Plastic criminals: credit card thieves make a killing in Mexico's finer restaurants.

It used to be that when one thought about organized crime, Al Capone and Manhattan prostitutes came to mind. But today it's a brand new crook roaming the urban landscape. He doesn't run underground gambling halls or have judges in his back pocket. Instead, he

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Credit card fraud has grown to an annual US$50 million business in Mexico, and well-organized, international gangs of thieves are employing waiters in the finest restaurants, bums in the dumpsters and hackers on the Internet to steal personal information and turn it into merchandise and cash.

"These are not street-corner rateros. This is part of a sophisticated organized crime racket," said Liberto Ferrer Anaya, the director of fraud prevention at the Mexican Banking Association.

METHODS OF RIPOFF

Several times this summer, credit card companies and various security organizations held conferences to educate the public about this problem, for which Mexico ranks No. 1 in Latin America.

Although Mexico is notorious for muggings in which credit cards are acquired through force, these strong-arm methods are not the most popular way to get hold of that valuable magnetic strip on the back of a card.

Skimming, in which a criminal swipes the code of an unwitting credit card holder, has become the main problem. This can be done with a handheld device that reads the code instantaneously. Waiters in posh Mexico City restaurants or fashionable Cancun discos are the main culprits, often skimming a patron's card on their way to the register. Security experts display Exhibit A--seized devices that are the size of a pack of cigarettes and can hang on a waiter's belt disguised as a pager.

"A quick swipe at a restaurant or in a disco. Who's going to notice?" said Guillermo Maniaux, the director of security for MasterCard, whose company has 650 million cards in circulation around the globe.

Waiters can skim several cards on a good night and sell them in bulk--at a rate of US$20 to US$30 per card, according to Maniaux--to higher-ups in the credit card fraud chain. In turn, the buyers will download these numbers on a computer and have them ready to charge for goods or services around the globe in a matter of minutes.

For this reason, experts in the field urge credit card holders to always keep an eye on their plastic. This suggestion has led some restaurants to use "terminales portables" (portable terminals) in which waiters charge the customers right at the dinner table.

"This has been very successful," said Ferrer, who noted that many D.F. restaurants (Mexico City accounts for about a third of the nation's credit card fraud) have installed the new devices after being questioned by law enforcement officials investigating fraud claims.

This use of technology shows how credit card companies are struggling to keep up with the plastic bandits, and many more sophisticated methods of prevention are in the pipeline.

COOPERATION MEANS PREVENTION

In addition to setting up umbrella committees and taking other traditional corporate steps in dealing with this drain on their bottom line, credit card companies--reeling from the millions of dollars that they lose--are becoming more proactive in fighting the problem.

In the technological front, they are pushing for digital encryption and PIN requests as well as upgrading chip technology in terminals to detect if a magnetic stripe has been cloned (copied from a legitimate card and rolled onto the back of a fake).

But Ferrer, who has worked for Banamex for 30 years and sits on Citigroup's worldwide board for fraud prevention, particularly applauded the cooperation between MasterCard, Visa and American Express in working together to break up the organized crime cells that are attacking their business.

"In this field we are cooperating, not competing. We share information, and we share technology," he said.

GOVERNMENT DOES NOTHING

Given that there is no federal law in Mexico against credit card fraud, companies are forced to work together and independently urge cardholders to be vigilant.

The federal government is glacially moving toward reform, according to Angelica Rendon, the director of Mexico's Coalition Against Fraud, and this slow "step-by-step" process has encouraged these defrauders to set up shop in Mexico and laugh at the lack of consequences for their thievery.

Rendon waxed dramatic in assessing the damage of credit card fraud to the fabric of society, saying, "This is the money that organized

crime elements use to buy arms, drugs and traffic organs." However, the point that the fraud empire is not being curbed--leaving it up to credit card companies to install tougher security measures or cardholders to increase their own vigilance--is a legitimate one.

CAREFUL WHAT YOU THROW A WAY

Defrauders can obtain credit card numbers through a wide array of tactics, beyond skimming and cloning.

Stolen cards, fraudulent applications, intercepting an electronic mail or telephone order or simply rifling through the trash for a copy of a credit card receipt is enough to obtain the necessary information. Any receipt that contains the name, account number and expiration date of the card is enough to make a buy over some Web sites.

Although fraudulent charges are covered by the companies and are rarely the responsibility of the cardholder, credit card fraud poses great threats to the law-abiding population at large. It is essentially a form of identity theft, which can wreak havoc on the holder's records and credit rating.

"Be careful," said the head of the U.S. Secret Service in Mexico, Edwin Lugo, who participated with Maniaux in one of this summer's roundtables. "There are many sharks in the water."

Matthew Brayman is the editor of BUSINESS MEXICO.