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Debit card fraud outbreak raises questions about data breach

Major credit card associations and financial institutions are saying little

March 9, 2006 12:00 PM ET

Computerworld - The continued refusal by major credit card associations and financial institutions to identify the source of a data compromise that has resulted in a wave of debit card fraud worldwide is fueling concerns about the scope of the problem.

It is also shining a spotlight on what may be growing attempts by criminal gangs to try to compromise PIN-based card transactions, which have until now been considered extremely secure, analysts said.

The immediate furor was ignited earlier this week by Citibank, which acknowledged that it had put transaction holds on an unspecified number of Citi-branded MasterCard debit cards after detecting fraudulent cash withdrawals in Canada, Russia and the U.K. (see "Citibank probes ATM withdrawals, cites potential U.S. ‘retailer breaches' ">).

In a brief statement, Citibank said that the fraud was the result of a “third-party business information breach” that took place last year. To protect its customers, the company said it “blocked PIN-based transactions in those locations for the customers affected by the breach." A spokesman for the company, however, refused to name the third-party retailer involved in the breach.

Citibank’s disclosure made it the latest in a fast growing list of financial institutions that during the past several weeks have reissued thousands of debit cards or blocked access to certain transactions in countries where ATM cards were used fraudulently to withdraw cash and make purchases on U.S. accounts.

The list includes banks such as Bank of America Corp., Wells Fargo Bank and Washington Mutual Bank, as well as numerous credit unions around the country. One example is $13 billion North Carolina State Employees Credit Union in Raleigh, N.C., which over the past two weeks has reissued more than 27,500 debit cards after being told by Visa U.S.A. Inc. of a security breach involving a U.S. retailer.

According to Leigh Brady, senior vice president at the credit union, many of the compromised debit cards were being used fraudulently in several countries, including Romania, Russia, Spain and the U.K. “This is the largest [card reissue] we’ve had one in quite a while,” Brady said.

In an advisory this week, analyst firm Gartner Inc. said the combined bank actions “reflect the largest PIN theft to date and point to a new wave of 'PIN block' card fraud."

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