Content area
Full Text
Introduction
Over a decade, credit card fraud has been a major problem in the Indonesian payments system. In addition to being costly, the offence is believed to have been used to support other crimes such as terrorism. Efforts have been made to address this issue among which is by putting in place fraud prevention measures to diminish offenders' crime opportunity. The discussions in this article focus on highlighting the trends in credit card fraud and its prevention in the Indonesian payments system particularly in the period of 2003-2007. References are also made to such practices in the USA, the UK and Australia in building a framework of an ideal credit card fraud prevention practice for Indonesia.
Prevalence and costs
Indonesian banks bear tens of billions of rupiahs of losses from credit card fraud every year ([44] Kompas.com, 2008b). According to the Indonesia Credit Card Association (AKKI), during the period July 2003 to April 2006, 89 cases of credit card fraud occurred, with losses of $US4.6 million, of which, 82 cases were committed through a counterfeit card fraud scheme (that is, creating forged cards by using stolen information), and the rest involved application fraud ([2] Alwie and Anthony, 2008). According to Mr Dodit Probojakti[1] of AKKI, Indonesian banks recorded $US4.4-$US5 million of losses from credit card fraud during 2007 ([44] Kompas.com, 2008b).
According to [13] Bank Indonesia (2007b, p. 30), application fraud and counterfeit card are the most common schemes of credit card fraud in the country. In terms of application fraud, Bank Indonesia believes that careless cardholder selection process is commonly the primary cause of credit cards falling into the wrong hands (cardholders with bad track records), which leads into the misuse of the cards ([13] Bank Indonesia, 2007b, p. 30). As stated by Mr Dodit Probojakti[2] of AKKI, the majority of counterfeit card fraud cases were in the form of credit cards issued by legitimate issuers being forged by criminal syndicates ([44] Kompas.com, 2008b). This was largely because most (if not all) credit cards in Indonesia (at least until the issuance of Bank Indonesia Regulation Number 7/52/PBI/2005 Concerning the Operation of Card-Based Payment Instrument Activities) were magnetic stripe based ([13] Bank Indonesia, 2007b, p. 30).
Financial loss from credit card fraud is not the...