Ringleader of casino kiosk scam confesses

Cheated big bank of $1 million

Ara Keshishyan pleaded guilty today (June 10) to leading and organizing a 14-defendant conspiracy to steal money from Citibank's casino kiosks.

The gang pulled the stunt in ten casinos in California and Nevada, including Pechanga in Temecula. All but one of the conspirators, a fugitive, have now been nabbed.

Here's how it worked: Keshishyan, of Fillmore, recruited his pals to open Citibank accounts that he would fund with seed money. Then the group spread out to the casinos, making identical, fraudulent withdrawals that would circumvent Citibank security protocols, permitting the ring members to withdraw many times more money than had been deposited in the accounts. The withdrawals were below $10,000 to skirt federal transaction reporting requirements.

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Oddly enough, Don, Citibank has the tightest-appearing security of any of the financial institutions that I deal with. It is scary to think that in this era of real-time, on-line computer systems anyone could pull this off. The instantaneous (or so they appear to be) computer-based systems should be invulnerable to such fraud. After all, this is not the era of pen-and-ink postings with occasional long-distance telephone calls between bankers. I still am skeptical about this story. Seems that someone knew something that should have not been known about the systems. As in an inside job of sorts.

Visduh: It occurred to me that Keshishyan might have worked for Citibank or gotten information from someone who had or does. Best, Don Bauder

I think we just saw (read) the down side to being an independent sovereign nation-- your ATMS are not linked! I can't imagine how else this would have worked.

Javajoe25: However, the casinos included Tropicana, Wynn, Harrah's, and Whiskey Pete's. Not all were Native American casiinos. Best, Don Bauder

I think "inside" rip off jobs are more common then we hear about. I had a $4,000 line of biz credit opened and within a few days it was maxed out from purchases at 4 Home Depots in L.A. , while the card was in my possession at all times. How would anyone have known of the account unless it was an inside job at Wells Fargo? I obviously got every penny returned quickly, but no follow up report.

Ken Harrison: How many people have NOT had to get a new credit card because somebody somehow got the key numbers and created a new card, than rang up expenses on it? It has happened to me and many others I know. Inside jobs? Possibly, but maybe not. Best, Don Bauder

Those thiings are puzzling indeed. The first time I had such an incident was about 15 years ago, involved a fake card being used to "swipe" gasoline at stations along I-15 in Riverside County. The card issuer didn't detect it--I did. Since then the card issuers have called me, or I've seen the charge pop up when I looked on line. But it has happened about four times in the past 2-3 years, and has involved all the cards I use. We do hear that the adoption of chip-and-PIN technology will make the cards far harder to duplicate and reduce fraud greatly. That technology has been in Europe, at least, for several years now. The US is behind the times with it, because the players could not agree about who would pay for the conversion. I'd think that the massive losses due to fraud would have made that an easy decision for the banks and other card issuers.

Visduh: It is my understanding that in Europe, there is some kind of security chip embedded in the card. Why American companies don't do the same is a mystery to me. Best, Don Bauder

Europe was just starting to implement the change in 2004 when my daughter, wife and I were there. My daughter was there again about 5 yrs ago, visiting the UK, France and Italy. As I recall, she said the only time she needed a chip and pin card was at some of the places she went in Italy, usually at smaller local places. The issue is money, primarily in the cost of making the transition. Chip-and-PIN cards use "smart card" technology and are processed using different readers than those used for magnetic stripe cards. The smart cards embedded with a chip communicate with the card reader using radio frequencies. That would mean changing all of the terminals in the US to the type that can accept either smart cards or magnetic stripe cards. That means every dept. store, grocery store, gas station,convenience store, restaurant, I'm sure you get the idea. You also have to remember that in Europe, the card issuers have more control over the merchant card processing infrastructure than in the United States where the card issuers are separated from the payment processing system and aren't in a position to force merchants to buy the new terminals required for processing chip-and-PIN cards. It is my understanding though, that Europe's credit card system is or at least was, basically offline, meaning the transaction information isn't instantly updated. Verification of the data is at the end of the day when the transaction data is transmitted, so credit card fraud can't be detected at the point of sale, whereas our credit card system. is online. Our security systems follow consumer spending patterns, often detecting fraud at the point of sale and questionable transactions can get immediately flagged.

A couple years ago n Scandinavia, the servers in restaurants all had a small hand-held device that could work both with the chip-and-PIN cards, and the magnetic sort. Most operations like hotels, etc. could work with both. But some fully automated things like ticket machines were chip-and-PIN only. But we had no problems with the older technology there. I do expect to see the US convert in the near future. Magnetic strips fail often, and are an open invitation to fraud.

Visduh: So we have a difference of opinion here. You think the U.S. will convert soon. Danfogel doesn't agree with that. Best, Don Bauder

Don Bauder, I think you need to read my comment again. I didn't express an opinion either way. I only related personal experience and gave some answers as to why American companies haven't converted their systems as of yet. If you want to know my opinion, I in fact have thought they should convert for quite some time and some already have. Citi, JPM and AMEX all began offering them upon request last year I think, USBank had one available in 2012 I believe, and Chase began offering one 2 or 3 yrs ago, if you had the right "premium" account, and I also got one thru the State Department FCU. But more importantly, according to a Bloomberg article I read a few weeks ago, most other companies will be making the switch by late next year. Visa, MC and AMEX have told banks and merchants that are still using the old technology for face-to-face transactions by October 2015, that they will be liable for any fraudulent purchases. And don't forget that Target's CFO said a few months ago that they are accelerating the effort to switch to the "chip and pin" system at a cost of $100 million. The one difference though is that if I remember correctly, most of the US companies are going with chip and signature rather than chip and pin technology, though some may offer both.

danfogel: So we don't have a disagreement after all. I like peace. Best, Don Bauder

Visduh, That was pretty much my daughter's experience in Europe. Most of the places that cater to tourist/int'l travelers would work with both, but a lot of smaller places not so much on the beaten path, and those automated things were chip and pin only.

danfogel: Yes, it would be expensive, but look at all the money spent when merchandise is purchased by someone who has filched the card numbers. Look at what the card companies spend on monitors who contact those whose cards are being abused. But I suppose the card companies have priced it out to their satisfaction. Best, Don Bauder

I am not defending their reluctance because of the expense. I happen to know someone in the business and she has said on several occasions that that until a few yrs ago that it was cheaper to deal with the fraud than to try and outsmart the bad guys because as fast as changes were made the bad guys would find away to beat the changes. Once the chip and pin system was successful, that changed things, even though implementation has somewhat "slow". It also became apparent that fraud problem had largely moved from Europe to America simply because U.S. cards were easier to hack than the European ones, think Target here. Plus, there is one other thing that companies are now starting to understand and that is the fraud liability shift. I couldn't find the Boomberg article, but here is the one from the WSJ from earlier in the year that you might find interesting: http://blogs.wsj.com/corporate-intelligence/2014/02/06/october-2015-the-end-of-the-swipe-and-sign-credit-card/

danfogel: That is an interesting story. Best, Don Bauder

Don Bauder, I was just thinking about something. If I remember correctly, you recently returned from a trip to Italy. How about relating what your experience was on your trip as a few of us have done.

danfogel: Crowds were horrible in Rome and Florence. Dollar/euro exchange rate bad, so everything expensive. Highlights: seeing Michelangelo's Statue of David, sitting in box seats at La Scala for a marvelous concert of Mahler and Beethoven conducted by Esa-Pekka Salonen, one of the world's greatest conductors. Loved Siena and Milan. Disappointed with restorations of da Vinci's Last Supper and Michelangelo's Sistine Chapel. Medieval, Renaissance art great but got too much of it. Found wonderful museum of modern art in Milan -- a relief. Best, Don Bauder

Don Bauder, I was referring to the topic of many of the above comments regarding the use of credit cards while traveling in Europe. More specifically, which type, chip or mag stripe, did you use, and what kind of services and/or inconveniences did you encounter while on your trip?

danfogel: We had no problem using credit cards. Of course, we were at tourist destinations. Best, Don Bauder

DonBauder, Obviously I don't want you to reveal any personal detail, but I was referring to the type of card, ie chipped or striped. Since you say you had no problems, which type were you using? Since you were at tourist destinations, I would assume mag striped.

danfogel: I would rather not get into those details. Best, Don Bauder

I was in Vancouver last month and the only way I could use my card at a store was with a chip and pin. They flatly refused the swipe method at most stores. Main reason was the insecurity. Luckily for me the credit union sent me a chip card on my credit card and it was chip, enter pin and go -- no signing!

Chris92074: It sounds like your credit union is ahead of the game. Best, Don Bauder

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