Prime Time Crime
(Published in the B.C. Report Magazine Jan. 1996)
Hall Leiren
January, 1996
A young woman working at the main branch of one of the major banks in Vancouver has her wallet stolen. It contains her credit cards and various items of identification, including her driver's licence. She reports the theft to Vancouver City Police, but somehow -- and she says she does not understand why -- a year later she is suspected of being in collusion with the gang that had stolen her card and which was being investigated by the RCMP. Her driver's licence has been photo-substituted. She is dunned by bill collectors to pay charges on her stolen card, including telephone calls and car rentals. Eventually, she says, she discovers her credit rating has been badly damaged.
"I was being investigated by the RCMP, who had a videotape from a store where someone using my I.D. had made some purchases," she says. "They came to the bank and talked to the head of security and showed him the video and he took them out on the floor and pointed me out and they could see I was not the person in the video." The young woman, who does not want her name made public, says she found the experience frightening, and while she believes she bas cleared her name she still checks regularly with the Credit Bureau of Vancouver to see if adverse information has been filed against her name. "The worst is that I am afraid to travel out of the county," she says. "What if my credit card and identification has been used abroad? Could I be arrested because they thought it was me?"
The case she got caught up in involved five individuals who police say are local members or associates of a gang called the Big Circle Boys. They were charged with credit card fraud totaling $ 267,531 after a two year investigation that began in 1992. They included Ken King-fai, 33; his common-la wife Ngan Wing, 31; Ling Che-keung, 34, called "Porsche Paul"; Michael Wong Siu-yee, 39; and Danny Mao Yuk-lau, 32, all of Vancouver. Ngan has already pleaded guilty in a case that began in September and was expected to finish in either late December or early January '96. Porsche Paul, Mao and Ling have disappeared.
Police say that despite living high on other people's credit they were also welfare claimants, have all been refugee claimants and are defended in court on legal aid.
When police raided one of the suspects' residences in Vancouver's West End they found equipment to counterfeit Canadian passports, citizenship certificates, social insurance cards and Canadian and American drivers' licences. They also found equipment for re-encoding and cloning credit cards. During a search of one of Ken's residences, police found more than $ 90,000 in property obtained by crime. In a raid on another residence, police seized expensive clothing, cameras, jewelry, leather goods and home entertainment equipment valued at more than $ 100,000. In a photograph apparently taken on a shopping spree through B.C. and Alberta, Ngan poses in an apparently newly purchased fur coat outside the Banff Springs Hotel.
Police said large numbers of stolen credit cards, as well as more than 1,000 credit card slips ready to be cloned, were seized. A large quantity of stolen credit cards and cloned cellular phones, on which the gang allegedly ran up tens of thousands of dollars in unpaid bills, were also seized. To take advantage of stolen credit cards with non-Chinese names the gang allegedly hired at least two Caucasians and one East Indian man to make buys with stolen credit cards, using stolen driver's licences with substituted photographs as identification.
Prior to her shopping spree to Banff, Ngan had pleaded guilty in another credit card fraud case in Kamloops. She had apparently not been stung too badly by the $ 6,000 fine she received, and despite being on welfare, paid it immediately. In cash.
COUNTERFEIT CREDIT CARDS ALONG with other phony documents appear to be a specialty of triads and other criminals in Hong Kong and China. (It is technically incorrect to refer to the phonies as counterfeit cards, since only currency is mentioned in the counterfeiting section of the Criminal Code. But in common parlance the cards are called "counterfeit.") The criminals are closely connected with the Dai Huen Jai, or Big Circle Boys, in Vancouver and the rest of Canada as well as the United States. Ten years ago the name Dai Huen Jai specifically referred to Chinese criminals, usually with training in the People's Liberation Army, who originated in the Canton (Guangzhou) area. Now it is used as a more generic term to describe career criminals from China who have entered Canada, almost invariably illegally and almost always as refugee claimants, to continue criminal activities that include drug trafficking, alien smuggling, credit card fraud, prostitution, loan sharking and other criminal activities.
Several hundred of these career crooks have been identified in the Vancouver area. Big Circle Boys is not a monolithic gang. Members often work in groups of just a few individuals. The important thing about 'membership' is that it provides links of common language, culture and origin, and, most important, criminal associations that alloy individuals to network in furthering their criminal activities. Triad-connected gangs in Hong Kong, operating factories capable of producing 10,000 fake credit cards a day, have become so adept at counterfeiting that they sell their expertise to other criminal gangs in Singapore and Malaysia, charging fees of more than C$ 100,000 for the service.
Law enforcement officials say counterfeiting of credit cards is virtually; a 100 per cent Big Circle Boys industry. What is astonishing to the ordinary citizen is that in Canada it is not a criminal offence either to clone credit cards of unsuspecting cardholders or to possess the phony cards. Possession of a phony card becomes a crime only when it's used to make a purchase, withdraw money' from an automatic teller machine or commit some other fraudulent action. These criminals are well aware of the gaping hole in the Criminal Code of Canada and are running a $ 100-million-dollar truck through it.
CREDIT CARD FRAUD HAS BECOME A multi-billion-dollar industry world-wide. It is highly lucrative, showing huge profits with little in the way of risks. Convictions, even in cases involving hundreds of thousands of dollars, usually involve relatively light sentences -- more often fines than jail time, especially for so-called first offenders. Both law enforcement and bank security people speculate that the courts tend to treat credit card fraud leniently, viewing it as a victimless crime that hurts only the banks. In fact, says Paul Facciol, director of credit card services security for the Canadian Bankers Association (CBA), about 1.25 per cent of the interest charged on credit cards is directly attributable to the cost of fraud. Merchants pay higher credit card fees and therefore charge their customers more for their products.
Victims who have had their credit card identities assumed by criminals often experience a sense of personal violation and outrage. The banks are reluctant to discuss security measures and how they are tipped off to fraudulent card use. Sometimes the only tip-off comes when an unwitting cardholder gets an enormous charge on his statement. Sometimes unusual buying patterns will tip off banks, as was the case with Vancouver businessman Mitch Jampolski, who had $ 17,000 in false charges on his card. Several months after he'd made a visit to Hong Kong, Visa called him and asked if he had made substantial purchases in Hong Kong that week. He hadn't. In his case the $ 17,000 consisted of jewelry purchases.
A Vancouver doctor, who believes his card information was stolen when he used it at an Oakridge area restaurant, says $ 4,000 in jewelry, a $ 500 restaurant meal in Richmond, and other purchases were charged to him.
"Lost or stolen cards can be in use by criminals virtually within minutes and that is why we urge customers to report as soon as a loss is discovered," says Bill Ingenthron, manager of corporate security for B.C. and the Yukon for the Royal Bank.
In 1996 credit card fraud has become a high-tech game, where techno-criminals use the latest equipment, ranging from laser copiers to encoding devices and specialized computer software to produce high-quality holograms and embossing that may not pass close scrutiny by experts but will certainly fool busy merchants and store clerks eager to make a sale. Criminals use encoding machines to read and re-encode information on the black magnetic strip on the back of credit cards. In some cases crooked merchants or employees sell the information; sometimes it is obtained by theft. In the Big Circle Boys case that went to trial in September in Vancouver, ironically Kevin Marks, the Crown prosecutor on that case, had $ 3,500 run up on his credit card by thieves paying for everything from groceries to clothing, restaurant meals and gasoline.
The take from credit card fraud is expected to top $ 100 million in Canada last year. World-wide losses by Visa and MasterCard alone reached US$ 1.4 billion in 1994, with approximately 30 per cent attributed to counterfeit credit cards. Estimated worldwide losses to all credit card companies in 1994 was between US$ 3 billion and US$ 5 billion.
About 80 per cent of total credit card fraud is attributable to either counterfeit or stolen cards, says Paul Facciol. According a, the most recent figures, the percentage of fraud involving counterfeit credit cards was up more than three per cent in Canada in 1995 over 1994 -- 29.4 per cent compared with 26.2 per cent. The CBA expects more than 60,000 incidents of credit card fraud this year in Canada.
Vancouver in many ways may well be the counterfeit credit card capital of the world. More counterfeit credit cards have passed through the port of Vancouver than any other single port of entry anywhere in the world, says senior Customs inspector Colin McDouall. That is undoubtedly a tribute by the Big Circle Boys to the laxity of Canadian laws. Recently, say officials, there has been an apparent slowdown in the number of cards passing through Customs in Vancouver, and bank officials contend that with more rigorous law enforcement and more heat being put on the criminals in Vancouver, Toronto appears to have become a major operations area for fraudsters. "But that may only be a blip and I don't think Vancouver can afford to relax," says Facciol.
Staff Sgt. Andy Nimmo of the Coordinated Law Enforcement Unit (CLEU) currently has several active operations against a number of credit card rings and has participated in other cases now before the courts. Says Nimmo: "If the credit card criminals have gone somewhere else, nobody has told us about it."
Nimmo estimates that one individual who was preparing to order gold coins by telephone from around the world, could have pulled off a $ 1-million fraud if his operations had been left undisturbed. The Big Circle Boys associate simply telephoned his orders to U.S. dealers, giving stolen credit card data. In a joint CLEU-Canada Customs operation, he was arrested with $ 52,000 in gold coins. He had information on more than 5,000 credit card customers in his possession. "He was sticking to reasonable limits on each order, but if he had worked his way through 5,000 cards it could have really added up," says Nimmo.
What happens to all the money? Large amounts are used to finance other criminal activities for more criminal profits. Big Circle Boy Stephen Lam used Caucasian crooks to help him carry out robberies in Surrey and paid them with the proceeds from counterfeit credit cards. But at other levels the proceeds go into drug trafficking, alien smuggling and a variety of other activities.
THERE HAVE BEEN FOUR DISTINCT PHASES to counterfeiting credit cards, says the CBA's Facciol. They first surfaced in 1989-'90, when the Big Circle Boys sourced 'white plastic', or credit card blanks, in China and got account information through collusion with dishonest merchants or through intimidation, and put customers' numbers on the blanks. The cards, usually quite crude, often with misspellings of English words, might be used on innocent merchants but also in collusion with less honest ones. "The merchant might get extorted, or he might get a cut of the proceeds," says Facciol. "You as the credit card holder only got the bill."
They used gold cards, where the embossed numbers would be flattened with a hot iron and then used with illegally acquired customer information, and the black strip on the back recoded. The cards would be run to the credit limit and then ironed and reused three or four times before the plastic deteriorated. Credit limits could be determined by simply running varying amounts on the card -- re-authorization -- either with a colluding merchant or using a merchant's number, easily obtained from stolen credit slips, and directly accessing the credit granter and re-authorized to test the limit. The third and fourth generations were full-bare counterfeits with sophisticated silk-screening embossing and holograms and gold-foil.
"We are dealing with very sophisticated criminals, who understand systems and how to get around them, whether it has to do with credit card security systems, telephone systems or the banking industry, or a lot of other thing" says Nimmo of CLEU. "They are very smart, very knowledgeable and don't shrink at using intimidation and extortion to get their way. The legal system we have lived under was designed on the principle that most people follow the rules. But our system is incapable of dealing with these types of criminals."
All along the fraudsters refine their methods, learning from mistakes. When arrested and charged they rarely plead guilty even when the evidence against them is overwhelming. "They want to know where they went wrong, what they did that they shouldn't," says Const. Tim Dean, a credit card expert with CLEU. "You can see their buddies sitting in the courtrooms, almost nodding and elbowing each other as if they're saying, 'Ahh, so that's where we blew it, well, we won't make that mistake again.'"
Insp. Gary Geer of the Vancouver City Police, who formerly worked on credit card fraud for CLEU, says the Big Circle Boys are formidable opponents. "These guys work with the most modern management techniques. I am convinced they regularly sit down in quality-control circles and take operations to pieces bit by bit and discuss what works and what doesn't work, what gets you arrested and what lets you get away with it."
He is convinced institutions in both Hong Kong and in Canada, such as banks, are penetrated by individuals who work to supply information to the Big Circle Boys. Sometimes they may help from criminal motives; at other times they may have been intimidated and extorted into becoming helpmeets of criminals.
"We had one instance of Hong Kong banks coming up with a new security feature for credit cards and found that counterfeit cards incorporating the feature were on the street in Vancouver before the banks in Hong Kong had issued the real cards to the public." In Vancouver itself police sources say they know of at least two incidents where personnel working at major banks have passed important inside information to Big Circle Boys gangs. They have been unable to determine if the individuals obtained employment at the behest of the criminals, or were employees who were intimidated or corrupted.
The Royal Bank's Bill Ingenthron says he is aware of one instance -- "not in my bank" -- of a corrupt employee helping criminals. "Obviously it is something we think about."
Merchant or employee collusion with criminals and sometimes merchant or employee carelessness can lead to serious losses. The gangs identify prospects who are "wined and dined and taken for a ride in the Mercedes" and gradually corrupted into helping the criminals with promises of glamour and big money. After credit card companies experienced unacceptable losses at the Aberdeen Centre, a Richmond shopping centre of some 50 merchants and restaurants that caters to the Chinese community, Visa and MasterCard security investigators swooped down on the centre and confiscated all credit card terminals. "The situation was completely out of hand and drastic action was needed," says one bank official.
At one cosmetics shop, fast-talking crooks bought $ 10,000 in perfumes and cosmetics in one go. Despite the fact that card after card was rejected as the criminals tried different credit limits, police believe the clerk was just too eager to make the big sale and kept putting cards through until the goods were paid for. Credit card privileges have since been restored to Aberdeen merchants who promised to enforce stringent card security.
At another local shopping centre, a suspicious merchant was responsible for the arrest of two Big Circle Boys who ordered $ 5,000 worth of silk suits. Police were waiting for them when they returned for their first fitting.
SOME TIME AGO A SUSPICIOUS-LOOKING package arrived at Vancouver's Main Post Office from Hong Kong and was rerouted to Canada Customs for closer examination. Inspectors ran it through an X-ray machine and the tell-tale green that signals 'plastic inside', gloved on the screen. The package contained 29 phony credit cards, no big surprise to Customs officials. What did astonish them was how the cards were wrapped. The brazen crooks had used the very fax sheet the Vancouver restaurant had sent to the criminals in Hong Kong who had made the clones, showing credit card numbers and other personal details stolen from unsuspecting customers. Presumably the return of the fax sheet was part of the gang's quality control. Customs officials won't speculate on whether the restaurant owner or a crooked employee filched customers' credit card information, stealing their identities and their good credit.
After due notice was taken of the content, the package was put back in the mail for delivery. "Unfortunately there was nothing else we could do," says senior Customs inspector Colin McDouall. "There is no law in Canada against having phony credit cards in your possession."
The consequences of this lack of legislation include such bizarre instances as the interception of a package from Hong Kong containing approximately 1,000 counterfeit credit cards by Canada Customs at Vancouver International) Airport. Under the interpretations from government legal advisers it had to be allowed through since there was nothing criminal about possession of counterfeit cards. What is more, Customs inspectors are forbidden under privacy laws and other legislation from informing police of these packages when they arrive. As a result, law enforcement agencies, if they learn about such shipments at all, do so long after the fact. Usually by then the trails have gone cold and the bandits have long been busy doing their shopping on someone else's cards.
Gangsters have taken advantage of the laxity in the law in another way. They carry a counterfeit card on which the information on the front relates to one individual and the information on the black magnetic strip On the back carries the encoded information of another individual. The information on the black strip often relates to someone with an account at a different bank than the one listed on the front. The crook uses the card to withdraw cash from an ATM machine and simply draws a magnet over the black strip to wipe out the information, making it difficult, if not impossible, to link the criminal to the transaction even if he were to be arrested. "You'd be surprised at the number of people we see with a credit card in someone else's name in one pocket and a magnet in the other," says one policeman.
Incredibly it was only last July 10 that new legislation came into effect that allows Canada Customs officers to seize a similar type of contraband, the avalanche of fraudulent Canadian and other passports, photo-substituted passports, phony drivers' licences and Canadian citizenship certificates, forged Care and Social Insurance cards, and other fraudulent identity documents, all used in the furtherance of various criminal activities. The CBA has been pressing for a change in the la that would treat counterfeiting of credit cards the same as counterfeiting of currency and is optimistic legislation could be enacted soon.
Aside from being hampered to some degree by lack of legislation, police say much more could be done to curb use of counterfeit cards, including use of photos on credit cards, special encryption and other high-tech features. While banks say they work hard to improve credit (card security, police say the banks have been lax, afraid of having to deal with customer complaints about increased security measures. Police contend, and many bankers agree, that the security issue is a battle between marketing departments who want card use to be as simple as possible, and security departments who want more stringent measures against loss. The marketing departments usually win. "But the banks are now hurting seriously and they may be ready to bite the bullet," says CLEU's Andy Nimmo.
RELATED: