Fleet card fraud is a dynamic and growing issue. Often underrated and overshadowed by credit and debit card fraud.
Our research has shown that fleet card fraud has continued to rise due to the COVID-19 pandemic. With the most common type of fleet card fraud being counterfeit card fraud, such as copied/skimmed cards.
Most cases of fleet card fraud are carried out for financial gain, but there are several reasons why criminals target fleet cards specifically, such as testing new techniques and ideas for committing wider fraud on what they often see as a less secure card form. It is much easier to try a new counterfeiting technique on a fuel card than it is on a store or bank card.
There are many psychological factors involved in committing fraud, which I will explore later in this article, but the rise in fleet card fraud is undoubtedly related to them being seen as an easy target by many fraudsters.
Here are a few key reasons why that remains the case:
Criminals and fraud syndicates are taking advantage of the technological constraints that currently exist in the fleet card ecosystem. Most fleet cards are still utilizing magstripe technology, and due to the use of legacy platforms, fleet card issuers are not able to migrate to new generation technology.
This is down to several factors, including the financial cost of changing terminals to accept new cards – which is an ongoing concern for many site owners given the frequency of change in the payments sector. As a result, many issuers struggle to implement sophisticated fraud prevention solutions at the same pace as other card-related product users.
As a result, merchants are unable to identify fraudulent cards, especially counterfeit cards, which “look and feel” the same as any other fleet or fuel card in the market. Many current platforms do not have the necessary preventative methodologies, such as enhanced online authorization rules to check magstripe track data and fraud parameters, or advanced risk and behavioural fraud systems implemented to act quickly and efficiently to prevent fraud attacks.
Understanding what mechanisms and methods are visible in the environment will encourage the fuel card issuer to focus on new technologies and operational methods, which will make it more difficult for fraudsters to expose the ecosystem to fraud. Fraud prevention technology, such as online card monitoring, real-time detection, pre-set fill-up limits and EMV Chip & PIN technology can be effective in reducing fleet card fraud.
Fraudsters learn from one another
Most crime, including fraud, is a product of association with a particular community or the physiological limits of an individual’s ability to participate in a crime. But a major factor in an individual committing fuel card fraud is that fraudsters learn from one another.
Just as ‘normal’ businesses offer training programs, fraudsters run schools and training programs to help their teams understand the technology and perfect their skills, often by associating and learning from peers with significant practical experience. This high level of organization and communication between fraudsters shows why those in the fraud prevention space need to also communicate with and train each other.
Rationalizing fraud behavior
Understanding “the why” and the choices made by an individual allows for a detailed analysis of why fleet card fraud is committed. Fraudsters tend to evaluate the negative and positive of committing fleet card fraud, a utilitarianism approach. The obvious benefits are that fraud offers financial gain, and the negative is getting caught and serving time in jail.
Depending on the effectiveness of law enforcement, fraud prevention activities, technology constraints and other factors, the financial gain on white-collar crime normally outweighs the negative impact. If a scenario occurs where there is an opportunity created, the result will be that the individual will most likely choose to commit fraud and the individual will justify their actions by rationalizing their behaviour.
Fraud syndicates rationalize their activity as being their right to own and run a business and generate revenue with a successful profit and loss (P&L) statement. They have comprehensive operations and view their syndicates as businesses with departments in finance, HR, marketing, and IT. Their major objective being counterfeiting cards and buying/selling diesel at high profits with low costs – a balanced risk portfolio. Syndicates are often individuals who combine all the above and have achieved business sustainability by mastering all aspects of fleet card fraud.
Taking the fight against fraudsters
It is imperative that we continue to focus on enhancing technology and preventative measures within the fleet card ecosystem. To do this effectively, we need to know where and how individuals learn the techniques for committing fraud and the rationalization of their criminal activity. We need to safeguard against creating process gaps, where individuals may become tempted to commit fraud by adopting a constant lesson’s learnt approach, which is why communication and collaboration as fraud prevention agents is key. Standing still is not an option.