Executive Summary
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The Automatic Teller Machine (ATM) was first commercially
introduced in the 1960s. By 2005, there were over 1.5 million ATMs installed
worldwide. The introduction of the ATM proved to be an important technological
development that enabled financial institutions to provide services to their
customers in a 24X7 environment.
The ATM has enhanced the convenience of customers by enabling them to access
their cash wherever required from the nearest ATM. However, as the banker and
the customer are not face-to-face, there is the risk of fraud, which may affect
the customers and also the bank’s reputation. |
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Unscrupulous individuals have devised a number of
methods to commit ATM frauds and these have become more
sophisticated in nature over the years. ATM fraud has evolved from
the conventional ‘trick of shoulder surfing’ to steal the PIN of
customers at the ATM, to more sophisticated methods such as the
Lebanese Loop, use of electronic gadgets, card jamming, card
swapping, diversions, website spoofing, or phishing, ATM burglary,
etc., which can be used to steal cash or ATM cards. Tricks used by
fraudsters for stealing customers’ personal details include skimmer
devices, fake PIN pad overlay, and PIN interception. Though the
highest numbers of ATMs worldwide are installed in the Asia Pacific
region, ATM frauds are more prevalent in Europe. The UK is often
termed as the capital of Europe in terms of ATM frauds.
Financial institutions have implemented many strategies to upgrade
the security at their ATMs and reduce scope for fraud. These include
choosing a safe location for installing the ATM, installation of
surveillance video cameras, remote monitoring, anti-card skimming
solutions, and increasing consumer awareness by informing them of
various methods of safeguarding their personal information while
transacting at the ATM or on the Internet. In addition, a number of
organizations across the world such as the NCR Corporation, Barclays
Bank and the MasterCard have introduced fraud detection solutions.
Financial institutions worldwide are shifting from magnetic strip
cards to chip cards to prevent fraudsters from stealing the personal
data of customers. There are also other challenges such as lack of
consumer awareness, declining consumer confidence, and the fact that
some financial organizations might conceal small frauds so as to
maintain their goodwill in the industry.
Anti-money laundering regulations are being implemented worldwide to
prevent ATM frauds. UL 291 Level 1 quality standards are being
followed by ATM manufacturers to make them tamper-proof. In the UK,
ICC Financial Investigation Bureau, the Fraud Intelligence Bureau,
and DCPCU (The Dedicated Check and Plastic Crime Unit) have been set
up to deal with ATM frauds. To safeguard consumer’s interests, Japan
has implemented regulations that direct financial organizations to
refund fraud victims. Enhanced security at ATMs and increasing
consumer awareness is estimated to decrease ATM frauds, and boost
consumer confidence for using ATMs and transacting online.
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