Chip and pin pushes card fraud abroad

The new "chip and pin" payment system intended to eradicate credit card fraud in Britain has resulted in a rise in card crime abroad, according to Lloyds TSB.

The bank said it had seen an increase in the number of fraudulent transactions abroad using UK cardholders' details since the new system was introduced.

"Chip and pin is so effective in this country that fraudsters are starting to move their activities overseas," said Emile Abu-Shakra, spokesman for Lloyds TSB.

Although chip and pin has made it harder for criminals to use stolen and cloned cards in shops, fraudsters can still copy the magnetic strip to produce counterfeit cards.

These can be used at cash machines and retailers abroad where transactions are still validated with signatures.

Cloned cards from the UK have been used in countries including France, Holland, Thailand, India and Sri Lanka.

Mr Abu-Shakra said Lloyds would be monitoring all overseas transactions and that customers who did fall victim to card fraud would be fully compensated.

Since its introduction, chip and pin has led to a reduction in card crime in the UK.

Figures from Apacs, which represents card issuers, show that last year fraud on lost, stolen and counterfeit plastic cards was down £60m (24%) on 2004's figure.

The figure could fall further following the introduction of chip and pin to all retailers in February.

However, Mike Bond, security director at Cryptomathic, a company that tackles plastic card fraud, said it was unlikely card crime would disappear altogether.

"Chip and pin spun to be the solution to fraud is clearly nonsense", he said.

"The flaws in being able to copy the magnetic strip on the back of the card are still there, although the chip isn't to blame".

Mr Bond said the use of chip and pin terminals in restaurants and shops could actually be making it easier for criminals to copy card details by attaching skimming devices to the terminals.

Earlier this week it was revealed that Shell had fallen victim to fraudsters, leading to the suspension of chip and pin in its 600 company-owned petrol stations.

More than £1m is believed to have been stolen by criminals using scanning devices.

Devices that "skim" data from plastic cards are readily available on the internet for less than £100.

Although owning one is not technically illegal, hand crafting a "miniaturised" version to slot into cash machines and card terminals shows intend to commit fraud.