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The U.S. uses easily counterfeited magnetic stripe cards.
Historically, card fraud in the United States has been low - the lowest in the
world. But will this last? Stakeholders in the U.S. payments industry saw some
major data breaches in the last few years, with huge losses of consumer credit
and debit card information. There is evidence this may be the result of fraud
and international cybercriminals, migrating to the U.S.
Europe, Japan and numerous places around the world, including those close to the U.S. - Canada, Mexico and Latin America - are migrating to EMV smart bank cards. Unfortunately, EMV cards also still have a magnetic stripe for use in all those places, like the United States, where chip cards have not been offered to end users. This is an important fact, because it means criminals are able to focus on the U.S. This is called “exporting the fraud.” The global banking community in general has long predicted that criminals would “export fraud,” focusing more strongly on magnetic stripe markets.
Now, there is strong evidence this is happening. According to APACS, the U.K. payments association, by 2007 the success of chip and PIN in the U.K. had reduced losses on transactions “on high street” (at domestic retail POS terminals) by 67% from £218.8 million in 2004 to £73.0 million. Mail-non-receipt fraud also fell, dropping 34%, and lost and stolen card fraud showed an overall decrease from 2006 of 18%.
All that is good news, but they also reported a significant trend that supports the “exportation of fraud” prediction. While counterfeit card fraud decreased domestically by 32%, overall it increased by 46% to £144.3 million “due to fraudsters copying U.K. cards and using these stolen cards in countries which do not yet have chip and PIN.” This trend continued in 2008, and APACS reported that exported fraud has nearly doubled in two years. (http://www.apacs.org.uk/resources_publications/card_fraud_facts_and_figures.html)
There is also strong evidence that international credit card thieves are now targeting the U.S. Last summer, 11 individuals were indicted for breaking into computer systems and stealing more than 45 million credit and debit card numbers from TJX Companies, BJ's Wholesale Club, OfficeMax, Boston Market, Barnes & Noble and Sports Authority. According to the U.S. Department of Justice, this was the biggest case of identity theft in history, yet most of the criminals involved were international hackers and credit card thieves.
Then, in January 2009, there was another breach. This time Heartland Payment Systems, an organization that processes credit and debit cards, was targeted. While the nationalities of the criminals and the losses are not yet known, more than 100 million card transactions are processed through the network each month.
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