Shanghai man Lu was always careful. He never kept his credit card out of sight and he never disclosed his password to anybody. But his precautions and care didn't count. Suddenly one day recently he was informed that transactions worth 30,000 yuan ($4,763) had been made in Italy using his credit card account - while he was in Shanghai with the card in his pocket. The confused man was also devastated to find that it was uncertain whether he would be able to get this money returned to him. He faced a lengthy dispute with the bank and the merchants involved.

Lu had never ever dreamed of losing so much money without doing anything. He is now a member of the fast-growing club of victims of high-tech credit card fraud. Figures from the Shanghai police show that in the first eight months of last year alone 1,900 cases of fraud using cloned or stolen debit or credit cards had been reported.

More than 700 people had been arrested and more than 12 million yuan had been retrieved from the thieves.

"We have been making increasing efforts to crack down on card fraud in recent years," said Wang Xin, a police officer in charge of economic crime investigation from the Shanghai Public Security Bureau.

"We have launched special operations to target card crooks and we have been working with banks and financial institutions, trying to deliver a knockout blow to the fraudsters," Wang told the Global Times.

Modernization

Although credit card theft is not something new, the techniques used to steal the card details are being constantly modernized. Crooks can now clone debit cards and credit cards if they can access the data stored on the magnetic strip on the back of those cards along with the PIN number of the users.

Criminals can employ shop assistants and bartenders, who handle a great many credit cards every day. They are told to swipe the customers' cards through a small device that copies information from the magnetic strip. It can be done inconspicuously and only takes a few seconds.

Reportedly a pocket-sized card reader costs around 3,000 yuan and a blank card costs between 8 and 10 yuan. Other fraudsters buy their magnetic strip information from illegal websites. While prices vary from region to region, criminals can buy a card's details for as little as $30.

Some professional fraudsters get their information by hacking banks or online merchants. They can also install ATM skimmers and cameras at cash points to discover PIN numbers. Some send fake e-mails in the name of banks to trick customers into disclosing personal information.

"An increasing number of card fraud cases involve the Internet," said Wang Xin, adding that cases involving foreign criminals working abroad have also soared in recent years. Last year the Shanghai police caught a gang of 11 people, seven of whom were from overseas. More than 150 counterfeit cards were found in their possession, which could have been responsible for the loss of millions of yuan.

A Shanghai police officer surnamed Cao revealed last year that a sophisticated service chain had developed in the black market with people selling magnetic strip information, making cloned cards and using counterfeit cards in shops.

Last July the Shanghai police arrested a 28-strong gang responsible for card fraud in seven provinces across the country. They bought overseas card details from the Internet and then made and sold replica cards on the Chinese mainland.

 

Banks fight back

Facing the soaring number of fraud cases, banks have taken countermeasures to protect their customers. The China Merchants Bank, which had issued over 38 million credit cards by September 2011, was one of the first banks on the Chinese mainland to introduce a 24-hour monitoring system that tracked consumption history and detected potential problems.

"It functions like a human brain and makes logical judgments," Zhang Jizhou, a press officer from the bank, told the Global Times. "So if I buy something with my credit card in Shanghai in the morning, but one or two hours later there are transactions made with the same card in the US, the system can tell it's highly improbable and will send a warning. Our staff will call the cardholder and check," Zhang said.

One solution to card fraud is to adopt smart chip credit cards. Widely used in the West, such cards are said to have effectively put a halt to the increase in card fraud because skimmers cannot clone information from microchips. However the majority of credit cards used in China still use magnetic strips to store account information. The People's Bank of China said that it will introduce chip cards in 2015.

Despite all the precautions consumers and banks take, criminals seem to be constantly one step ahead. While the police have made considerable progress in arresting fraudsters, those whose cards were stolen or cloned are often left facing litigation, where there is no guarantee that they will be reimbursed.

When Shanghai man Lu learned of the overseas transaction being attempted, the money hadn't then been transferred from his account to the merchant's. But when he asked the bank to stop the sales, he was told that his account had been frozen and that it was up to the merchant to stop taking the money.

Lu called the police but they needed his bank statements for evidence and his bank statements did not show the transactions because they had not been completed.

Compensation furor

In December the Shanghai Pudong New Area People's Court caused an uproar when it ruled that a Shanghai man surnamed Luo had no right to claim compensation from a shopping mall because the thief's signature resembled his signature on the back of his card.

In June 2010 Luo received text messages from the Industrial and Commercial Bank of China notifying him that his card had been used to make purchases worth 451,000 yuan at two shopping malls in Zhejiang Province and that 5,002 yuan had been withdrawn from his account at an ATM machine. While the court ordered that the bank pay Luo 114,900 yuan in compensation, it decided that one of the shopping malls should not be held accountable for Luo's loss as the shop assistant couldn't have told the cloned card from a genuine one because of the similarity of the signatures. Luo has appealed the decision.

Currently there are no specific laws covering economic disputes caused by card fraud. Chinese courts normally make their decisions based on contract law and tort liability law, according to Cheng Qingsong, a lawyer with the Yingke Law Firm.

Cheng said that banks have to protect the security of customers' accounts and shop assistants have to check if the customer's signature is the same as that on the card. "Shops should be responsible for customers' economic losses if they fail to spot a signature that is really different. But the law is vague about how precise professional sales staff should be in identifying signatures."

Cheng suggested customers learn about card insurance policies, which vary from bank to bank. Some banks automatically reimburse customers for losses from fraudulent transactions made within a set number of hours before a customer reports the loss of a card. "In practice customers are often at a disadvantage as the contracts they sign with banks often have very limited details. As credit cards become a primary method of transaction, the authorities needed to update the law to improve the industry regulation and protect the rights of customers," Cheng said.

 

A theft-proof card on trial

While fraudsters are finding increasingly clever ways to steal account details, banks and other institutions are working on new methods to fight the battle against high-tech information theft.

Hailed as theft-proof, a new type of credit card, shown at an electronics exhibition in Las Vegas in January, is now being tested by Citibank.

Powered by a tiny battery that can last for three years, this card generates a different security code every time it's switched on. The number stored in the magnetic strip also changes, which means it cannot be cloned with current technology.

The credit card number also changes every time it's used. The same size as an ordinary credit card, these cards have a small LCD that displays six digits of the card number, but this is invisible unless a PIN is entered.

However, the heightened security in cards like this also means that online transactions made using the card become more complicated and time-consuming. It could take a few more years before they will replace the current cards.

 

Keep it to yourself

With the growth of card fraud you can never be too vigilant. Although fraudsters try to find loopholes, cardholders can reduce the risks of being tricked by taking the following steps:

 Shield your hand when you type in your PIN at a cash machine. Criminals may have installed monitors at cash points.

 Don't apply for a credit card at a street stall. Although some banks do accept applications from outside their offices, it is safer to go to the bank and fill in the forms in person - your details could be sold on.

 Install anti-virus software on your computer and use a firewall to block unknown or suspicious software. Only use secure websites when buying online.

 Never disclose your passwords or PINs in e-mails. If in doubt, check with your bank directly.

 Always keep an eye on your card. Try to avoid having your card taken away to be swiped. Your card may be "skimmed" and data from the magnetic strip can be copied in just a few seconds.

 Don't throw away bank slips or receipts without shredding them. Thieves can use your card number and other information on them to make clones.

 Check your bank and credit card statements carefully and regularly.

 If your card is lost, stolen or you suspect it might have been cloned, report it immediately to your bank.