Bank worker gets kudos for cracking ATM scam.

NEW YORK - They were pursued by bank security officials, local police, and the U.S. Secret Service, but the nation's most infamous automated teller machine fraudsters might still be free if not for the work of a savings bank employee and a New York City businesswoman.

As the date draws near for the sentencing of two men who operated an elaborate scheme last spring that used an unauthorized ATM machine to defraud Connecticut banks of more than $100,000, the Secret Service is handing out commendations today to a group of citizens who helped catch the criminals.

Among those cited by the Secret Service is Helen Meloche, ATM operations manager at the Savings Bank of Manchester, Conn. Ms. Meloche, who first called attention to suspicious ATM transactions at her bank, will receive a special commendation from the Secret Service and a share of $35,000 in reward money.

Other Scams

But despite the speed with which the highly publicized case was cracked, the Secret Service also indicated that the convicted men, Alan S. Pace and Gerald H. Greenfield, were believed to be involved in other banking-related scams.

"There are other schemes involving these men that are currently under investigation," said Dan Marchitello, U.S. Secret Service agent in charge of the Connecticut investigations.

When the men were arrested in June, the Secret Service confiscated all the equipment involved in the Connecticut scam, including the Fujitsu ATM that was installed by the thieves at the Buckland Hills shopping mall.

Account Data Gathered

Rather than dispensing cash, this ATM, which was not hooked up to any bank but displayed a variety of network logos, captured personal identification numbers and account information from the cards of people who tried to use it. Those data were turned into ATM cards that were then used to illegally withdraw cash from dozens of ATMs in and around New York City and in Florida.

In addition to the ATM used in this scam, the Secret Service seized from the thieves four other cash machines, ATM software, credit card embossing equipment, and a photo identification system that was believed to be used to make phony drivers' licenses.

The thieves were able to acquire the ATMs through a banking equipment reseller who confused the name of the thieves' bogus company - Guarantee Trust Corp. - with that of one of their legitimate customers.

"It was a case of mistaken identity on our part," said a representative of the ATM reseller, who spoke on the condition that he and his company would remain anonymous. "[The thieves'] knowledge of ATMs was comparable to that of our other customers, and they gave us no reason to believe they weren't for real."

The Secret Service is tight-lipped about where the thieves got the other equipment, but bankers and network executives familiar with the fraud said it is not surprising that the men could acquire the tools of the electronic banking trade.

"Their credentials, as I understand it, were unimpeachable," said Richard P. Yanak, president of the Neni Corp., which operates the New England-based Yankee24 ATM network. "The company's credit history was good enough to fool anyone."

Fear of a Repeat

Yet despite the sophisticated nature of the Connecticut fraud, many bankers are nonetheless worried about a recurrence of the crimes. These worries are reinforced by the incidence of other similar scams over the past few years.

In California, for instance. an ATM fraud scheme earlier this year bilked bankers of more than $200,000, according to the Secret Service.

The thieves videotaped ATM transactions to learn a customer's personal identification number and later collected account and card numbers from discarded transaction receipts. As in the Connecticut scheme, this information was turned into cards that could be used at a variety of ATMs.

Similar scenarios have occurred in Europe as well, experts said.

Lessons to Be Learned

The Secret Service is hopeful that the banking industry and those that serve banks will learn some lessons from the Connecticut incident.

Several observers said bankers should take their cues from Savings Bank of Manchester's Ms. Meloche, who first uncovered the scam.

According to executives at the bank, Ms. Meloche noticed a high incidence of large withdrawals from accounts that had been the subject of recent customer balance complaints. Upon further examination, it became clear that many of these withdrawals were being done at the same ATM in New York City.

"At the time, I thought it was conceivable that a computer error could have made all the transactions look like they were all coming from the same place," said Douglas Anderson, executive vice president at Savings Bank of Manchester.

But, Mr. Anderson said, some other events convinced him that they had a sophisticated fraud on their hands. "Our ATM at the mall had been deliberately tampered with and the new ATM at the mall had vanished."

Mr. Anderson contacted Yankee24, which in turn notified the Secret Service.

With the network's help, the Secret Service was able to pinpoint an area in New York City where much of the fraudulent activity had occurred. An employee of Express Card Systems Inc., which had sold the thieves some equipment, provided the identification that led to the arrest and eventual conviction of the ATM con artists.

Rolex Watch Scheme

Secret Service sources said the men convicted of the Connecticut ATM scam were also behind a credit card scam in which fraudulent America Express cards were used to obtain $300,000 worth of Rolex watches.

Experts noted that credit card scams tend to be more lucrative than those involving ATM cards, which typically carry a $400 daily withdrawal limit.

Nonetheless, bankers need to be aware of ATM fraud and the liabilities that come with it, they said. Banks are expected to reimburse their customers for any fraud of $50 or more.

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