In the last year Queens District Attorney Richard A. Brown has presided over the breakup of two large credit card fraud rings operating from his New York City borough.
As the district attorney since 1991, Mr. Brown is well known for his tough-on-crime stance. People call him, simply, "the Judge." He spent 18 years on the bench-in a local criminal court and the state Supreme Court.
Last year his office uncovered a multimillion-dollar credit card fraud ring, operating out of Jamaica neighborhood, which it said defrauded victims around the nation. Two weeks ago, the office announced another major credit card fraud bust. (See related article.)
Last year's case drew widespread coverage from the national media, which brought to public consciousness the concept of identity fraud-the theft of a consumer's identity to get false credit cards and other illegal documentation.
In February 1996, Mr. Brown addressed the House Banking Committee about the need for greater precautions in the issuance, use, and acceptance of credit cards.
Mr. Brown chatted with American Banker recently about this and related topics.
What were some of the issues you talked about when you addressed the House Banking Committee last year?
BROWN:One of the major thrusts was the fact that the Postal Service was simply accepting change of address cards without any attempt to verify them.So it meant that one of these rings could simply go ahead and identify people from invoices or carbons from the American Express, Visa (card), and so on.
As a result, the Postal Service did, indeed, take steps to prevent the fraudulent diversion of mail by insisting on verification of the forms.
I had a list of things that I talked about beyond that. I urged consumers and legitimate merchants to be more careful in the use and the acceptance of credit cards.
Second, I urged that greater incentives be provided for the discovery of counterfeit cards-things like rewards to cashiers who confiscated counterfeit cards and customer incentives for early detection. I urged training of law enforcement and security personnel in debriefing the so- called shoppers who used counterfeit credit cards.
That is how the first case got itself started. We found a woman in Brooklyn who attempted to use a counterfeit credit card to purchase a fax machine and a computer, and rather than simply charging her with grand larceny, we debriefed her.
As a result of that debriefing, we went to an apartment in Queens, and what we found in it were hundreds of counterfeit Visa, MasterCard, Discover, and American Express cards, and stacks of counterfeit cards in various stages of being counterfeited.
I also said that we could be more aggressive in the prosecution of cases such as these, by not just going after the individual who uses the counterfeit card, but rather by going ahead and doing the in-depth investigation that we have done in both of these cases.
And using our state's organized crime control act, which is the equivalent of the federal RICO Act, it gives us enhanced penalties of up to 25 years in jail, to get at the entire ring and all of the members.
What kind of changes to New York State law are you seeking?
BROWN: We've asked for changes in New York State law, because in this case we had the theft of hundreds of thousands of dollars (by people) using credit card account convenience checks to get cash and to access numbers for catalogue purposes.
And in New York State there are really insufficient penalties for defendants who possess credit card convenience checks, because the use of a credit card convenience check is the same as taking a cash advance against the credit card.
Nevertheless, the possession of convenience checks under New York law is only a misdemeanor. What we would want to do is increase our state law so that it more mirrors the federal law, which makes the possession of multiple credit card access numbers and convenience checks a felony.
Most importantly, we've got to change the mindset of the credit card and banking industries.
What has to change?
BROWN: Security and fraud enforcement (now) takes a back seat to those who market and use credit cards. The view seems to be that if we make it more difficult for the consumer to use the card, it's going to be used less-that the losses will be absorbed as long as cards are easily utilized and gross sales rise.
I would argue, that is penny-wise and pound-foolish. The groups that are involved in our couple of cases are becoming more sophisticated; the losses will continue to grow.
What seems to be the case when you talk with the security people within the credit card industry is that they tell you that internally they are fighting the marketing people.
The marketing people say, "Hey, if I go ahead and get this credit card out into commerce and into the hands of people who are legitimately using it in 99 cases out of 100, and you have one guy who uses it illegally, then I am still way ahead of the game and I am prepared to absorb the cost of the fraud." And that seems to be the attitude.