Computer Crime Research Center


Preventive measures for ATM frauds

Date: June 29, 2006
Source: Computer Crime Research Center
By: Praveen Dalal

The problem of ATM frauds is global in nature and its ramifications have been felt in India as well. The IT Act, 2000 does not contain any specific provision regarding the same and the traditional law of IPC, 1860 also cannot be relied solely and independently to tackle this problem. A possible non-penal breakthrough has been attempted in this article for solving the problem of ATM frauds since punishment may not always be the best remedy.

I. Introduction

The traditional and ancient society was devoid of any monetary instruments and the entire exchange of goods and merchandise was managed by the “barter system”. The use of monetary instruments as a unit of exchange replaced the barter system and money in various denominations was used as the sole purchasing power. The modern contemporary era has replaced these traditional monetary instruments from a paper and metal based currency to “plastic money” in the form of credit cards, debit cards, etc. This has resulted in the increasing use of ATM all over the world. The use of ATM is not only safe but is also convenient. This safety and convenience, unfortunately, has an evil side as well that do not originate from the use of plastic money rather by the misuse of the same. This evil side is reflected in the form of “ATM frauds” that is a global problem. The use of plastic money is increasing day by day for payment of shopping bills, electricity bills, school fees, phone bills, insurance premium, travelling bills and even petrol bills. The convenience and safety that credit cards carry with their use has been instrumental in increasing both credit card volumes and usage. This growth is not only in positive use of the same but as well as the negative use of the same. The world at large is struggling to increase the convenience and safety on the one hand and to reduce it misuse on the other. An effective remedy for prevention of ATM frauds, however, cannot be provided unless we understand the true nature of the problem.

II. The nature of problem

The nature of problem can be best understood by having an insight of the “modus operandi[1]” used for the commission of ATM frauds. One method of the same is by placing a device on an ATM that prevents the machine from reading a card. Once an inserted card is struck a fraudster pretending as a genuine cardholder will suggest that the intended victim re-enter his or her security code. When the cardholder ultimately leaves in despair, the fraudster retrieves the card and enters the code that he has watched clandestinely. Another method involves use of fake cards using data collected from tiny cameras and devices called "skimmers" that capture and record bank account information. This is lesser risky as it do not involve any fraudster-victim interaction and the absence of any fraudster makes the cardholder more relaxed and lesser conscious about the safety of the password. Another interesting method of ATM frauds involves the use of “duplicate ATMs” by the fraudsters that uses software which records the passwords typed on those machines. Thereafter, duplicate cards are manufactured and money is withdrawn with the use of stolen passwords. Sometimes such frauds are an inside job with the collusion of the employees of the company issuing those cards. Whatever the mode of these frauds but it is definitely illegal and punishable as per the law of the concerned country. The punishment may, however, not bring back the money lost in the process. Thus, the punishment of an offender will though prove deterrent to other offenders yet it may not be the best method of restoration of stolen property. Thus, preventive safeguards and insuring the ATM fraud risks seems to be the right approach.

III. Preventive solutions

The discussion for this heading can be grouped as follows:
(A) Solutions for banks, and
(B) Solutions for customers.
(A) Solutions for banks: The solutions for the banks providing ATM services can further be grouped as:
(i) Technological solutions, and
(ii) Insurance solutions.
(i) Technological solutions: These may include:
(a) Designated time: The customers can choose times for using ATMs by phone. The customers can change the chosen time any time and even defer total use of ATMs as per their convenience. This method is not only economical but also effective to tackle forged cash card scams as the fraudster has to match not only the password but equally the “timing” as well.

(b) Microchip technology: The banks can also provide cards containing a microchip that can make them harder to forge.

(c) Biometric tokens: Biometrics tokens are the safest bet for prevention of ATM frauds. The most widely used biometric tokens include those of fingerprints, irises, faces and palms. The fraudster can match everything but he can never match the biometric peculiarities.

(d) Enhanced security: The banks may enhance the security features of the ATM’s for providing a better service.

(e) ATM Monitoring: The banks can monitor ATMs continuously by installing closed-circuit cameras and other devices.

(f) Customised softwares: The banks must use customised softwares that records relevant information on ATM cards or credit cards so that banks can establish whether an unauthorised ATM transaction has taken place by using a counterfeit card;

(g) Customer motivation: The banks must encourage customers to report any suspicious activity on ATMs by providing the basic infrastructure.

(h) Alerts: The bank must alert customers if the customised softwares note any unusual transaction patterns.
(ii) Insurance solutions: The banks must also secure themselves the protection of insurance cover since they may find themselves liable for the payment of money lost due to these frauds. This is generally happening in foreign countries and very soon the same may be the position in India. In the world of “Internet Banking” no bank can afford to remain indifferent and aloof to this possibility. Thus, an insurance cover is a must for these banks.
(B) Solutions for customers: The solutions for the customers availing ATM services can be grouped as:
(i) Precautionary solutions, and
(ii) Insurance solutions.
(i) Precautionary solutions: It is very important for cardholders to protect their cards from being misused. Here are some of the measures a cardholder should adopt to protect his card from being misused:
Never leave your credit card unattended in a vehicle or changing room.
Avoid leaving your card loose in pockets or bags.
Always keep your card secure in your wallet or handbag.
Keep a close watch on your credit card and wallet/bag/briefcase in public places.
Never allow anyone else to use your card.
Sign new cards as soon as they arrive and cut up old cards when they expire.
When purchasing goods, please be patient if your card is sent for authorisation or verification.
If your card is lost, stolen or not received, please inform the card issuing bank/organisation immediately.
Always retain sales/charge slips to compare with the amount specified on the billing statement.
When travelling abroad or within the country, ensure that you carry the telephone number of the card issuing bank/organisation.
Do not disclose your PIN (Personal Identification Number) to anyone.
Always memorise your PIN.
If you forget your PIN, please contact card-issuing bank/institution and intimate them of the same. The bank will then send you a new card with a new PIN, on receipt of which you should immediately cut up your old card.
If your card ever gets stuck in the ATM, do not reveal your PIN even to the concerned bank official/institution. It would suffice to let him / her know that your card has got stuck in the ATM.
These are some of the measures that could help protect the credit cards of customers from possible misuse[2].
(ii) Insurance solutions: The customers, like banks, can also secure themselves the protection of insurance cover for the money lost due to these frauds. This trend is very popular in foreign countries and very soon the same may find a place in India as well.

IV. Conclusion

The ATM fraud is not the sole problem of banks alone. It is a big threat and it requires a coordinated and cooperative action on the part of the bank, customers and the law enforcement machinery. The ATM frauds not only cause financial loss to banks but they also undermine customers' confidence in the use of ATMs. This would deter a greater use of ATM for monetary transactions. It is therefore in the interest of banks to prevent ATM frauds. There is thus a need to take precautionary and insurance measures that give greater "protection" to the ATMs, particularly those located in less secure areas. The nature and extent of precautionary measures to be adopted will, however, depend upon the requirements of the respective banks.

Praveen Dalal. All rights reserved with the author.
* Arbitrator, Consultant and Advocate, Supreme Court of India.
Pursuing Ph.D in Cyber Forensics.
Contact at:

[1] The expression “modus operandi” refers to the manner in which a particular offence is generally committed repeatedly.
[2] Protect your plastic better:, dated: 10-04-03.

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2009-07-04 11:16:16 - Hey ATM FRAUD HAPPENED WITH ME ........... Sushant Danekar
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