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2009-07-01:The ATM debacle: Any respite for bank customers?

By Adeyemi Adepetun

WHEN it was introduced some decades ago, it was meant to reduce unnecessary traffic in the banking hall, make consumers have quick access to their money and make life convenient to a certain level.

The introduction of Automated Teller Machine (ATM) terminals as a banking instrument was lauded by several customers as an alternative to the frustrating queues that characterised the country's banking hall.

However, the situation today has changed drastically, it has become a source of worry to users and providers (banks), because the function it was meant to provide has been eroded seriously. It has become a money wheel for fraudsters, who have found new haven in compromising innocent people's personal identification numbers (PIN).

Actually, the ATM is a computerised telecommunications device that provides the customers of a financial institution access to financial transactions in a public space without the need for a human clerk or bank teller.

On most modern ATMs, inserting a plastic ATM card with a magnetic stripe or a plastic smartcard with a chip that contains a unique card number and some security information, such as an expiration date or CVC (CVV), identifies the customer. The customer entering his or her PIN provides security.

Although ATMs were originally developed as just cash dispensers, they have evolved to include many other bank-related functions. In some countries, especially those, which benefit from a fully integrated cross-bank ATM network, such as Portugal? ATMs include many functions which are not directly related to the management of one's own bank account, such as: making withdrawals, deposit currency recognition, acceptance, and recycling: paying routine bills, fees, and taxes (utilities, phone bills, social security, legal fees, taxes and so on.

ATM behaviour can change during what is called "stand-in" time, where the bank's cash dispensing network is unable to access databases that contain account information (possibly for database maintenance), that is when there is network problem. ATMs atimes can also deduct money from the accounts without actually dispensing money; these among others are the bane of this money spinning machines.

Nonetheless, in order to give customers access to cash, customers may be allowed to withdraw cash up to a certain amount that may be less than their usual daily withdrawal limit, but may still exceed the amount of available money in their account, which could result in fraud.

The prevalent reported cases of people perpetrating all kinds of fraud through the ATM has become a source of serious worries to both users and the banks, with a call to find a lasting solution to the crisis before it becomes unabated.

Recently, at the 12th Quarterly General Meeting of the Committee of Chief Inspectors of Banks in Nigeria (CCIBN) in Lagos, the Managing Director of Fidelity Bank of Nigeria, Mr. Reginald Ihejiahi, expressed concern about the lack of co-operation among banks in the fight to stem the incidence of ATM related frauds now plaguing the industry.

According to him, to fight this scourge, banks must co-operate to fight this battle. He observed that the current silence among banks on ATM frauds makes it difficult for banks to share vital information that will help curb the menace.

The banking chieftain, who spoke on the topic: ATM Fraud and its Implications on Retail Banking, traced the origin of ATM fraud to the 1993 installation of fake ATM in a shopping mall in Manchester, Connecticut, U.S.A.

According to him, the incidence of ATM fraud has grown since then to become one of the most common frauds confronting the banking industry in the country. "Banks are inundated with customers' complaints and this is yet to stop," he observed, further pointing out that the methods often used by the fraudsters are not completely different from what obtains overseas.

Ihejiahi, who was represented at the event by the Executive Director, Business Banking, Willie Obiano, bemoaned the fact that in spite of the negative effect of ATM fraud on the economy, there are no statistical data to show the exact volume of money lost through ATM related frauds in Nigeria. "Neither have we seen any successful conviction of the few ATM fraudsters arrested so far to serve as deterrent to others," he further noted.

In his views also, banks have not helped their own case as they have failed to co-operate to tackle the problem. "We don't share experience", he observed further, citing competition in rolling out ATM machines and ATM products, inadequate understanding of the switch controls, lack of reliable fraud statistics and proliferation of products rolled out without consideration of the implications as reasons why the incidence of ATM fraud is on the rise in Nigeria.

The Fidelity Bank MD wondered why ATM cards should be indiscriminately issued to customers without regard to their literacy level.

According to him, one of the frequent causes of fraud is when customers are careless with their cards and pin numbers as well as when they respond to unsolicited mails and text messages or provide card and pin details to unknown persons among others.

Ihejiahi also blamed switches and other service providers whose fierce competition for market share makes possibilities of a united attack on the menace of ATM fraudsters impossible. He would like to see the promulgation of enabling laws under which e-business including ATM transactions can be conducted in the country, which will ensure that switches are properly regulated and supervised.

He therefore advised that there must be increased co-operation among banks to fight ATM frauds with the help of structures like the Committee of Chief Inspectors of Banks in Nigeria (CCIBN) as well as members of the public, providing useful information when required

He also recommended that Central Bank of Nigeria (CBN) should regulate switches and other e-banking service providers while attempts should be made to standardise the ATM and processes.

To Group Executive, Card Services, Intercontinental Bank Plc Mr. Roland Obe, said in Lagos recently during a chat with the media that in most cases, the card holder rather than the bank creates room for fraudsters to have a field day. He said that the best solution to the problem is a strong commitment by the cardholder not to let out vital information to third parties or suspected dubious persons.

"There is no absolute solution to ATM fraud, but it can be minimised. The reason is that the card works with Personal Identification Number. Once you compromise your PIN in anyway knowingly or unknowingly the account has lost its security component. It's like your normal cheque book, once somebody else can sign your signature your account has lost a very important aspect of its security," he said.

He stated that the access to a customer's accounts is not through the bank's operating system but rather from the customers card, stressing that if your card is cloned then the fraudster has unfettered access to your account and every account that is linked to that card, this always due to customers negligence or customers ignorance.

Speaking on what the government can do to assist, Obe said it will better if the Economic and Financial Crimes Commission (EFCC) set up a department that takes care of cyber financial crimes, stressing that it is important to have a regulation that guides registration of websites in the country.

"At present, I doubt if there is any, just like you cannot open any company without registering with CAC, so let it be impossible to own a website without adequate registration by the government. Those sites must be monitored regularly. It very important also for the government to create more awareness on electronic payment transactions, by way of advertisement regularly this should not be left for the private institutions alone.

He said one other challenge to this issue was Nigerians resistance to change. According to him, "typically, Nigerians always resist change even, if it's for our benefit. Several adverts and notifications have gone out, yet our people will not change their magstripe for the Verve CHIP and PIN, to make it easy we refused to make it compulsory but cheap to acquire just to make sure the customer is protected as long as our people refuse to exchange their current magstripe card for the Verve to that extent they are susceptible to ATM Fraud."

He stressed that the only thing is that the magstripe can easily be cloned while the chip and pin is not easily cloned, adding that apart from this there are scam mails with which fraudsters use to extract card information from the unsuspecting public, such mails are on the prowl stating "certain organisation is doing an upgrade of its ATM facilities because of 'fraud', therefore log to a web site and key your card information to the platform provided so that your ATM card can be upgraded, most innocent card holders get this information and they comply with the instruction but if you look closely at this website you will discover certain features are there which authentic websites would never display.

However, curtailing the current crisis, he said that Intercontinental Bank Plc has rolled out 1.2 million secured ATM cards, otherwise known as Verve Card or anti-fraud ATM cards, which are meant to mitigate the spate of ATM fraud in the industry.

According to him, about 200,000 units of the cards were already with customers while additional batch of 300,000 were now being deployed to the customers, with about 700,000 in stock for deployment as soon as customers come forward for them.

Obe stated that the cards are coming ahead of the December 31 deadline given by the Central Bank of Nigeria to banks operating in the country to migrate their customers from magstripe ATM cards to the more secured Chip and Pin cards otherwise known as Verve Card.

In his own view, the Managing Director of Interswitch, Mr. Mitchell Elegbe, said to effectively tackle the scourge in the country, there is need for industrial coalition.

Elegbe said there should be an anti-fraud organisation that would among other things have as its objectives develop strategies for planning and managing regular anti-fraud initiatives that would focus on fraud investigation, analysis and mitigation, stressing that this can only be achieved through collaborative efforts with law enforcement agents such as EFCC.

The Interswitch boss revealed that about a year ago, Interswitch and some of its member banks embarked on a multi-channel fraud awareness campaign programme and communication materials were deployed across radio, print (newspaper adverts) and outdoor (billboards) channels in strategic locations across the country.

This he said was followed up by another series of campaigns, solely sponsored by Interswitch. The media campaign, which kicked off in April 2009, was communicated through creative delivery of radio jingles, on-air personality publicity (DJ hype), newspaper adverts and banner display on the Internet as well as short message services (SMS), warning card users not to disclose their personal identification number (PIN) to anyone.

He added that Interswitch has also put in place an Information Technology (IT) Risk and Fraud Management team whose mandate is to focus on fraud investigation and analysis. It would liaise with member banks, regulators, and law enforcement agents on fraud matters. It is also equipped with specialised resources to manage fraud investigation. Other fraud preventive initiatives embarked upon by Interswitch include MoneyGuard, FraudWatch, FraudGuard, FraudInsure, IdentityGuard, and FraudAware.

The CBN had given June 30, 2009 deadline to the 24 banks to stop the issuance of the fraud- prone magnetic strip ATM cards and in its place issue the chip cards.

It was gathered that 12 banks namely: Intercontinental Bank, Citibank, Skye Bank, Bank PHB, Oceanic Bank, Ecobank, First City Monumental Bank (FCMB), First Bank, Stanbic IBTC, Unity Bank, Zenith Bank and UBA have ordered for Verve cards (containing a chip and a PIN) as a replacement for their existing magnetic strip cards and to augment stock of the new cards.

The magnetic stripe card technology that is still widely in use does not to guarantee security of the cards and leaves the holder at the mercy of criminals. The chip, which is the card type the CBN wants banks to adopt from next month contains the same information as the old magnetic stripe but has additional processing capabilities and a secure memory that checks fraud.

Investigations revealed that bank customers are seriously jittery over the rising ATM card fraud.

To Mrs. Solaide Orelope, who resides in Alapere-Ketu, a suburb of Lagos, she described the development as disturbing.

She said: "Though ATM cards have actually made it possible for people to withdraw money without having to wait in the banking halls; the cases of ATM fraud being lodged by some banks customers make the situation worrisome."

Another female banker, Tokunbo Ajai, in one of the new generation banks, blamed some bank customers recklessness and greed in not keeping their PIN code secret, " Average Nigerians are greedy, that is why someone will say send your PIN number and you send immediately, exposing yourself to untold dangers, despite campaigns everywhere that you should not for any reason disclose it to anybody, not even a family member."

To Mr. Chinedu Nnorom, a local government worker, said fraudsters perpetrate the financial crime by stealing the PIN and consequently getting hold of the funds of the unsuspecting ATM users.

He, however, called on regulators and operators to help the public, stressing that they should come up with new innovations that will cage the fraudsters.

Source: The Guardian

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