1. Card fraud in Hungary (case study ) and MON™ fraud prevention system
Mr. Antal KUTHY
President-CEO, E-GROUP Plc
Board Member of Hungarian Assoc. Of IT Companies
& Chairman, Hungarian-Hong Kong Innovative Business Council

2. = Banking Front-Office Technology

3. Integrated Product Portfolio

4. Card fraud in Hungary
( a case study )

5. OTP Group Merkantil Group (leasing group) OTP Mortgage Bank Ltd.
OTP Building Society Ltd.
OTP-Garancia Insurance Ltd.
OTP Fund Management Ltd.
Hungarian International Finance Ltd.
OTP Real Estate Ltd.
OTP Factoring Ltd.
OTP Fund Services Ltd.
OTP Travel Ltd.
OTP National Health Fund

6. Main f. indicators of OTP Bank (audited, HUF billion, 1USD=250HUF)
FYI: Hu popolution is only 9.5m, so over 60% of card market)

7. The number of transactions executed by the Bank's card owners through the Bank’s ATMs, reached 65.0 million in 2003 (2005: over 100m)
Turnover of these transactions was HUF1,594.2 billion, an increase of 5.6% and 17.8%, resp. over 2002.
The number of withdrawal transactions on the Bank’s own POS network was 6.7 million, the turnover was HUF1,084.8 billion. (2005 over 10m)
The number of purchases on POS terminals at merchants was 42.8 million (34.1% increase) valuing HUF351.4 billion (34.1% increase).
1 EUR=250 HUF

8. OTP Bank as Acquirer Fraud by Type (%) 2003

9. OTP Bank as Issuer
Fraud by Type (%) 2003
Increase in 2002: 25% 4.

10. Nature of counterfeited cards transactions
74% on POS
26% on ATM (2003)
( this rate in 2000 was 100% POS.)
ATM fraud is technical based
Where use PIN code (POS) the fraud rate is smaller
ATM robbery takes only <5 minutes
Team size: 10 specialists enough

11. OTP’s acquiring-network monitoring systems1.
OTP’s acquiring-network monitoring systems
1. On-line Monitoring for detecting suspicious purchases and ATM transactions
The following POS transaction are monitored:
Multiple use of Bankcards at the same merchant outlet on a single day
Bankcards used at more than 2 different merchant outlets in our network on a single day
Purchases where the transaction amount exceeds the daily average transaction value of the merchant. Remark: In case of new merchants the value is compared to MCC average (successful transactions)
Rejected purchases where transaction amount exceeds the predefined amounts set by rejected codes

12. 2. All Internet, MOTO and other key-entered transactions
Transactions made by cards having been used previously at a merchant during the counterfeiting period (possible counterfeited transactions in need of extra attention).
Cash withdrawals made in our post offices or in our branches, if either the transaction amount exceeds pre-defined limit or more transactions were initiated with the same card
Bankcards with more transactions initiated with at Filling stations – Gas Stations- (MCC 5541) on a single day
All refunds made by merchants

13. The following ATM transactions are monitored:
Too many cash disbursement trials with a card on a single day considering cardholders’ average spending habit
Banckards used both before and after midnight
Captured bankcards
Bankcards that have been used multiple days, „ongoing”
Captured bankcards=bevett bankkártya

14. OTP’s acquiring network monitoring systems
Off-line Monitoring programs for filtering out merchants with suspicious activity has been developed …
Chargeback Monitoring
Merchant Authorisation Request Monitoring (considering previous day; off-line):
Analyis of daily card acceptance activity of a merchant outlet such as total number and amount of succesful and declined transaction requests, number of key entered transactions to magnetic stripe read transactions, purchases with cards with the same BIN etc. and compares the data to the average parameters characterizing the outlet.
High Risk Blocking:
The amount of the suspicious purchase is paid to the merchants after the issuer bank has confirmed the genuineness of the transaction in question.

15. Issuer side monitoring systems1.
Issuer side monitoring systems
On-line Monitoring for detecting suspicious POS and ATM transactions
The following POS transactions are monitored:
Bankcards used several times at the same merchant outlet on a single day
Bankcards used at more than 3 different merchant outlets on a single day
Purchases where the transaction amount exceeds the daily average transaction value of the merchant. In case of new merchants the value is compared to MCC average.
Bankcards used in different countries on a single day.
Transactions made by cards that has been used previously at a CPP merchant during the counterfeiting period (possible counterfeited transactions need extra attention).

16. Transactions made in risky countries
All Internet, MOTO and other key-entered transactions
Suspicious Internet or MOTO terminals, where possibly fraudulent transactions occurs with generated account numbers
Cash withdrawals made in branches and in post offices where transaction amount exceeds the predefined limits.
Bankcards which more than the set prepaid mobile phone transactions via Hungarian ATMs (MCC 4816) are initiated with on a single day
The following ATM transactions are monitored:
Too many cash disbursement trials with a card on a single day considering cardholders’ average spending habit
Banckards used both before and after midnight
Bankcards used at ATMs located at high risk areas
Captured bankcards
Bankcards that have been used more days running abroad

17. Off-line Monitoring and other instruments to minimize fraud
Issuer Referral Call Service
Off-line Monitoring Program:
Transactions under floor limit are monitored.
Collusive Cardholder Monitoring
Blocked and Expired Card Monitoring:
In case of transactions under floor limit with non-existing cards, cards are inserted into the international stop-list. If continuous fraudulent usage arises. Acquirer banks are also advised of the phenomenon.
SMS Control Service („MONEYGUARD” : most succesful innovation implemented 6 years ago)
Transactions number which appear in the monitoring system: 3-10,000 / day (>>> Intelligent Analysis is necessary, special high value add expert systems)

18. Monitoring process Visualization Analysis
Alarm message (telephone, fax)
Blocking card

19. Total Reported Fraud / Sales Ratio
OTP Bank as Acquirer
Total Reported Fraud / Sales Ratio
Basis Points

20. Total Reported Fraud / Sales Ratio
OTP Bank as Issuer
Total Reported Fraud / Sales Ratio
Basis Points
The Hungarian and European ratios are calculated for only Mastercard and Maestro products.

21. End of 1st Part of Presentation