Card fraud in Hungary case study and MON fraud prevention system

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Card fraud in Hungary(case study ) and
MON fraud prevention system

• Mr. Antal KUTHY
• Antal.Kuthy_at_egroup.hu
• President-CEO, E-GROUP Plc
• Board Member of Hungarian Assoc. Of IT Companies
• Chairman, Hungarian-Hong Kong Innovative
  Business Council

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Banking Front-Office Technology
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Integrated Product Portfolio
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• Card fraud in Hungary
• ( a case study )

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OTP Group
Merkantil Group (leasing group)
OTP Mortgage Bank Ltd.
OTP Building Society Ltd.
OTP-Garancia Insurance Ltd.
OTP Fund Management Ltd.
Hungarian International Finance Ltd.
OTP Real Estate Ltd.
OTP Factoring Ltd.
OTP Fund Services Ltd.
OTP National Health Fund
OTP Travel Ltd.
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Main f. indicators of OTP Bank (audited, HUF
billion, 1USD250HUF)
FYI Hu popolution is only 9.5m, so over 60 of
card market)
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• The number of transactions executed by the Bank's
  card owners through the Banks ATMs, reached
  65.0 million in 2003 (2005 over 100m)
• Turnover of these transactions was HUF1,594.2
  billion, an increase of 5.6 and 17.8, resp.
  over 2002.
• The number of withdrawal transactions on the
  Banks own POS network was 6.7 million, the
  turnover was HUF1,084.8 billion. (2005 over 10m)
  
• The number of purchases on POS terminals at
  merchants was 42.8 million (34.1 increase)
  valuing HUF351.4 billion (34.1 increase).

1 EUR250 HUF
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OTP Bank as Acquirer Fraud by Type () 2003
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OTP Bank as Issuer
Fraud by Type ()2003


Increase in 2002 25
4.
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Nature of counterfeited cards transactions

• Counterfeited cards
• 74 on POS
• 26 on ATM (2003)
• ( this rate in 2000 was 100 POS.)
• ATM fraud is technical based
• Where use PIN code (POS) the fraud rate is
  smaller
• ATM robbery takes only lt5 minutes
• Team size 10 specialists enough

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OTPs acquiring-network monitoring systems
1.

• 1. On-line Monitoring for detecting suspicious
  purchases and ATM transactions
• The following POS transaction are monitored
• Multiple use of Bankcards at the same merchant
  outlet on a single day
• Bankcards used at more than 2 different merchant
  outlets in our network on a single day
• Purchases where the transaction amount exceeds
  the daily average transaction value of the
  merchant. Remark In case of new merchants the
  value is compared to MCC average (successful
  transactions)
• Rejected purchases where transaction amount
  exceeds the predefined amounts set by rejected
  codes

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2.

• All Internet, MOTO and other key-entered
  transactions
• Transactions made by cards having been used
  previously at a merchant during the
  counterfeiting period (possible counterfeited
  transactions in need of extra attention).
• Cash withdrawals made in our post offices or in
  our branches, if either the transaction amount
  exceeds pre-defined limit or more transactions
  were initiated with the same card
• Bankcards with more transactions initiated with
  at Filling stations Gas Stations- (MCC 5541)
  on a single day
• All refunds made by merchants

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• The following ATM transactions are monitored
• Too many cash disbursement trials with a card on
  a single day considering cardholders average
  spending habit
• Banckards used both before and after midnight
• Captured bankcards
• Bankcards that have been used multiple days,
  ongoing

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OTPs acquiring network monitoring systems

• Off-line Monitoring programs for filtering out
  merchants with suspicious activity has been
  developed
• Chargeback Monitoring
• Merchant Authorisation Request Monitoring
  (considering previous day off-line)
• Analyis of daily card acceptance activity of a
  merchant outlet such as total number and amount
  of succesful and declined transaction requests,
  number of key entered transactions to magnetic
  stripe read transactions, purchases with cards
  with the same BIN etc. and compares the data to
  the average parameters characterizing the outlet.
• High Risk Blocking
• The amount of the suspicious purchase is paid to
  the merchants after the issuer bank has confirmed
  the genuineness of the transaction in question.

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1.
Issuer side monitoring systems

• On-line Monitoring for detecting suspicious POS
  and ATM transactions
• The following POS transactions are monitored
• Bankcards used several times at the same merchant
  outlet on a single day
• Bankcards used at more than 3 different merchant
  outlets on a single day
• Purchases where the transaction amount exceeds
  the daily average transaction value of the
  merchant. In case of new merchants the value is
  compared to MCC average.
• Bankcards used in different countries on a
  single day.
• Transactions made by cards that has been used
  previously at a CPP merchant during the
  counterfeiting period (possible counterfeited
  transactions need extra attention).

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• Transactions made in risky countries
• All Internet, MOTO and other key-entered
  transactions
• Suspicious Internet or MOTO terminals, where
  possibly fraudulent transactions occurs with
  generated account numbers
• Cash withdrawals made in branches and in post
  offices where transaction amount exceeds the
  predefined limits.
• Bankcards which more than the set prepaid mobile
  phone transactions via Hungarian ATMs (MCC 4816)
  are initiated with on a single day
• The following ATM transactions are monitored
• Too many cash disbursement trials with a card on
  a single day considering cardholders average
  spending habit
• Banckards used both before and after midnight
• Bankcards used at ATMs located at high risk areas
• Captured bankcards
• Bankcards that have been used more days running
  abroad

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• Off-line Monitoring and other instruments to
  minimize fraud
• Issuer Referral Call Service
• Off-line Monitoring Program
• Transactions under floor limit are
  monitored.
• Collusive Cardholder Monitoring
• Blocked and Expired Card Monitoring
• In case of transactions under floor limit with
  non-existing cards, cards are inserted into the
  international stop-list. If continuous
  fraudulent usage arises. Acquirer banks are also
  advised of the phenomenon.
• SMS Control Service (MONEYGUARD most
  succesful innovation implemented 6 years ago)
• Transactions number which appear in the
  monitoring system 3-10,000 / day (gtgtgt
  Intelligent Analysis is necessary, special high
  value add expert systems)

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Monitoring process

• Visualization
• Analysis
• Alarm message (telephone, fax)
• Blocking card

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OTP Bank as Acquirer Total Reported Fraud /
Sales Ratio Basis Points
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OTP Bank as Issuer Total Reported Fraud / Sales
Ratio Basis Points
The Hungarian and European ratios are calculated
for only Mastercard and Maestro products.
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• End of 1st Part of Presentation
• Antal.KUTHY_at_egroup.hu