 digit Card Security Code and/or the card's expiry date, as well as the more prevalent use of wireless card scanners that can process transactions right away. Nowadays, carding is more typically used to verify credit card data obtained directly from the victims by skimming or phishing. A set of credit card details that has been verified in this way is known in fraud circles as a phish. A carder will typically sell data files of phish to other individuals who will carry out the actual fraud. Market price for a phish ranges from US$1.00 to US$50.00 depending on the type of card, freshness of the data and credit status of the victim
PREVENTION FOR CREDIT CARD FRAUD Credit card fraud is bad business. In 2004, credit card fraud cost US merchants 2,664.9 million dollars (Celent Communications). Credit card fraud is a significant problem in Canada, too. The credit card loss total for 2007 was $304,255,215, according to the RCMP. And while 'no-card' fraud is growing, most credit card frauds are still being committed using lost, stolen or counterfeit cards. Whether you have a brick-and-mortar business or an online one, credit card fraud is costing you money. Credit card fraud prevention when dealing with credit card customers face-to-face
1. Ask for and check other identification, such as a driver’s license or other photo ID. Check to see if the ID has been altered in any way as a person trying to use a stolen credit card may also have stolen or fake ID. 2. Examine the signature on the card. If the signature on the credit card is smeared, it could be that the credit card is stolen and the person has changed the signature to his or her own.
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3. Compare signatures. Besides comparing the signature on the credit card with the person’s signature on the credit card slip, compare the signatures as well to those on any other ID presented. 4. Check the security features of the credit card. i.
Have another look at the card’s signature panel. It should show a repetitive colour design of the MasterCard or Visa name. Altered signature panels (those that are discoloured, glued, painted, erased, or covered with white tape) are an indication of credit card fraud.
ii.
Check the credit card’s embossing. “Ghost images” of other numbers behind the embossing are a tip-off that the card has been re-embossed. The hologram may be damaged. (The holograms on credit cards that have not been tampered with will show clear, threedimensional images that appear to move when the card is tilted.) 5. Check the presented card with recent lists of stolen and invalid credit card numbers. 6. Call for authorization of the credit card – remembering to take both the credit card and the sales draft with you. That way if the customer runs away while you’re making the call, you still have the credit card. Ask for a “Code 10” if you have reason to suspect a possible credit card fraud, such as a possible counterfeit or stolen card. 7. Destroy all carbon copies of the credit card transaction, to ensure that no one can steal the credit card information and help prevent future credit card fraud. It’s also very important to be sure that your staff is educated about credit card fraud. You can use the points above as a “to do” list for dealing with credit card transactions. For information on the suspicious behavior that may indicate someone trying to commit credit card fraud, see Suspicious Behaviors That May Indicate Credit Card Fraud.
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When dealing with credit card customers over the phone or through the Internet, credit card fraud prevention strategies such as scrutinizing the credit card aren’t going to work. You can, however, be alert to suspicious behaviors and shape your credit policies to nip credit card fraud in the bud. 1. Don’t process credit card orders unless the information is complete. 2. Don’t process credit card orders that originate from free e-mail addresses or from e-mail
forwarding addresses. In such a case, ask the customer for an ISP (Internet Service Provider) or domain-based e-mail address that can be traced back. 3. If the shipping address and the billing address on the order are different, call the customer to confirm the order. You may even want to make it a policy to ship only to the billing address on the credit card. 4. Be wary of unusually large orders. 5. Be wary of orders shipped to a single address but purchased with multiple cards. 6. Be wary of multiple transactions made with similar card numbers in a sequence. 7. Be wary of orders you’re asked to ship express, rush or overnight. This is the shipping of choice for many credit card fraudsters. Call the customer to confirm the order first. 8. Be wary of overseas orders – especially if the order exhibits any of the characteristics noted above. 9. The first is Mod10 algorithm testing. Mod10 is an algorithm that will show whether the card number being presented is valid card number and is within the range of numbers issued by credit card companies. It cannot give any other details like no. issued by any other company. This test should be first to be that it is applied to any credit card number one process. If the card fails Mod10 one can safely assume fraud.
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Credit card fraud may not be entirely preventable, but by establishing and following procedures to check every credit card transaction, you can cut down your credit card fraud losses.
CASE STUDY INDIA'S FIRST ATM CARD FRAUD The Chennai City Police have busted an international gang involved in cyber crime, with the arrest of Deepak Prem Manwani (22), who was caught red-handed while breaking into an ATM in the city in June last, it is reliably learnt. The dimensions of the city cops' achievement can be gauged from the fact that they have netted a man who is on the wanted list of the formidable FBI of the United States. At the time of his detention, he had with him Rs 7.5 lakh knocked off from two ATMs in T Nagar and Abiramipuram in the city. Prior to that, he had walked away with Rs 50,000 from an ATM in Mumbai. While investigating Manwani's case, the police stumbled upon a cyber crime involving scores of persons across the globe. Manwani is an MBA drop-out from a Pune college and served as a marketing executive in a Chennai-based firm for some time. Interestingly, his audacious crime career started in an Internet cafe. While browsing the Net one day, he got attracted to a site which offered him assistance in breaking into the ATMs. His contacts, sitting somewhere in Europe, were ready to give him credit card numbers of a few American banks for $5 per card. The site also offered the magnetic codes of those cards, but charged $200 per code. The operators of the site had devised a fascinating idea to get the personal identification number (PIN) of the card users. They floated a new site which resembled that of a reputed telecom companies. That company has millions of subscribers. The fake site offered the visitors to return $11.75 per head which, the site promoters said, had been collected in excess by mistake from them. Believing that it was a genuine offer from the telecom company in question, several lakh
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subscribers logged on to the site to get back that little money, but in the process parted with their PINs. Armed with all requisite data to hack the bank ATMs, the gang started its systematic looting. Apparently, Manwani and many others of his ilk entered into a deal with the gang behind the site and could purchase any amount of data, of course on certain terms, or simply enter into a deal on a booty-sharing basis. Meanwhile, Manwani also managed to generate 30 plastic cards that contained necessary data to enable him to break into ATMS. He was so enterprising that he was able to sell away a few such cards to his contacts in Mumbai. The police are on the lookout for those persons too. On receipt of large-scale complaints from the billed credit card users and banks in the United States, the FBI started an investigation into the affair and also alerted the CBI in New Delhi that the international gang had developed some links in India too. Manwani has since been enlarged on bail after interrogation by the CBI. But the city police believe that this is the beginning of the end of a major cyber crime.
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GENERAL TIPS ON AVOIDING POSSIBLE INTERNET FRAUD SCHEMES 1. Don't Judge by Initial Appearances It may seem obvious, but consumers need to remember that just because something appears on the Internet - no matter how impressive or professional the Web site looks - doesn't mean it's true. The ready availability of software that allows anyone, at minimal cost, to set up a professional-looking Web site means that criminals can make their Web sites look as impressive as those of legitimate e-commerce merchants.
2. Be Careful About Giving Out Valuable Personal Data Online If you see e-mail messages from someone you don't know that ask you for personal data such as your Social Security number, credit-card number, or password - don't just send the data without knowing more about who's asking. Criminals have been known to send messages in which they pretend to be (for example) a systems administrator or Internet service provider representative in order to persuade people online that they should disclose valuable personal data. 3. Be Especially Careful About Online Communications with Someone Who Conceals His True Identity If someone sends you an e-mail in which he refuses to disclose his full identity, or uses an e-mail header that has no useful identifying data (e.g., "
[email protected]"), that may be an indication that the person doesn't want to leave any information that could allow you to contact them later if you have a dispute over undelivered goods for which you paid. As a result, you should be highly wary about relying on advice that such people give you if they are trying to persuade you to entrust your money to them.
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4. Watch Out for "Advance-Fee" Demands In general, you need to look carefully at any online seller of goods or services who wants you to send checks or money orders immediately to a post office box; before you receive the goods or services you've been promised. Legitimate startup "dot.com" companies, of course, may not have the brand-name recognition of long-established companies, and still be fully capable of delivering what you need at a fair price. Even so, using the Internet to research online companies that aren't known to you is a reasonable step to take before you decide to entrust a significant amount of money to such companies. 5. SUGGESTIONS ON CYBER MONEY LAUNDERING Because of the nature of Cyber money laundering, no country can effectively deal with it in isolation. Cyber money laundering has to be dealt with at organizational [Bank or Financial Institution], national. AT ORGANIZATIONAL [BANK] LEVEL The banking and other financial organizations can reduce the quantum of money laundering by following the guidelines issued by central banks of respective countries in letter and spirit. The old principle of ‘Knowing the customer’ well will help a great deal. AT NATIONAL LEVEL Some countries liken UK have taken proactive steps to control this crime, which could be cumulated by others. In UK, deposit taking institutions (including banks) are expected to report suspicious transactions to the law enforcement authorities.
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RECENT TRENDS ð In February 2009, a group of criminals used counterfeit ATM cards to steal $9 million
from 130 ATMs in 49 cities around the world all within a time period of 30 minutes.
ð June 4, 2009, 10:00 AM — IDG News Service — Cybercriminals are improving a malicious software program that can be installed on ATMs running Microsoft's Windows XP operating system that records sensitive card details, according to security vendor Trustwave. The malware has been found on ATMs in Eastern European countries, according to a Trustwave report. The malware records the magnetic stripe information on the back of a card as well as the PIN (Personal Identification Number), which would potentially allow criminals to clone the card in order to withdraw cash. The collected card data, which is encrypted using the DES (Data Encryption Standard) algorithm, can be printed out by the ATM's receipt printer, Trustwave wrote. The malware is controlled via a GUI that is displayed when a so-called "trigger card" is inserted into the machine by a criminal. The trigger card causes a small window to appear that gives its controller 10 seconds to pick one of 10 command options using the ATM's keypad. "The malware contains advanced management functionality allowing the attacker to fully control the compromised ATM through a customized user interface built into the malware," Trustwave wrote. A criminal can then view the number of transactions, print card data, reboot the machine and even uninstall the malware. Another menu option appears to allow the ejection of an ATM's cash cassette. Trustwave has collected multiple versions of the malware. The company believes that the particular one it analyzed is "a relatively early version of the malware and that subsequent versions have seen significant additions to its functionality." The company advised banks to scan their ATMs to see if they're infected. IDG News Service
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CONCLUSION Lastly I conclude by saying that “Thieves are not born, but made out of opportunities.” This quote exactly reflects the present environment related to technology, where it is changing very fast. By the time regulators come up with preventive measures to protect customers from innovative frauds, either the environment itself changes or new technology emerges. This helps criminals to find new areas to commit the fraud. Computer forensics has developed as an indispensable tool for law enforcement. But in the digital world, as in the physical world the goals of law enforcement are balanced with the goals of maintaining personal liberty and privacy. Jurisdiction over cyber crimes should be standardized around the globe to make swift action possible against terrorist whose activities are endearing security worldwide. The National institute of justice, technical working group digital evidence are some of the key organization involved in research. The ATM fraud is not the sole problem of banks alone. It is a big threat and it requires a coordinated and cooperative action on the part of the bank, customers and the law enforcement machinery. The ATM frauds not only cause financial loss to banks but they also undermine customers' confidence in the use of ATMs. This would deter a greater use of ATM for monetary transactions. It is therefore in the interest of banks to prevent ATM frauds. There is thus a need to take precautionary and insurance measures that give greater "protection" to the ATMs, particularly those located in less secure areas. The nature and extent of precautionary measures to be adopted will, however, depend upon the requirements of the respective banks. Internet Banking Fraud is a fraud or theft committed using online technology to illegally remove money from a bank account and/or transfer money to an account in a different bank. Internet Banking Fraud is a form of identity theft and is usually made possible through techniques such as phishing. Credit card fraud can be committed using a credit card or any similar payment mechanism as a fraudulent source of funds in a transaction. The purpose may be to obtain goods without paying, or to obtain unauthorized funds from an account. Cyber space and cyber
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payment methods are being abused by money launderers for converting their dirty money into legal money. For carrying out their activities launderers need banking system. Internet, online banking facilitates speedy financial transactions in relative anonymity and this is being exploited by the cyber money launderers. Traditional systems like credit cards had some security features built into them to prevent such crime but issue of e-money by unregulated institutions may have none. Preventing cyber money laundering is an uphill task which needs to be tackled at different levels. This has to be fought on three planes, first by banks/ financial institutions, second by nation states and finally through international efforts. The regulatory framework must also take into account all the related issues like development of e-money, right to privacy of individual. International law and international co-operation will go a long way in this regard. Capacity of human mind is unfathomable. It is not possible to eliminate cyber crime from the cyber space. It is quite possible to check them. History is the witness that no legislation has succeeded in totally eliminating crime from the globe. The only possible step is to make people aware of their rights and duties (to report crime as a collective duty towards the society) and further making the application of the laws more stringent to check crime. Undoubtedly the Act is a historical step in the cyber world. Further I all together do not deny that there is a need to bring changes in the Information Technology Act to make it more effective to combat cyber crime.
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BIBLIOGRAPHY WEBSITE: www.cybercellmumbai.com www.agapeinc.in www.britannica.com
SEARCH ENGINE: www.google.com www.yahoo.com www.wikipedia.com
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