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The Paradox of Plastic Currency: Credit Card Nears to the End of its Reign

21 minute read


Security is Increasing but So Is the Interest of Criminals

All signs point to the fact that we’re moving towards a cashless society. The increasing popularity of contactless cards and mobile payments indicates that comfort overrides the fear of giving up our privacy. It’s no secret, however, that where there’s cash, there’s conmen and when money becomes digital, crime will want in on the action. No doubt, though, that this requires far greater intellect than hijacking an armoured car.

The first case of credit card fraud, or more particularly identity theft, took place in 1899 in America when a cattle middleman let out a slew of swearwords and threw the credit coin sent to him by a transportation company into the trash. To his great surprise, he received a hefty bill for rides he’d never made at the start of the next month. Someone had collected the coin he’d thrown away and used it for their own gain.

Once gold stopped being transported in trains, criminals turned their attention to credit card fraud. Criminals usually access card data in three ways:

  • With a skimmer device that copies the PIN code and the data on the card’s magnetic strip;
  • Phishing, i.e. a fraudulent attempt to obtain information via email, which usually includes building a website that significantly resembles a trustworthy website that is then used as a lure to get people to disclose their information, e.g. the website might ask you to change your card’s PIN code;
  • Malvertising, i.e. using online advertising to spread malware by getting people to click on the ads;
  • Occasionally groups manage to hack into the databases of large companies and then reap the spoils.


Examples of Cyber Attacks

In the mid-2000s, a criminal active in Russia and Eastern Europe managed to steal the data of 32,000 credit cards. The data was used to clone the cards, resulting in an estimated 17 million pounds worth of damages in the following years. The complex money laundering system spanned from London to Estonia and Poland.

In 2012, an international investigation lead to a group that had hacked into one hundred Australian retail sellers and stolen the data of 30,000 credit cards. The data was used to create forged credit cards and the caused damages reached around 30 million Australian dollars.

Criminals normally use skimming to record credit card data from ATMs by attaching a thin cover on the keypad and a skimming device near the card slot. This allows them to record the PIN code and the card’s data. It’s a dependable but terribly slow method – it only allows copying a couple hundred cards a day. The criminal also has to check the ATM, which increases the risk of getting caught.

What a group of criminals did in Target in 2013 was use the scale effect – an employee that was working with the criminals uploaded malware to a computer or coaxed someone to use malvertising. The criminals managed to record the PIN codes and card data of 40 million people in the chain’s stores.

The record holders – considering both the money stolen and the intricacy of the plan – are a gang of eighteen from New York that managed to cause up to 200 million dollars in damages before being tried in 2017. By using forged documents, fake companies and actual operating companies, the group created approximately 7,000 made up identities. These fake people were given great credit histories that allowed them to take on loans from banks and get cards with great credit limits. As you may have guessed, the loans were never repaid.

However, it’s not only criminals that are associated with money-related frauds but also whole countries. War sometimes motivates countries to attempt to undermine the economy of their opposing countries by introducing counterfeit money on the enemy’s territory. For example, Nazi Germany attempted to undermine the British economy by circulating counterfeit pounds. But the national counterfeit money trade also blossoms during peacetime.

David Wolman writes in The End of Money that counterfeiting money is a science. Counterfeit one hundred-dollar bills were of such great quality during the final decade of the previous century that the US had to commission a new design for the note in 1996. This truly marked the symbolic end of era as the design had remained unchanged for seventy years. However, the next change came already in 2006, as counterfeiters were keeping up with the developments.

The story associated with the optically variable ink used on the dollar is a good indication of the level of counterfeiting. The ink used in printing the new one hundred-dollar bills in 1996 would change from green to black when viewed at different angles. The special ink was bought from an exclusive Swiss company. However, soon after the transaction, North Korea also bought ink from the same company. The ink they bought changes from green to scarlet depending on the angle. To the untrained eye, this is very similar to the green-to-black combination. It wasn’t long until counterfeit dollars using the green-to-scarlet ink entered circulation.

The economies of other countries are also undermined using more modern means –cyber attacks. The more electronic a country’s financial system, the more tempting of a target it becomes to both criminals and hostile countries.

So, while a cashless economy might seem an incredibly comfortable and affordable alternative at first glance, this is by no means true as the sums required to improve cyber security on the level of each company and country are constantly on the rise.

Cyber security is just as important in securing a financial system as the gold and silver standards once were. It’s good to know that Erply’s home country Estonia ranked first in Europe and fifth in the world in cyber security at the World Summit on the Information Society in Geneva in 2017. So Estonia is not a bad place to set up the world’s virtual pots of gold.

Thank you!

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