Why ATM Skimming Fraud Jumped Ahead of Point-of-Sale Skimming in 2012

Credit and debit card skimming at automated teller machines outstripped card skimming at the point of sale in 2012, according to a new fraud report from FICO Labs, a San Jose, Calif.-based predictive-analytics and decision-management software unit of Fair Isaac Corp. Twenty states also saw an increase in credit card fraud, including many along the East Coast.

The report is based on fraud reported by the FICO Card Alert Service, which analyzes 65% of all ATM transactions in the U.S.

Nearly half (46%) of card skimming reported by the service took place at bank ATMs, while 36% occurred at retail POS terminals and 18% took place at white-label ATMs—machines not operated by financial institutions, FICO says. California, Florida and the Northeast were hit particularly hard by card skimming at ATMs, says John Buzzard, manager of FICO Card Alert Services.

“The Northeast has been favored by criminals a couple of years now,” Buzzard tells Digital Transactions News. “There’s an embedded group of organized criminals that are working the East Coast and they’ve been doing so for a couple of years.”

That contrasts with fraud patterns in 2011, when 79% of skimming incidents occurred at POS terminals, due largely to a multi-state crime ring that was identified by the FICO Card Alert Service, Buzzard says. That ring compromised 70 locations of a single retail brand spread over 18 states.

“We had a very large retail compromise in one calendar year and in the next year, we sort of put that case to bed, and we had smaller, diffuse cases,” he says. “Once you close a case, and there’s no more fraud to it, then the other things stand out.”

Skimming activity at financial institutions’ ATMs has been increasing for several years, especially on the East Coast and the Northeast. “My hypothesis on that is not only is it our organized criminals who are living and operating there but they’re really targeting communities that aren’t quite as savvy,” Buzzard says.

In addition, more people are doing financial transactions either online or at ATMs, and tend to use the ATM at the bank or credit union where their card was issued, he says. Criminals are beginning to put skimmers on those ATMs on long holiday weekends or at times when financial institutions are closed. “That’s pretty typical,” he says.

ATMs in areas where people get together and socialize also are prime targets, Buzzard says.  “In Miami, where there  are lots of nightclubs and people are clustering—that’s a great hotspot,” he says. “They go where the money is and where people are socializing. When you socialize, you use your ATM.”

Credit card fraud increased in 20 states, including seven states on or near the East Coast: Maine, Massachusetts, New York, North Carolina, Pennsylvania, Vermont and Virginia. South Dakota reported the largest increase in credit card fraud, with a nearly 26% jump, according to FICO.

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