Computer fraud threat to banking system

Press, 3 August 1983, Page 20

Computer fraud threat to banking system

From

ROBIN McKIE,

in London

Three New York children uncovered a remarkable secret. Using a commercial computer network hired by their school they cracked a code developed by Pepsi Cola to control its Canadian freight movement.

The discovery proved irresistible. In a few days, they began a large and confusing interchange of business on Pepsi’s behalf. Baffled subsidiaries started to receive lorry loads of empty bottles; train loads of cola syrup were dispatched across Canada to unsuspecting factories; the company’s headquarters was deluged by fictitious business. It took the combined forces of the F. 8.1. and the Canadian Mounted Police to track down the culprits. Being minors, all escaped prosecution, although their activities undoubtedly cost Pepsi “an absolute fortune,” as one international banker recently put it.

The tale certainly has comic overtones. Nevertheless, the children’s antics highlight a serious problem for companies and banks attempting to combat computer fraud, which is rising at an alarming rate. One recent estimate suggested the average sum stolen in each computer fraud in America has reached $400,000. which is 10 times the average haul Of a “normal” bank raid. Some computer thefts

are of mammoth proportions.

A computer consultant, Stanley Rifkin, managed to switch $10.6 million from a United States bank into his own account. He then transferred the money to Europe and used it to buy discount Russian gems. He was caught only because his girlfriend betrayed him to the F. 8.1. She got a reward for the information and the bank made a profit by selling the gems for $l4 million. Rifkin was jailed. “It is easy to feel some sympathy for Rifkin,” said Kevin Kearney, assistant manager of the Bank of International Settlements in Basle. “However, his activities and those of people like him ultimately threaten our personal liberties.” At a seminar in the South of France, organised by the computer giant, Sperry, Mr Kearney said a bank swindle involving hundreds of millions of dollars was imminent and inevitable; Computers linked by data networks allow banks to handle a vast amount of financial traffic. Each day 83,000 transactions, worth a total of $5 billion, take place in New York. Ten years ago only 700 transactions took place. “The old system had plenty of checks and buffers in it,” Mr Kearney said. “Anything that looked odd could be checked. Now

the whole business is moving so fast it is impossible to keep it properly under control. “Make no mistake, when a major fraud comes along, the results will be devastating. If big enough or if there are several in a row, the frauds will seriously hinder international trade. If a bank stands to lose several hundred million dollars it will become very cagey about handing out money.” More worrying in some ways is the possibility of the intervention of governments. A government sufficiently worried about economic disruption caused by frauds could begin to record all transactions.

“The simple way to do that would be to make money illegal,” he said. “All payments would be made by credit card and in that way the government would not only know about our every purchase but would have an exact record of our movements, of our spending patterns, and our behaviour.

“You would not be able to buy a bus, train or plane ticket without that being recorded centrally. Similarly phone calls and salary payments would be added to the system and all details stored for easy security surveillance. We would indeed be in the era of Big Brother,” — Copyright, London Observer Service.