EC to Launch Probe of Online Credit Card Crime

The European Commission this month began a three-year program designed to crack down on credit card fraud in cross-border Internet transactions.

The EC reported that such crimes increased 50 percent last year and totaled $540 million.

Most of the increase, the EC said, was a result of small-time rip-offs in the $50 to $100 range on purchases made across national borders on the Internet or by phone.

“Fraud undermines the effectiveness of the EU internal market, reduces public confidence in cross-border payment systems and threatens the successful development of e-commerce,” the EC said in a statement.

The statement cited calls for action issued by various European Union summits, most recently at the March 2000 Lisbon meeting of the EU Council. Tackling the problem is largely the task of the payment systems industry.

However, the EC statement said, “The European Commission can play a useful role in establishing systems to ensure better information exchange, stronger cross-border cooperation on coordinated preventative measures and clear and binding rules with adequate sanctions for those found to break them.”

Commissioner Frits Bolkenstein, who is in charge of the internal market — meaning unrestricted trade among EU member states — said, “The rate of increase in fraud and counterfeiting of payment cards concerns us all. To date the counterattack has mainly focused on domestic payments, but the scale of cross-border fraud means we need urgent action at a European and, indeed, international level.

“This action plan sets out a framework for better cooperation and coordination,” he said. “Criminals commonly use sophisticated techniques to commit fraud and counterfeiting. They have repeatedly shown their ability to exploit any weak link in the chain. We must work together to beat them at their own game.”

Plans to counter fraud were drafted in cooperation with the payment card industry, national authorities, retailers, network operators and consumer groups. The EC said it would take three years before it would report on progress and “propose further action as necessary.”

The EC plan, Bolkenstein said, had five objectives. They include technological improvements, improved information exchange, better educational material and cooperation, specific fraud prevention measures and better ties to non-EU members.

Measures under consideration include:

• A single phone number across the EU for consumers to report theft or loss of cards more easily.

• Publication of guidelines on exchanging information related to fraud prevention.

• An EU-wide fraud protection Web site with information on initiatives and links to all relevant organizations.

• Specific initiatives to improve the security of payment products and systems “based on the findings of a commission study on specific security aspects.”

• Agreement across the EU on “key items of evidence” needed to probe and prosecute fraud cases.

But Bolkenstein warned that the fight against fraud had to be pursued on a global basis lest those based in the EU take their operations to other countries.

The increase in fraud cases and the hesitation of European consumers to use credit cards online come at a time when credit card use has begun to boom across Europe.

Europeans tend to use cards in restaurants and shops but are still concerned about providing numbers on the Web or by phone.

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