Belated, Hurried Response by Government

Recently, it became known that ATM cards issued by banks were forged and used by con artists. This occurrence of identity theft is due to the moral hazard on the part of bank employees and loose security system of the banks. Bank employees sold customer-related information, and the banks used a security system, under which con artists could fake as many copies of the cards as they wanted only by knowing victims` account numbers.

In response, the authorities have eliminated the blanks on the deposit and withdrawal forms, and mandated differentiation of PINs for bank accounts and ATM cards. Most experts, however, believe the follow-up measures came out too late, and there will be more victims.

Experts say that the current ATM and credit cards made using magnetic stripes are vulnerable to tempering, and it is impossible to prevent bank employees from selling the information on customers. Thus, they argue, a fundamental change should be made to seal off the loophole.

The Financial Supervisory Service, a government agency in charge of overseeing banks and other types of financial institutes, confirmed yesterday that only customers of the 4 banks, such as Woori, Kwongjoo, Busan and local Nonghyups, have been victimized, and it has not verified any other cases so far.

The total amount of the damage came to 369 million won (or approximately $307,500). Bankwide, Woori customers sustained 184 million won, local Nonghyups 116 million won, Kowngjoo 24 million, and Busan 45.8 million.

In case of Woori Bank, a retired former employee at its branch in Koonja, Seoul, without authority, accessed bank slips and obtained information. Then, teamed up with counterfeiting con artists, he forged numerous ATM cards and withdrew money out of 52 accounts at 19 branches nationwide.

Busan Bank`s verifying system has been broken down and could not prevent con artists from using faked cards. On the other hand, the ATM cards of local Nonghyups, Kwongjoo Bank and Jeonbuk Bank are so flimsily made that con artists could copy the cards only by obtaining account numbers.

Kim In-suk, a senior official of the supervisory body, said, "Without conspiring with an employee of a bank, con artists could not obtain the customer information in a large scale like this."

The Financial Supervisory Service ordered Woori Bank to encode random numbers into the magnetic stripes of all old and new cards, and local Nonghyups to replace the old cards with new ones for free of charge.

Kwongjoo Bank will also encode random numbers into the stripes on new cards, and is considering substitution of old cards. In the meanwhile, Busan Bank has invalidated all the cards that have been idling for the past 6 months which were issued prior to February 22, 1999, and will replace old ones whenever customers visit the bank.

Jeonbuk Bank, whose cards are still encoded in an old fashioned way, has not detected any misuse case, but is upgrading its security system.

The service believes customers of savings and loans associations may have been victimized, but not yet reported.

According to the government report, the number of ID-theft cases and the amount of the damage shot up from 28,976 (or 24.5 billion won) in 1999 to 75,000 (or 70 billion won) last year.

Especially, con artists in Japan and Taiwan have moved into Korea, and produced more and more faked cards taking advantage of the defective magnetic stripes.

The trend is on the rise as Japan and Taiwan have mandated the use of more thoroughly temper-proof IC cards.