The Crime Of Our Century – Prepaid Card Identity Theft
The current boom in identity theft was predictable, maybe even inevitable. It's a natural result of what we might call “identity inflation.”
Not so long ago, the information on file about the average American consisted of a fairly small number of paper records, stored in metal cabinets in far-flung offices. People's financial particulars were usually revealed only to a discreet local banker. Criminal impersonation took time and effort, not to mention lock-picking skills.
Today, thanks to electronic communication, we routinely share our most sensitive data – whether we know it or not – with people around the world. This information is continuously being collected, organized and stored in cyberspace. All a would-be impostor has to do is locate it.
By no means are prepaid debit cards immune to this growing threat. In fact, prepaid cards have been involved in some of the most brazen recent cases of identity theft. In May 2013, for instance, the U.S. government alleged that an international ring of crooks had used prepaid cards to loot $45 million from banks in the Middle East. The scheme, as described by the feds, was a blend of high-tech and grass-roots larceny. Hackers “tricked” cards into drastically raising their cash limits. Then a worldwide army of accomplices fanned out to withdraw the money from ATMs before security experts spotted trouble. Most prepaid debit card fraud is not so elaborate. But no one denies that the nature of these cards makes them especially appealing to lawbreakers.
Crooks are clever
The well-known 2012 study by the Pew Charitable Trusts noted that “perceived anonymity” is one of the things people like most about prepaid debit cards. And it's more than just perceived. These cards, once they're loaded with money, are self-contained spending instruments. Because they are not linked to checking accounts or credit accounts, they don't help reveal customers' financial histories or allow for easy tracking.
An honest consumer's desire for such anonymity is understandable. But thieves crave anonymity, too, and for all the wrong reasons.
Taking advantage of the “here-and-gone” potential of prepaid cards, crooks often use them to move ill-gotten funds. More sophisticated scammers, as in the alleged Middle East case, can forge data to temporarily “create” electronic assets, then hurriedly convert them into cash or goods. Once the ruse is recognized, a merchant or financial institution is left holding the bag. Because prepaid card transactions rarely involve big sums, this kind of scheme requires lots of manpower, but recruitment is apparently easy.
Heists hurt the economy. But should fraud be a concern for you, the law-abiding individual with a prepaid card? Are you personally at risk? The answer, unfortunately, is yes.
Nationally recognized credit expert John Ulzheimer, no fan of prepaid debit cards, says bluntly, “They facilitate fraud,” he says. “If anyone were to steal or find your card, or otherwise compromise the account information, they could easily use the card or steal its value.” That danger is the flip side of anonymity: A card that acts like cash can be used by anyone. Some cards have fraud protection, but as Ulzheimer points out, many do not.
What would James Bond do?
The good news, if there is such a thing, about this fraud vulnerability is that it's limited. The amount of money on a prepaid debit card is rarely large, and once that money is spent, there's no more damage the thief can do to you. Ulzheimer acknowledges that “the exposure is relatively low, unless you're irresponsible and leave the card lying around.”
Carelessness is obviously foolish. But these days, even ordinary caution may be insufficient. Instead, assume that someone is always spying on you, and treat your prepaid debit card as classified information. Get the safest card you can, especially in terms of fraud protection. Don't share it or lose sight of it. Don't even talk casually about having it, any more than you would chat about carrying cash. Use the card only in situations where you feel secure, and beware of bystanders monitoring your actions.
Don't feel embarrassed about being vigilant. Scammers who can scoop up millions of dollars in a few hours can bilk you if you give them the least opportunity. If all this talk of identity theft and stolen data makes you feel besieged by mysterious forces beyond your control, Ulzheimer has a realistic reminder about prepaid debit cards. Maybe it's reassuring. Or maybe not.
“Most fraud is perpetrated by family and friends,” he says.