ATM Fraud - Tech tricks

A bunch of tech-savvy thieves has been exploiting a design flaw in the working of automated teller machines (ATMs) to pull out a few crore rupees from bank ATMs in Punjab and Kerala since 2010, said a report in The Economic Times recently. The modus operandi of the 'transaction reversal' fraud is ridiculously simple. ATM machines are apparently not designed to count currency notes that are retracted if the depositor does not pick them up 42 seconds after withdrawal. So fraudsters allow the ATM to retract a few notes in each cash withdrawal. When the ATM retracts notes, it apparently credits the entire sum punched for withdrawal back to the depositor's account. The news report says that Federal Bank lost Rs75 lakh to the fraud and the police have subsequently made arrests and filed 30 cases in Punjab as well. Further, the loophole has been plugged with the National Payments Corporation of India (NPCI) asking banks to disable the cash retraction facility by 31 March 2012. This still leaves a few questions unanswered. First, was there any attempt by the RBI to check if the 'gang' that masterminded the fraud was connected to the few specialised companies that supplied or serviced ATM machines?

Secondly, the fraud required hundreds of bank accounts to be opened and significant cash deposited in them. It could well be that the accounts were rotated in order to wipe out any trail to the fraudsters. Could such a large number of accounts have been opened with fraudulent documents unless there was a flagrant violation of know your customer (KYC) norms by banks? This means that banks continue to encourage dubious accounts knowing full well that they are used to launder black money. Yet, as always, it is only genuine customers wanting to open accounts who are given a run-around, making a mockery of regulations.

Source: MoneyLife

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