Authorities in Brooklyn, N.Y. have charged more than 100 people in what they're calling the largest identity theft bust in recent history. The theft ring stole credit card information, which they then used to make purchases totaling more than $12 million. Most of the merchandise was resold overseas.
Law enforcement personnel didn't just point the finger at those they arrested in this case – they also blamed credit card companies, saying the companies put too much money into marketing and not enough into security.
Deputy Inspector Gregory T. Antonsen, commander of the New York Police Department Identity Theft Squad, was quoted as saying that the bust shows the need for computer chips implanted in credit cards to deter fraud – in other words, smart cards.
Many European countries already have smart cards, which require cardholders to enter a personal identification number on a keypad, like you do when you use a debit card. The cards deter fraud because they contain chips that encrypt transaction information and require thieves to not only steal card data but also know the cardholder's PIN. The chip can also generate one-time-only passwords for more secure online commerce.
Experts say smart cards make it much harder to commit fraud. But U.S. card companies have been reluctant to issue smart cards because it would force retailers to install expensive upgrades to their payment systems.
But credit card companies are beginning to shift toward smart cards. In August, Visa announced that retailers who do not support smart cards by 2015 would be held liable for fraudulent transactions. MasterCard has said that ATM owners must accept smart cards by 2013 or they will be held liable for fraud stemming from their machines.
But experts also say smart cards are not without issues. Researchers at Cambridge University found last year that they could make a payment using a smart card without the PIN by using a device to intercept communications between the card and the terminal. Those researchers concluded that smart cards technology is seriously flawed.