SAN FRANCISCO - Visa U.S.A. has intensified its attack on fraud with two initiatives.
One was organizational, with Visa organizing fraud committees in major cities. The other was technological, involving the distribution of a simple piece of card-reading hardware to law enforcement agencies.
The card association put both to the test in Los Angeles, one of the capitals of counterfeiting. According to Visa, approximately 50% of all people arrested in that city carry phony cards.
In the Los Angeles fraud committee, which started last January, Visa brought together investigators from 15 of the issuing banks in the city that suffer significant losses.
San Francisco was the second city to have such a committee. Visa expects to have five more committees running by the end of the year. Atlanta is on the drawing board now.
Comparing Notes
The members convene once a month to compare notes on their cases and share leads. A consultant hired by Visa is a liaison between the investigators and law enforcement officials.
"The whole idea behind forming the committees is to free up the bank investigators from having to constantly meet with law enforcers," said Allan A. Trosclair, vice president of fraud control at Visa U.S.A.
"And the mission of the committees is to identify the major cases and trends first and then educate law enforcers."
The cooperative investigations can be complex, since in Los Angeles there are more than 130 law enforcement agencies. Four of them have met with the Visa consultant.
In the second initiative, Visa is giving devices called "BIN checkers" to the police, customs and immigration, and other agencies.
BIN checkers - they get their name from the bank identification numbers encoded in the cards' magnetic stripes - read the encoded data to verify that a card is valid.
When the plastic is swiped through a checker, the machine can detect a counterfeit and identify its type. A card might be completely fake or might have been lost or stolen and then tampered with, either by altering the information in the magnetic stripe or re-embossing the raised account number on the front of the card.
Mr. Trosclair and Dennis Brosan, Visa's director of security, spearheaded the project.
BIN checkers are not entirely new. For nearly two years, MasterCard International has been distributing them at major ports of entry, border crossings, and airports in the United States. South Africa, and parts of Asia.
Canadians' Idea
Those original BIN terminals were introduced 2 1/2 years ago in Canada under joint auspices of MasterCard, Visa, and American Express.
Dennis Brosan, who used to be a Visa representative in Canada, and Paul Facciol, senior manager of fraud and security card operations at Canadian Imperial Bank of Commerce in Toronto, conceived of the idea and solicited the help of the Canadian Bankers Association.
National Business Systems, a Canadian vendor, manufactures the terminals for Visa, the Canadian consortium, and MasterCard. Visa and MasterCard distribute the identical machine, which costs $150.
In the Visa campaign, each time someone is booked by a police department, any credit card in his or her possession is to be swiped through the BIN checker.
The account number, expiration date, card type, and name of the issuing bank - all read from track 2 of the card's magnetic stripe - appear within five seconds of each other on the terminal's screen.
Looking for Problems
A computer chip in the machine is programmed to read the bank identification numbers of the 700 issuers who report the highest incidence of fraud. The greatest percentage of those issuers are Visa members, owing to that brand's lead in the market.
The Canadian BIN checkers are programmed to cover only 300 issuers.
"Essentially, the BIN checker is the same machine that merchants use to verify cards at the point of sale, except it is programmed to read information only from certain issuers," said Stephen Schwets, a fraud investigator for Royal Bank of Canada in Toronto. And because a BIN checker has limited access to information, it cannot be used as a primary authorization terminal.
A limitation from the investigator's perspective, he said, is that the checker does not display data from track I of the card's magnetic stripe.
Like track 2, track I holds the account number. In addition, it contains the cardholder's name.
Mr. Schwets said that being able to read track 1 would let the investigator compare the account numbers. In addition. knowing the cardholder's name would help in tracing the history of the card, he said.
Effectiveness Unknown
Mr. Trosclair said it is still too early to determine the effectiveness of BIN checkers in the United States.
And except for anecdotal information, Mr. Facciol said, there is no firm data proving the machines are making a difference in Canada.
MasterCard, which has distributed 100 terminals in the U.S., also said it can't measure the number of cards confiscated because of the BIN checker. However, the terminal's success can be inferred from the large number of requests from law enforcers, the card association said.
The first 15 Visa-issued machines were distributed in June to the Secret Service, and since then more than 100 checkers have been given to major cities, including Houston, Chicago, Phoenix, and Miami.
Each city receives a certain number, depending on the extent of its fraud problem. For example, Los Angeles received about 25 BIN checkers, while Chicago got only five.
Visa's goal is to send out 300 BIN checkers by December.
Tell-Tale Signs
Visa also also began distributing more than 1.5 million fliers that teach merchants about the tell-tale signs of counterfeit cards.
The flier were sent out to retailers that are especially susceptible to counterfeiters, such as department stores, car rental businesses, and stereo and jewelry stores.
"Part of the impetus for all of these projects is the result of two recent hires at Visa, who together have 30 years of experience in credit cards and law enforcement," said Mr. Trosclair. He declined to name the two, citing the sensitive, investigative nature of their work.
