During the long Double Tenth holiday weekend, word got out that money had been pilfered from accounts with the Tainan branch of the Bank of Taiwan, sending shock waves reverberating throughout Taiwan. It was soon learned that perpetrators had used a miniature camera to spy on depositors operating an ATM located at the Bank of Taiwan's Tainan branch, and used the information obtained to make counterfeit ATM cards.

On 11 October the Bank of Taiwan shut down over 600 ATMs around Taiwan for 16 hours to thoroughly check the machines, but unauthorized withdrawals continued, enveloping several other banks as the crime spree spread northward. As of 7:00 p.m. on the 14th, in excess of NT$30 million had been stolen from 257 accounts with 24 banks. More than half of the accounts were with the Bank of Taiwan.

This type of crime is nothing new-the last two or three years have seen sporadic examples all over Taiwan. Nor is this the first time that they have been perpetrated on a large scale-during the three-day Tomb Sweeping Festival holiday in April, ATMs in Taipei City and County were used to illegally withdraw in excess of NT$20 million from the accounts of more than 100 Bank of Taiwan and Taiwan Business Bank depositors. Perpetrators made confident by past ATM card fraud successes and banks opting not to adopt security measures aimed at stemming further losses led to the recent wave of theft.

Following the incident, Minister of Finance Lin Chuan repeatedly guaranteed that depositors would be fully protected. Bureau of Monetary Affairs head Gary Tseng emphasized that banks would be held fully responsible for all money withdrawn using bogus ATM cards.

C-a-s-h c-a-r-d spells "trouble"

Lax card issuing practices coupled with banks eager to exploit the gold mine of consumer banking have led to a market glutted with ATM cards, credit cards, and cash cards. In the scramble for market share, however, banks would rather focus on low-cost marketing than invest in secure cards or other theft prevention technologies, or reevaluate the security of their ATM operating procedures.

Consumer Foundation secretary-general Cheng Jen-hung explains, "Taiwan has become a paradise for financial crime and a nightmare for purchasing with plastic. Who is going to stick out their necks to guarantee consumers' rights?" In the past, when individuals complained that their accounts had been plundered or their cards used illegally, more often than not banks accused them of having shared their PINs with friends or relatives who then made off with their money. Banks required victims to prove that the money had, indeed, been stolen before they would even consider compensation. Faced with the difficulty of providing proof, most victims had no choice but to absorb their losses.

Although banks are also victims in these ATM crimes, the public feels that they are not putting enough effort into maintenance and crime prevention in their self-service banks and ATMs, giving thieves loopholes to exploit. They feel that banks obviously should absorb customer losses.

Because ATM card fraud often involves interbank withdrawals, the ROC Bankers' Association has proposed a resolution, stating that in the event a depositor with Bank A has money illegally withdrawn from his account through an ATM owned by Bank B, Bank B is responsible for compensating all resulting monetary losses.

The association also put forward a resolution stating that, as of 13 October, banks should no longer require customers to use cards to gain access to Taiwan's self-service banks, because criminals had attached tiny sensors to the mechanisms to pilfer information encoded in the magnetic strips. The schedule for installing readers for "smart" cards equipped with chips in ATMs across Taiwan has also been moved up one year from the original date of June 2005 to the end of next year. The use of smart cards will be required in all interbank transactions in Taiwan and the use of magnetic strip cards discontinued.

Financial crime paradise

Financial crime will not necessarily disappear just because magnetic strip ATM cards are no longer used. Tina Chiang, assistant general manager of MasterCard International of Greater China, explains that strict control over bank money flows is the most important measure for preventing ATM card fraud. Simply relying on chip-based cards is not enough.

Experts have proposed concrete recommendations for preventing financial crime. For example, in cases where individuals are not required to show their faces to set up bank accounts, such as over the Internet or over the phone, experts recommended that the Ministry of Finance issue a general order to financial institutions requiring that the first transfer or withdrawal of money from new accounts of this sort be done at a bank window, to enable banks to videotape the individual requesting the service. This would make it more difficult for criminals to set up fake accounts.

In another example, criminals have used ploys such as claiming to issue tax refunds or distribute lottery prize money to lure potential victims. Experts suggest that financial institutions adopt a one-workday delay whenever a depositor transfers money into an account for the first time, so as to give them sufficient time to cancel potentially risky transactions.

In addition to compensating victims for financial losses, financial institutions and oversight agencies should take further steps to understand the problem and ensure that they have done all that they can in the way of risk management. After all, the accounts that these banks manage are filled with their depositors' hard-earned money. How can they not do their best to protect it?