Though credit card issuers are starting to make headway in the war against fraud, one type of crook continues to elude them: their own employees.
Insider scams are on the rise as a result of employees' increased access to electronic account information, credit reports and other customer data, experts say. While issuers are trying to fight back with high-tech surveillance strategies, these defenses are not yet foolproof.
The dangers were highlighted on Oct. 30, when 32 people suspected as members of a Nigerian crime ring were arrested in connection with insider credit card fraud at American Express Co. and other unnamed financial institutions.
All told, the institutions lost $2 million, with American Express losing half of that. The Secret Service estimates the total loss could have hit $22 million had the fraud gone undetected.
Richard H. Urban, president of Card Alert Services in Arlington, Va., said insider crime is "a growing problem" because "people (previously) without access now have access" to data bases and mainframes from their desktops.
Criminals now can "stay under the radar screen" because they can move between a broad range of electronically linked financial networks.
The rise in insider crimes comes as general credit card fraud is declining. The most common varieties of fraud involve mail-order and telephone scams, lost and stolen cards, and counterfeit cards.
In the first eight months of 1996, MasterCard said it had lost $267.9 million in fraud, down from $270.8 million for the same eight months a year earlier. Although Visa's most recent figures were not available, it reported fraud declines in 1994 and 1995.
Though statistics on insider fraud are hard to come by, experts say the problem is clearly growing.
The American Express case shows that criminals "have bypassed sophisticated technology to get to hard paper information," said William Whiteside, special agent with the Secret Service in New York.
"You can have all the security devices on the card, but if someone can get into the garbage can or a computer file, they can get the information on your card account and create their own card," he said.
Mr. Whiteside said criminals pinch "a little at a time, so it does not attract too much attention," and "they are very patient."
In the recent case, two female American Express employees in Miami were charged with the crimes. The women were allegedly part of the ring. One of them worked as a credit analyst and had access to the personal information of delinquent account holders. She is said to have accessed accounts of creditworthy and wealthy account holders.
American Express became aware of the problem through routine monitoring of employee activities, said company spokeswoman Gail Wasserman.
Ms. Wasserman said American Express allowed the employees to continue to work there "to allow the Secret Service to monitor them. They were obviously passing along information to their confederates."
In addition to credit card fraud, the Secret Service said it found the ring was involved in automated teller machine fraud, cloning cellular phones, making false applications, and stealing credit histories and credit cards.
Michael Stenger, special agent in charge of the Secret Service's financial crimes division, said that as technological advances affect the financial industry, organized, international crime groups become more involved because criminals "can go to an ATM machine in London and defraud a financial institution in New York."
Earlier this year, First Bank System Inc., Minneapolis, averted a credit card scam when it was discovered that 5,000 active account numbers had been stored in an Internet provider's system. The bank did not lose any money. Experts suggested the break-ins were the work of a First Bank employee.
"As the industry raises barriers to prevent outside access," criminals "gravitate more toward the inside," he said, adding that incidents of collusive merchants double-swiping cards or knowingly accepting fraudulent plastic are also on the rise.
The secret service said West African crime rings historically have ties to companies with access to credit reports, such as real estate companies, mortgage companies, and car dealerships. These rings - along with others from the Middle East and Asia - often use the proceeds of fraud to fund narcotics trade and gunrunning, authorities said.
