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financial fraud

Measures that banks use to detect card fraud can unintentionally lock legitimate customers out of their own funds.Mike Thomas

You pop your bank card into the ATM to take out some money but, instead of crisp bills, you get a message to contact your bank.

You feel surprised, confused and then concerned. You know you have money in there. So why can't you get it?

In Canada, there are 23-million debit cards actively in use. They're the primary pipeline to our hard-earned cash – according to the most recent figures, in 2010 there were nearly four billion transactions with debit cards. But even in a society that is becoming progressively more cash-free, your trusty piece of plastic can leave you high and dry.

Banks will deactivate a card if they suspect there's been any fraudulent use. Though recent security measures such as chip technology have reduced the number of fraud cases, banks tend to err on the side of caution. And a frozen account can cause a massive inconvenience.

Sheldon Stanleigh, owner of a renovation company, stopped at a gas station one Sunday evening to fill up before a drive from Guelph to Toronto. When he went to pay, his card was denied. He was carrying very little cash and his credit card was at its limit. Mr. Stanleigh knew there was plenty of money in his account, so while the gas station attendant held his driver's licence, he contacted his bank.

"They said, 'It seems your card has been possibly compromised, so it's been put on hold. In order to get a new one, you have to go into a branch,'" said Mr. Stanleigh. "I said, 'I've got gas, I can't pay for it and I can't use my credit card, so what am I going to do?'"

Mr. Stanleigh was passed to a manager, who informed him that his card had been used at an ATM where fraud had recently occurred. Mr. Stanleigh confirmed his identity and verified all the transactions on his account were correct, but the manager told him that once there is an investigation, the card is cancelled.

"I said, 'I need to use my card or someone from the bank is going to have to come here and pay this person for the gas,'" said Mr. Stanleigh.

The bank agreed to authorize a temporary increased credit limit on his credit card, just enough to pay for the gas.

"You're helpless, you're stuck, and it's very frustrating," he said.

As maddening as that can be, those safety precautions are there for a reason, says Doug Melville, ombudsman for Banking Services and Investments in Canada: "The fraudster could phone in, and what if they've got your purse? … So the process is there to protect the consumer and the bank."

When a card is unexpectedly frozen, it is often because the bank detects suspicious activity, like uncharacteristic purchases or transactions in different geographic locations.

"It knows the personal details of your transaction history, so if it sees Canadian Tire, Ikea, groceries, groceries, groceries and then all of a sudden, buying theatre tickets in Covent Garden, it's going, 'Wait a minute, how can that be?'" said Mr. Melville. "And it flags it as a high-risk transaction. If it's high enough to beat the threshold, it's auto-blocked."

Software developer Neil Dickson thinks there must be a better way. He had a frustrating experience when he attempted to do some routine banking at an ATM in Burnaby, B.C.

"I was shocked to find that upon merely trying to check my balance, I was met with an error message saying that the transaction could not be completed," he said. "I was quite worried that I wouldn't be able to pay my rent on time."

Mr. Dickson got a call the next day from the bank saying there had been "suspicious" activity on his account that previous evening. When he verified that all the transactions were his own, they lifted the hold on the account. However, Mr. Dickson was left feeling like the fraud-detection software just wasn't good enough.

"One would expect that software used in banking transactions should meet higher standards of reliability than, for example, most home-computer applications," he said. "If a movie doesn't look quite right on your computer, it's a minor nuisance. If bank deposits or withdrawals don't work quite right, it's potentially catastrophic."

The Interac Association says that although debit card fraud had been on the upswing since 2005, in the last couple years fraud numbers have actually gone down. Interac debit card losses to financial institutions resulting from skimming declined to $119-million in 2010 from $142-million in 2009. Fraud numbers for 2011 dropped even lower, to $70 million, which Caroline Hubberstey, head of external affairs for the Interac Association, says it's thanks to chip technology.

"The chip is extremely difficult to try to copy," she said. "That decreases the criminal's ability to duplicate the card and commit card fraud."

There are concerns, however, about the radio-frequency identification (RFID) card, which allows people to pay by simply waving their cards near a payment terminal. Critics are concerned about the potential for "electronic pickpocketing": Thieves can use radio scanners to harvest personal and financial information from cards. Ms. Hubberstey says the recently released Interac Flash card can't be illegally scanned because it only processes through chip technology; other cards can be protected by RFID scan-blocking sleeves.

As always, safeguard your account: Don't share your PIN numbers, check your balance frequently and keep your hands on your card. And it might not hurt to a) have a little cash on hand, and b) let your bank or credit card company know when you'll be travelling.

Special to The Globe and Mail


Wallet Worries

A recent poll says Canadians are still concerned about some traditional forms of fraud. Although some are still engaging in risky behaviour, more people are taking precautions to protect themselves. Some of the poll's findings include:

  • 87 per cent of participants said they were concerned about debit card fraud versus 81 per cent in the 2011 poll.

  • 91 per cent of participants were worried about identity theft versus 86 per cent in the 2011 poll.

  • 65 per cent of Canadians rely solely on ATMs that belong to their bank versus 58 per cent in the 2011 poll.

  • 30 per cent have spoken to their bank about reducing their withdrawal limit versus 25 per cent in 2011.

  • 19 per cent now change their PINs every couple of months versus 12 per cent last year.

  • 14 per cent admit they have carried their debit card or credit card PIN in their wallet.

  • 11 per cent have sent their credit card number through e-mail.

  • 10 per cent have told someone their PIN.

Source: The third annual TD Canada Trust Fraud Prevention Month poll

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