Financial Times
Jail, fines for credit card crooks
By Suren Gnanaraj
Lengthy jail terms and tough
fines have been proposed in new legislation to curb an increase in credit card
fraud in Sri Lanka.
The proposed Payment Device
Frauds Act will fill a serious lacuna in the law by recognizing all credit card
and Automated Teller Machine card frauds as a crime with a maximum fine up to
Rs. 500,000 and a maximum prison sentence of 10 years.
A credit card offence would
be regarded as a cognisable offence, which would permit an arrest to be made by
the police without a warrant.
The proposed Act, which was
largely drafted by the banks, incorporates provisions from similar statutes adopted
in the United Kingdom and the USA.
Dr. Wickrema Weerasooriya,
legal consultant to the Central Bank, who is helping bankers fine tune the new
law, said it had been approved by the financial sector reforms committee and was
to be submitted to Minister of Finance, K. N Choksy before being sent to the Cabinet
for approval.
The Act broadly defines a 'payment
device' as "any card, plate, code, account number, microchip, optical instrument
or document where magnetised encoding has taken place or a device in which information
is recorded by mechanical, electronic, optical or other means, whereby account
numbers and mandatory and discretionary data are stored which is recognised by
the issuer for the purpose of completing a transaction."
Dr. Weerasooriya said that
this will help ensure that the law keeps pace with technology, providing protection
to banks that aim to introduce new and sophisticated payment devices in the future.
Sri Lanka had been targeted
by several foreign criminals and syndicates, in which foreign credit cards are
used here, and local credit cards are 'skimmed' and used abroad, he said.
'Skimming' is regarded as the
most popular form of credit card fraud, in which encoded data stored in the magnetic
strip of a card is copied on to a counterfeit card.
Dr. Weerasooriya said, "At
present, those arrested for credit card frauds are charged under the penal code,
which was drafted 100 years ago, at a time when credit cards were not even conceptualised."
The law was inadequate to help
conduct investigations or to prosecute credit card fraudsters, and the penalties
imposed were insufficient to serve as a deterrent.
Sri Lanka had earned a bad
reputation as a country which had no legal coverage to deal with credit card frauds,
which was internationally regarded as a serious offence.
P. Sridharan, Assistant General
Manager of the card centre of Hatton National Bank (HNB), said that 'skimming'
was a result of the weak technology introduced by the international credit card
giants, Visa and Master.
"The magnetic strip can be
copied on to another card and used under a different name and a different signature.
Therefore, both Visa and Master are to revert to a chip-based credit card by the
year 2008, which cannot be copied like the present magnetic strip," he said.
He attributed the high level
of interest rates levied on credit card bills to the rising amount of credit card
frauds, which require the banks to absorb the losses.
Zeyan Hameed, Manager of the
credit card centre at HNB, said that the safest way to reduce the risk of credit
cards being used for fraudulent purposes is to remain vigilant as to where it
is being taken for payment, and ensuring that the card is swiped only once.
"Unless there is a genuine
error in the swiping machine, do not let your card be swiped twice," he warned.
He said that the swiping machine
technology had now improved, no longer requiring the machine to remain stationed
next to a telephone landline.
"The swiping machine can
now be carried up to a customer's table at a restaurant, whilst remaining connected
to a telephone line through a remote control device." However, this technology
is yet to come to Sri Lanka. See connected story -Using
your credit card wisely - The Business Club
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