Skimming Fraud: Definition, Examples & Prevention

Skimming fraud is a growing threat, costing consumers millions each year. In 2021 alone, global losses from skimming reached a staggering $2.8 billion—enough to buy a luxury car for every person in a packed football stadium. This alarming trend underscores the urgent need for robust fraud prevention measures. In 2021, two men were sentenced to 75 months in federal prison for an ATM skimming scheme that resulted in $587,529.50 in losses to financial institutions in Michigan, Nebraska, and Iowa.

But what exactly is skimming fraud? How does it happen, and more importantly, how can you protect yourself and your company?



Skimming fraud is a serious threat to consumers and businesses alike. It involves the use of a skimming device, which is installed on a legitimate card reader to capture credit card information when a card is swiped. The stolen data is then used to create counterfeit cards or make unauthorized purchases, leaving victims with significant financial losses.

How Skimming Fraud Works

Skimming fraud typically involves three key steps:

1. Criminals install a skimming device on a legitimate card reader, such as an ATM or gas pump. These devices are designed to blend in with the existing equipment, making them difficult to detect.
2. When a customer swipes their card, the skimming device captures the card's magnetic stripe data, which includes the cardholder's name, card number, and expiration date. Some skimmers also have a tiny camera or keypad overlay to capture PINs.
3. The stolen data is then retrieved by the criminals, either by physically collecting the skimming device or through wireless transmission. The data is used to create counterfeit cards or make online purchases.

Types of Skimming Fraud

Skimming fraud can occur in various settings, with some of the most common types being:

ATM Skimming

ATM skimming involves installing a device on an ATM's card reader to capture card data. Criminals may also use hidden cameras or fake keypads to record PINs, enabling them to create counterfeit cards and withdraw money. The FBI notes that skimming devices are often found on ATMs and point-of-sale terminals.

Point-of-Sale Skimming

Point-of-sale (POS) skimming happens when a skimming device is placed on a card reader at retail locations like restaurants or stores. Sometimes, employees are involved in installing these devices, which are often hidden from the customer's view.

Gas Pump Skimming

Gas pump skimming has become more common recently. Criminals install skimming devices inside gas pumps, making them hard to detect. They often use Bluetooth to transmit stolen data wirelessly, allowing them to retrieve information without accessing the device physically. 

How to Detect Skimming Fraud

Detecting skimming fraud requires a combination of vigilance, technology, and proactive measures. Here are some general strategies to identify and prevent skimming fraud:

1. Regular Inspections: Frequently inspect ATMs, gas pumps, and point-of-sale terminals for any signs of tampering. 
2. Monitor Surveillance Footage: Install and regularly review security camera footage around payment terminals to identify any suspicious activity. Visible surveillance can also deter criminals from attempting to install skimming devices.
3. Employee Training: Train staff to recognize and report suspicious devices or behavior. Ensure they understand the importance of securing payment terminals and conducting regular checks.
4. Advanced Fraud Detection Systems: Implement advanced fraud detection systems, like the Sanction Scanner, that can identify unusual patterns of activity and flag potential skimming incidents. These systems can help in early detection and prevention.
5. Customer Alerts: Set up systems to alert customers of suspicious transactions or when their card is used in a high-risk location. Utilizing tools like Sanction Scanner can enhance the effectiveness of these alerts by providing real-time monitoring and risk assessment. This can help quickly identify and mitigate fraud.
6. Check for Bluetooth Signals: Use Bluetooth scanners to detect any unauthorized Bluetooth signals near payment terminals, as some skimming devices use Bluetooth to transmit stolen data.
7. Implement Tamper-Evident Seals: Use tamper-evident seals on payment terminals to make it easier to detect if a device has been tampered with. This adds an extra layer of security.
8. Collaboration with Law Enforcement: Work closely with law enforcement agencies to track and apprehend criminals involved in skimming activities. Sharing information and resources can enhance the effectiveness of fraud prevention efforts.
9. Use Secure Payment Technologies: Invest in secure payment technologies such as EMV (chip) card readers and contactless payment options, which are less susceptible to skimming compared to traditional magnetic stripe readers.

Skimming Fraud Prevention Techniques

Preventing skimming fraud requires a combination of vigilance, technology, and best practices. Here are some effective techniques:

For Consumers

• Inspect Card Readers: Before using an ATM or point-of-sale terminal, inspect the card reader for any signs of tampering. Look for loose or bulky parts that don't seem to belong.
• Cover Your PIN: Always cover the keypad when entering your PIN to prevent hidden cameras from capturing it.
• Use ATMs in Secure Locations: Prefer ATMs located inside banks or well-lit, secure areas over those in isolated or less secure locations.
• Monitor Account Activity: Regularly check your bank statements and account activity for any unauthorized transactions. Report suspicious activity immediately.
• Use Contactless Payments: Whenever possible, use contactless payment methods like mobile wallets or tap-to-pay cards, which are less susceptible to skimming.

For Businesses

• Regular Inspections: Conduct frequent inspections of ATMs, gas pumps, and point-of-sale terminals to check for skimming devices.
• Employee Training: Train employees to recognize and report suspicious devices or behavior. Ensure they understand the importance of securing payment terminals.
• Secure Payment Terminals: Use tamper-evident seals and secure mounting for payment terminals to make it more difficult for criminals to install skimming devices.
• Upgrade Technology: Invest in EMV (chip) card readers and contactless payment options, which are more secure than traditional magnetic stripe readers.
• Implement Surveillance: Install security cameras to monitor ATMs and payment terminals. Visible surveillance can deter criminals from attempting to install skimming devices.

For Financial Institutions

• Advanced Fraud Detection: Use advanced fraud detection systems that can identify unusual patterns of activity and flag potential skimming incidents.
• Customer Alerts: Implement systems to alert customers of suspicious transactions or when their card is used in a high-risk location.
• Regular Audits: Conduct regular security audits of ATMs and other payment terminals to ensure they are free from skimming devices.
• Collaboration with Law Enforcement: Work closely with law enforcement agencies to track and apprehend criminals involved in skimming activities.

By combining these techniques, consumers, businesses, and financial institutions can significantly reduce the risk of skimming fraud.

How Does Sanction Scanner's Fraud Detection Tool Help?

Sanction Scanner's fraud detection tool enhances your fraud management strategy through tailored, rule-based screening and dynamic alerting. By allowing you to design customized scenarios, it targets the unique fraud risks specific to your industry, reducing false positives by 96.99%. This approach refines your fraud detection capabilities and boosts overall efficiency.

The tool meticulously scrutinizes every transaction, assigning risk scores and generating immediate, actionable alerts for high-priority issues. Sophisticated algorithms assess risk factors, providing a clear roadmap for rapid response. Alerts can be customized to match your organization's risk tolerance, giving you control over the monitoring process.

Sanction Scanner also offers in-depth transaction analysis, revealing crucial details like account names, volumes, balances, and relationships. This helps uncover suspicious patterns that typical audits might miss, indicating potential fraudulent schemes or money laundering activities.

Integration is seamless with a robust API that merges effortlessly with your existing systems, providing real-time oversight to swiftly halt suspect transactions. The user-friendly interface requires no coding knowledge, making sophisticated fraud prevention accessible to all team members.

To learn more about how Sanction Scanner can enhance your fraud detection efforts, we invite you to get in touch with us. Our team is ready to assist you in safeguarding your operations.