War against credit card swindles not yet over

War against credit card swindles not yet over

By Johannes Simbolon

JAKARTA (JP): It was already three days after three Malaysians had made off with Rp 17 million (US$7,555) worth of jewelry from the store in Citraland Mall, West Jakarta, but the owner still looked frightened.

"I am afraid they will take revenge," she told The Jakarta Post, requesting anonymity.

The robbery was the latest in a wave of credit card swindles sweeping the city. One of the suspects was caught at the crime scene by the shop attendant and the mall's security personnel. His two accomplices, however, managed to get away with the jewelry.

There is not yet any security system able to completely prevent such crime. Shop are equipped with on-line credit card authorization, or EDC (Electronic Draft/Date Capture), machines, which are designed to detect fake or blacklisted cards.

In the recent Citraland case, however, the machine failed to reject the fake card proffered by the three Malaysians.

The shop-owner only became suspicious because the three young men insisted on buying the jewelry in three separate transactions. She telephoned Bank Bali to check on the card and was told it was fake. From the code number on the Malaysian's card, it was confirmed that it had not been issued in Malaysia, but in the U.S.

"The bank official added that the method they used was very sophisticated," said the jeweler, who has not suffered financially as a result of the robbery. Under the existing rules, the bank will reimburse the funds lost, because she followed the procedures of checking the card. She would have been denied compensation had she not first checked the card with the on-line authorization machine.

Brain

Since credit cards were introduced here in 1973, about 1.5 million cards have been issued. Plastic money is gradually replacing cash as a means of payment. Most cardholders, however, remain in the dark as to how credit card crimes occur. They only become concerned when something "unusual" happens -- that is, when they get a credit card bill that exceeds their purchases. Then they complain.

Unlike conventional criminals, credit card crooks never use violence. Instead, their tools are brains and technology. Banks, in turn, have developed high-tech security systems, but it seems the crime world is always able to find novel ways of break into the system.

"It seems that the criminals have some kind of a research and development center, where they devise new methods once a new security system is introduced," said a security officer at one bank's card center, requesting anonymity for security reasons.

According to the handbook issued jointly by the Indonesian Credit Card Association (AKKI), the police and Bank Indonesia (BI), credit card crime mostly occurs in one of the following forms:

* Lost/stolen cards. This method was popular in Indonesia in 1991 and 1992, before the on-line authorization machines had been introduced. The crooks had only to imitate the signatures of the real cardholders. Stolen or lost cards are sold for between Rp 100,000 and Rp 150,000. The easier the signature, the higher the price. Vendors of other peoples' cards usually collude with corrupt merchants to find out whether the card has already been blacklisted. The merchants know about blacklisted cards from a bulletin sent to them by AKKI each week.

Now, this method is on the way out because, aside from AKKI's weekly bulletin, the banks also send merchants a daily blacklist report. Shopkeepers are also informed cards reported stolen or lost on the same day.

* Non-received cards. This scam uses cards which have not been received by their applicants. In the U.S. banks send cards by post due to the huge number of applicants. Criminals are able to steal the cards by colluding with postal workers. They need only to put their signatures on the signature-less cards. The cards may then be sold or sent abroad, which explains why crime using non-received cards sometimes occurs here.

In Indonesia, cases involving non-received cards are few because banks always use couriers to deliver cards to applicants.

* Counterfeit cards. Crime involving the use of counterfeit cards are the most difficult to prevent and the most common form of credit card fraud in Indonesia, constituting about 80 percent of reported cases. Using encoding and embossing machines, criminals can change a card's embossed numbers as well as the number on the magnetic stripe. They may imitate the number on the sales receipt given by merchants who collude with them. As the Citraland case shows, the on-line authorization machine may fail to detect a counterfeit card.

* Fraudulent applications. Some criminals lie to banks to have an apparently bona fide application for a credit card accepted. They may rent a good office for a month, furnish themselves with business licenses issued by the government and with business cards on which they are referred to as "manager". Then, having received the one or more credit cards, they buy a lot of goods with it and disappear.

Punishment

According to AKKI data, card-issuing banks and other financial institutions in Indonesia suffered as much as Rp 25.5 billion in losses from credit card crimes in 1993. The next year, the losses were down to Rp 12.8 billion as AKKI, together with BI and the police, commenced a coordinated effort to combat such crimes. In 1994, the police launched a national program to educate its personnel on credit card crime. Early this year, a handbook was issued for the police on the subject.

"If previously only police officials at the National Police headquarters could handle the crime, today even officers at small stations are capable of handling such cases," Lt. Col. Aryanto, chief of the economic crimes investigation unit of the city police, told the Post.

AKKI chairman Joko Sasongko Sukanto says the coordinated efforts to combat credit card crime were commenced after it was realized that the crime is so serious that, apart from inflicting losses on banks, it could also affect the national economy. The high number of credit card crimes in Indonesia may cause card- issuers abroad to worry that their cards will be duplicated. Thus, they may advise their cardholders not to shop here with their cards. That, in turn, would decrease the country's foreign exchange earning, according to Joko.

"Today, the crime is already under control," Joko said.

It used to be rampant, partly because the system was weak. Credit card crime suspects used to be released on bail pending trial. When the day of the trial arrived, the law enforcers often failed to bring them before the court. Today, the police are rarely willing to release such suspects on bail. This change in policy has helped reduced credit card crime.

The decrease in credit card crimes has also been attributed the courts' newfound perception that such offenses are serious, leading to harsher sentences for people convicted of card crimes.

Under the Indonesian criminal code, credit card criminals face a maximum of six years imprisonment. The courts formerly handed out sentences of between two and six months, encouraging crooks to resume the activity on their release.

AKKI executives believe that the Indonesian criminal code is strong enough to deter credit card criminals, provided that judges mete out sentences approaching the maximum.

"Singapore and Malaysia also threaten their credit card criminals with about the same jail term. But the judges, realizing the seriousness of the crime, always sentence them to near the maximum. That's why credit card criminals from those countries now prefer committing the crime in Indonesia," said an AKKI executive who requested anonymity.

The case of Fifi Gautama, a hard-core credit card criminal, may be a good example. The woman was sentenced to only two months jail by the Surabaya district court in 1992 for credit card fraud. She had already been in detention for that period and so was released immediately at the conclusion of her trial. In 1993, she was convicted of credit card crime again, this time in Jakarta, and was sentenced to less than two months imprisonment. Her apparent impunity ran out last year, however, when she was convicted of another card crime on Batam Island in Riau. She is now serving a four-and-a-half year jail term.

The Batam court's decision has become a landmark in Indonesia's war against credit card crime. Other courts across the country are now expected to adopt a similar approach to stop crooks like those in the Citraland case.