Fergie's Tech Blog

Chip and PIN Fraud Hits Lloyds TSB

This is the second instance of Chip and PIN fraud I've heard this week -- the first was with Royal Dutch Shell in the UK.

John Leyden writes on The Register:

Lloyds TSB has admitted that flaws in the new Chip and PIN system recently introduced for debits cards in the UK open up the system to fraud. Conventional fraud may be down because of the system but crooks are still able to use cloned debit or credit cards in foreign ATMS.

Instead of authorising debit card transactions by signature Chip and PIN means that customers use a four digit PIN code to give the go-ahead to purchases.

Although cloned cards won't have a forged chip the PIN associated with this microchip is the same as that associated with a magnetic stripe. Foreign ATMs only read this magnetic strip and not the PIN. So providing fraudsters obtain the data on the magnetic strip, along with the associated PIN, they are able to make withdrawals overseas using a conventionally cloned card, something that wouldn't work on a UK high street. Delays in identifying foreign ATM cash withdrawals as potentially fraudulent are compounding the problem.

posted by Fergie @ 5/11/2006 10:34:00 AM