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Wednesday, 18 July, 2001, 15:06 GMT 16:06 UK
Banks to help fund fraud force
Credit cards
Banks want to crack down on credit card fraud
By BBC News Online's personal finance reporter Sarah Toyne

Banks are to fund at least half of a new police unit to tackle organised credit card fraud, under a proposed partnership being discussed with the Home Office.

APACS, which runs the clearing system between banks, is already involved with training of police officers, but the new deal would mean that the banks actually contributed to fraud-fighting costs.

It could also involve sharing intelligence and a greater co-operation between banks and the police.

The Home Office confirmed that discussions were taking place between the banks and the police with the aim of creating a "dedicated law enforcement agency" to deal with organised credit card fraud.

Credit card fraud cost 300m last year and is expected to reach 800m by 2005. Banks are becoming increasingly concerned about the escalating costs.

End of fraud?

The initiative was mentioned at a seminar looking into smart cards at the Home Office on Wednesday afternoon.

Banks and retailers, who attended the seminar, also reaffirmed their commitment to introduce smart cards by 2004 to try and reduce fraud on the High Street.

Home Office Minister John Denham
Home Office Minister John Denham is met UK banks on Wednesday

Banks and retailers have disputed who should foot the bill for the 1.1bn funding required for the introduction of smart cards, and have been negotiating for 10 months.

Under the proposed system, a cardholder's details will be contained in a chip and a pin number will replace a signature at the point of sale to cut down on fraud.

The use of a chip is intended to cut down on "skimming", whereby a customer's details are easily copied from a magnetic strip on the back of credit cards and then money is taken fraudulently.

Works abroad

However, the card will still contain a magnetic strip to enable transactions abroad where there may not be similar technology.

In these circumstances, a signature rather than a pin number will also be required.

The card is being developed under an agreed international standard and is aimed at cutting down fraud in America, Europe and the Far East.

Shops will benefit from the new smart cards. Their introduction would mean quicker processing and could lead to unmanned checkouts.

Co-operation

The benefits for banks, however, are much greater and the two sides will need to work together so that the cards are introduced on time.

Retailers are demanding compensation from the banks to cover their share of the 1.1bn bill. This is estimated at between 300m and 350m.

Most retailers want a reduction in fees to cover their costs over the next few years.

The level of compensation must be agreed between retailers and individual banks.

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See also:

11 Jul 01 | Business
Lloyds TSB customers hit by fraud
18 Jun 01 | Business
Identity theft: stealing your name
20 Feb 01 | Business
Credit card fraud rises by 50%
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