Card Games
Restaurants beware: In the wrong hands, technology easily can aid and abet fraud
By Margaret Casey, Special to R&I -- Restaurants & Institutions, 4/1/2004
Fraud investigators at a charge-card company were the first to stitch together a patchwork of clues and complaints. Mystery meals popping up on customers' statements—at least $60,000 worth of erroneous billings—seemed at first to have no connection, but the tangled path led to two Philadelphia-area restaurants. On the payroll at both operations was a waiter who later was charged with stealing credit-card account numbers.
The dirty dealings began when patrons handed over plastic to pay their tabs. Using a device called a skimmer—smaller than an electronic garage-door opener and available over the Internet for a few hundred dollars—the waiter surreptitiously read and stored data from the magnetic strip on the back of credit cards. An accomplice manufactured counterfeit cards with the filched numbers.
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Other cases of criminal credit-card cloning carried out in restaurants are equally brazen. Last year, a 51-month prison sentence was handed down to a worker at a T.G.I. Friday's in Laguna Niguel, Calif. He also used a handheld skimmer to lift information from patrons' credit cards and had more than 80 counterfeit cards at the time of arrest.
Financial fraud is a huge drain on businesses. The Association of Certified Fraud Examiners puts an annual price tag of $400 billion on a range of activities that bilk money from U.S. consumers and businesses. Estimates put U.S. credit-card skimming losses at $1 billion or more annually. Nearly everyone agrees that it is startlingly hard to track, detect or prevent.
"The way skimming works, there's not a lot you can do to prevent it," says James Kollar, agent in charge of the Santa Ana, Calif., office of the U.S. Secret Service, the office that investigated the Laguna Niguel case.
In some retail settings, transactions are carried out in view of cardholders, minimizing risk. Restaurants, however, generally place registers in discrete locations accessible to staffers rather than guests. "The card often disappears from the customer's view at some point," Kollar notes.
Crime Stoppers
The Secret Service actively investigates financial crimes, especially
those of a large scale. According to Kollar, it becomes involved
in skimming cases "when it's more than one waiter." Public-awareness
campaigns and the successful suppression of such crimes often
lead to a drop in the number of reported cases. In California,
Los Angeles and Orange counties have seen a drop in skimming because
of recent publicity.
Well-defined internal processes are the best defense against such fraud. "If managers watch employees, you can nip this in the bud," Kollar suggests.
Loss Prevention
The easy availability of credit-card skimmers coupled with criminal intent makes card fraud a difficult crime to prevent, according to James Kollar, agent in charge of the Santa Ana, Calif., office of the U.S. Secret Service. He says awareness that such crimes can happen and vigilance are the best prevention tools, especially in restaurants.
"The high turnover rate in restaurants sometimes allows the type of person who might commit crimes to be employed," he says, adding that it is important for hiring managers to conduct thorough background checks and monitor staff.
Kollar recommends checking identification cards when a credit-card payment is made to help minimize the chances of a counterfeit card being used in a restaurant. And for cardholders, he stresses the importance of checking monthly statements.
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