Best Practices

New Retail Scam Targeting EMV Chip Terminals

Beware for this scam by fraudsters hitting smoke shops

Fraud can target nearly any business, but card-present merchants had been able to breathe a little easier in recent years thanks to the introduction of the EMV chip. This tiny piece of hardware has gone a long way toward reducing fraud from cloned cards and other longstanding methods that exploit the vulnerabilities of older technology like magnetic strips. It’s an undeniable fact, however, that fraud is constantly evolving alongside the technologies developed to stop it. Now, retail merchants are finding themselves increasingly victimized by a new scam that uses deception to circumvent EMV chip security features.

EMV Changed The Playing Field

Originally, point-of-sale terminals read credit card information off of the magnetic strip customers would swipe through them. The customer’s identity could then be verified with a signature, an ID, or a ZIP code. Of course, these safeguards were easy to defeat if you had a stolen card. Signatures and IDs can be forged, and a cardholder’s ZIP code is often easy to guess. Worst of all, fraudsters wouldn’t even need to steal your actual credit card. Devices called “skimmers” can read the magnetic strips on cards, copy the information they contain, and clone them onto a new card.

The presence of the EMV chip verifies the authenticity of the card and can allow for customers to use encrypted PINs to authorize transactions. Skimmers can’t read EMV chips, and fraudsters can’t create cloned cards with valid or functional EMV chips. By requiring customers to use EMV chip-verified transactions at the point of sale, merchants can screen out many of the more commonplace forms of credit card fraud.

Unfortunately, not all merchants are willing or able to upgrade their terminals, and most newer terminals are set up to allow for transactions to be processed off of the magnetic strip to accommodate older cards without chips, or cards with malfunctioning chips. This is the loophole that fraudsters are now trying to exploit.


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