Unraveling ATM Transaction Reversal Fraud: Strategies to Safeguard Your Finances

Picture a quaint, small town enveloped in the tranquility of a peaceful night. The only signs of life are flickering street lamps and the glow from the neighborhood automated teller machine (ATM). You spot someone approach the ATM, withdraw cash and walk away. It all looks so normal. What you don’t realize is that you have just witnessed a fraud attack, specifically, transaction reversal fraud (TRF).

In transaction reversal fraud, a casual observer could be forgiven for thinking that a normal ATM transaction is taking place. The fraudster inserts a card, enters a PIN, and selects the cash withdrawal amount. Here is where the fraud occurs:  as the perpetrator waits for the ATM to dispense the cash, he triggers a fault at the ATM during the cash dispensing operation. This causes the ATM to reverse the transaction but allows the fraudster to force the machine to dispense the cash. This subtle sleight of hand gives the criminal the cash, leaving the bank to foot the bill.

Criminals are always looking for ways to exploit the convenience offered by modern banking. Transaction reversal fraud leaves ATM providers vulnerable to significant financial losses.

In ATM transaction reversal fraud, they exploit a feature in ATM operations that reverses a transaction if it is not completed within a specific timeframe. This security feature ensures that the transaction is automatically reversed if a customer forgets their money or the ATM cannot dispense the requested amount. As a result, the money is credited back to the customer’s account.

Criminals typically manipulate the ATM so that it appears that the cash has not been dispensed when in fact, it has. This triggers a transaction reversal, and the money is credited back to the account despite being dispensed. This fraud requires physical access to the ATM and knowledge of how the machine works.

Common Methods of Transaction Reversal Fraud

  • Swallow: When the card is ejected, the fraudster does not take the card and will wait for the transaction to time out. The ATM will then capture (swallow) the card and reverse the transaction. At this point, the shutter can be forced open to remove the cash. This can cause damage to the machine and leave the ATM provider to not only lose the money but also leave them with repair costs and puts the ATM out of commission while repairs occur
  • Jam: Similar to the swallow method, when the card is ejected, the fraudster does not take the card and will wait for the transaction to time out. But instead of letting the card be captured, the criminal will hold on to it so it appears jammed. The ATM will then time out and reverses the transaction. At this point, the shutter will be forced, and the cash removed.
  • Swap: When the card is ejected, the criminal does not take the card and will force a second card into the slot while removing the original card. The ATM cannot recognize the swap and will capture the second card. The ATM will then reverse the transaction. At this point, the shutter will be forced, and the cash removed. In this method, the second card will not be a bank card; instead, it will be a magnetic card like a loyalty card or a hotel key card, letting the fraudster keep the initial card used.

In summary, TRF is an attack involving events that generate multiple error codes and an unnecessary payment reversal. These attacks can be tricky to isolate and detect before financial losses occur, especially if changes to the ATM host applications are required. While there is no way to prevent a fraudster from physically prying open the shutter, there are strategies to help detect and reduce TRF from occurring.

Strategies to Prevent ATM Transaction Reversal Fraud

Some of the measures that ATM operators can take to mitigate and prevent ATM transaction reversal fraud include:

  1. Transaction Time Limits: Set strict time limits for ATM transactions to prevent fraudsters from having enough time to manipulate the ATM or card reader. A transaction can be automatically terminated if it does not complete within this predetermined timeframe.
  2. Repeated Transaction Limits: Limiting repeated transactions or reversals from the same card can help prevent TRF. This measure can help identify suspicious activity related to a particular card and initiate appropriate responses.
  3. Transaction Monitoring and Analytics: Implement real-time ATM transaction monitoring and analytics to identify and respond to any unusual activity or patterns indicative of TRF. Artificial Intelligence (AI) and Machine Learning (ML) algorithms can be used for this purpose, as they can analyze vast amounts of transaction data in real-time and rapidly identify fraudulent patterns.
  4. Fraud Detection Systems: Sophisticated fraud detection systems can identify unusual patterns and flag potentially fraudulent transactions. This could involve monitoring the frequency of transaction reversals from the same card or ATM and sending alerts when a certain threshold is exceeded.
  5. Software Updates and Security Patches: Regularly update the ATM’s software and apply security patches when available. Older software may have known vulnerabilities that fraudsters can exploit.

Banks, ATM network operators, and Independent ATM Deployers can significantly reduce the occurrence and impact of TRF by taking a proactive and comprehensive approach to risk management. This safeguards their financial health and helps maintain customer trust and confidence in the banking system.

Fighting Transaction Reversal Fraud with INETCO BullzAI

INETCO BullzAI (BullzAI) is a cutting-edge solution to help ATM operators detect and prevent ATM transaction reversal fraud. By leveraging advanced machine learning algorithms and real-time transaction monitoring capabilities, BullzAI can quickly identify and respond to suspicious activity on your ATM network through detailed alerts and preventative measures. This enables you to take immediate action to protect your customers and your own financial interests while minimizing the impact of this type of fraud.

While preventing fraudsters from attempting to physically alter an ATM to affect TRF may not always be possible, BullzAI can provide real-time access to the necessary data to help detect it. BullzAI is built for payment environments and can detect fraud early in the process, blocking suspicious activity without impacting legitimate payments. This access allows for immediate identification and added protection of your ATM networks. ATMs can be shut down within seconds if transaction reversal fraud is detected. While this won’t prevent fraudsters from causing physical damage to the ATM, your cash will be safer.

ATM transaction reversal fraud is a growing threat that poses significant risks to consumers, Independent ATM Deployers, and banks. Learn more about how INETCO BullzAI can help you defend your ATM network from fraudsters by setting up a demo with our solution experts today.