High-tech credit card scam spreads

The scam - which emerged in south-east Asia but has now spread as far a field as Turkey - involves gangs inserting a recording chip into credit card terminals. The terminals are placed with unsuspecting retailers and the card information recorded each time a card is swiped. The adapted terminals have been placed by fraudsters posing as maintenance engineers.

"We are very aware that we are dealing with, if not international criminals, at least criminals with international links," said the Association for Payment Clearing Services, which monitors fraud in the UK. "They tend to franchise their knowledge to different countries pretty quickly."

The scam is the latest to hit card companies, which are already struggling to halt a spiral of fraud losses. Last year European-wide fraud rose by more than half as criminals set up card "factories" to simultaneously manufacture thousands of copies of cards. Visa, one of the two main card networks, lost E400m ($350m) to fraud in the EU in the year to September.

The gangs using the latest fraud have a good knowledge of the workings of the complex card terminals. Once in a store, the adapted terminal records card details for the gangs. But it does not take every card, making it hard for anti-fraud monitoring by card companies to trace the source of the card numbers.

"The examples where this has happened have mostly been in the far east," said Frank Wilkins, vice-president of fraud management for Visa's EU region. "But a gang has been caught in Ankara."

Card companies believe the solution is to move to chip cards, which contain a microchip as well as a magnetic stripe. These are highly encrypted, and the terminals which read them include tamper-proof areas which automatically wipe their software if modified.

Most European countries have agreed to adopt chip cards, but the cost is high, with British banks alone expected to spend GBP300m on cards and terminals.