If you think cloning is just about creating identical sheep, you better grab hold of your wallet. Cloning, also known as skimming, is a burgeoning and highly effective form of credit card fraud.
Skimming is costing credit card users stateside and worldwide millions in phony charges, as stolen clones are sold and used in the United States and elsewhere around the globe.
The practice took off in the United States several years ago and is beginning to approach the scale of fraud that plagued credit cards in the early 1990s before new precautions were taken, according to Gregg James, a special agent with the Secret Service's Financial Crimes Division in Washington.
As many as 10 to 15 restaurants a week around the United States are cited by industry sources as harboring skimmers, James says. And while the agency and credit card companies are tight-lipped about the actual dollar losses because of competitive concerns, he called New York a "hotbed" of skimming among U.S. cities. Skimming is also keeping Canadian authorities busy and is growing in Mexico.
"Any place you use your card, you could be a victim," adds James.
An Unknowing Victim
Kathryn Mangold learned that the hard way.
A manager at a leading hospital in London — where the scam so far is centered — she unknowingly became a victim in April, when a week after shopping in central London she received a letter from Barclaycard, Britain’s biggest credit card company, which had issued her Visa card.
Normally very vigilant and careful with her cards, she was shocked to read that there had been abnormal activity on her account. After speaking directly to the bank she found out that someone had gone on a shopping spree the weekend after her shopping trip and, using her card details, they had spent the equivalent of more than $800 in a computer superstore and a toy store chain.
Lucky for her, the bank acted quickly and canceled her account number.
Says Mangold, “Although my faith in credit cards has been shaken there is no viable alternative at the moment.”
Fraud Adds up to Millions a Year
Mangold has plenty of company. Skimming is costing credit card issuers the equivalent of more than $350,000 a day.
According to the group that manages the United Kingdom’s payment clearance system, such counterfeit fraud is responsible for losses of $72 million in Britain in 1999. That figure almost doubled last year and is expected to double again this year.
And experts say skimming is also one of the most difficult types of credit card fraud to prevent, because the criminals work so fast that they leave almost no trace.
Interactive Step-by-Step Guide to Skimming
Working the Skimming Scam
Here’s how the scam is run. Criminal gangs recruit gofers, who then find temporary work within restaurants, hotels and retail outlets. The recruits are given small, illicit, electronic devices known as skimmers that capture all of the credit or debit card’s details in the few seconds that it takes to swipe the card through the machine.
When unsuspecting customers go to pay their bill, their card is first swiped through the legitimate credit card machine, but then, secretly, it is also swiped through the smaller skimmer machine.
The gofers then pass the gadgets onto counterfeiters, who pay them the equivalent of around $150 for their part in the crime. Once the details have been given to counterfeiters, they download the information onto a computer and make up a fake card.