ATM Fraud: New Skimming Scheme Hits Banks

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A series of skimming crimes that hit the Nashville, TN area recently is but one of many ATM fraud schemes preying upon financial institutions and their customers.

Nashville police reported last week that they were investigating an ATM card skimming scheme where at least 600 individuals were potential victims. Investigators say five Bank of America ATMs were hit, as well as an unknown number of US Bank machines. A total of 60 people had fraudulent withdrawals from their accounts for anywhere between $100 to $5,000 dollars. Investigators suspect that the skimming schemers have now moved on to other cities.

The problem is not isolated to Nashville, says Terrie Ipson, fraud expert at Diebold, an ATM manufacturer. "No one vendor or ATM type is more susceptible over another," Ipson says, "so everyone needs to be aware of this threat."

Ipson notes that a report from the ATM Industry Association (ATMIA) earlier this summer shows the growing nature of the international threat of card skimming. Among recent incidents:

• In Las Vegas, 75 skimming attacks were reported over a three-month period, as compared to previous rates of 2-3 incidents per year.
• In Sydney Australia, the New South Wales Fraud Squad reported 60 skimming attacks in the first four months of 2009, with a spokesman saying the devices used are "becoming smaller, more sophisticated and capable of storing more data."
• In California, investigators reported that skimmers and card duplicators could be bought from overseas sellers on the Internet for a few thousand dollars.

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Card skimming is not new. Early forms of skimming device and even dummy ATMs installed in empty shop fronts were used to capture card information in the 1990s. What has changed are the scale and geographical spread of such attacks, Ipson says.

The ATMIA recommends these steps to help prevent ATM fraud:

• Build awareness among customers, branch employees and ATM service teams to help detect devices added to ATM exteriors. Visual clues include tape residue near or on a card reader that would show a skimming device had been placed on the ATM.


• Chip-based cards house data on microchips instead of magnetic stripes, making data more difficult to steal and cards more difficult to reproduce.


• Contactless cards, out-of-band authentication using cell phones and biometric readers are all new authentication technologies that can be used as alternate methods for conducting secure ATM transactions.


• Alert systems monitor routine patterns of withdrawals and notify operators or financial institutions in the event of suspicious activity.

"There is no single silver bullet that will solve ATM skimming," Ipson says. "Skimming continues to be an emerging threat. The criminals are investing lots of money to develop these devices, [and] consumers can be fooled into thinking they are legitimate."