Nepal Rastra Bank (NRB) on Tuesday summoned representatives of banks and financial institutions (BFIs) and asked them to expedite the process of making electronic card-based financial transactions more secure.

The central bank called the bankers a day after the Central Investigation Bureau (CIB) of Nepal Police sounded alarm bells over involvement of international criminal ring in thefts of personal identification numbers (PINs) and passwords to steal money from ATM kiosks in Nepal.

“Today, we held a meeting with representatives of Nepal Bankers’ Association, Development Bankers’ Association of Nepal and Finance Companies Association of Nepal at our office and asked them to make card transactions more secure at the earliest,” said NRB Spokesperson Narayan Prasad Poudel.

“They have agreed to abide by the regulator’s direction and said they were in the process of upgrading their systems to make card transactions more secure.”

Bankers have said they are in the process of replacing magnetic-stripe cards with chip-based cards, which are considered more secure.

BFIs were supposed to replace all magnetic-stripe cards with chip-based cards by the end of mid-September 2015, but not all have followed this NRB directive. One of the reasons why BFIs are dragging their feet is NRB’s reluctance to take any action or impose fine for failing to comply with the directive.

“In order to fully comply with this directive, BFIs along with vendors like SCT and VISA have to upgrade their technology,” said Poudel. “So the regulator has not been able to take any action against them.” Bankers said they in the process of replacing magnetic-stripe cards with chip-based cards. “Majority of the banks have already initiated the process,” said Laxmi Bank CEO Sudesh Khaling. “Also, upgrading the card only won’t be sufficient, as ATMs should also be upgraded so that the new cards can be used.”

Currently, BFIs have installed around 1,900 ATMs in the country and it will take some time to completely  upgrade all the machines, according to NRB.

The bankers also said upgradation of technology won’t be enough to curb theft, and that continuous vigilance is a must. “We might use the latest technology, but criminals will always find a way to outsmart us,” said Sanima Bank CEO Bhuvan Dahal. “Therefore, we have to make our customers aware, continuously monitor our ATM booths and report suspicious activities.” Currently, almost all banks send SMS alerts on cash withdrawal to their customers, charging a nominal price, said Dahal.

“We urge all the customers to subscribe to this service, as it will inform customers whenever deposits have been withdrawn. If such withdrawals are unauthorised, then customers can lodge complaints.”

However, it is said many depositors are not aware of such a service and many do not subscribe to it because it is not mandatory.

The CIB on Monday made public three Romanian fraudsters with equipment used for stealing data from the electronic cards. Ghita Huzum (52), Iosif Moraru (48) and Alexe Cristian Bughiurlan (45) were arrested from Hotel Nepal Tara at Narsingh Chowk, Thamel, on Friday.

Police recovered Rs308,500, 10,905 euros and 470 Philippine pesos, and a set of equipment, including false ATM keypads, false card slots, debit cards, mobile phones and hidden camera sets from them.

Police said the defrauders fixed pinholes or hidden cameras to record PINs of ATM cards, installed duplicate card slots together with card reading devices at ATM booths, which save all the details of the users. With the help of card skimmers, they would copy all the details of the card to a blank slot and use the details to withdraw money.

‘BFIs have to compensate depositors in case of theft’

KATHMANDU: Banks and financial institutions (BFIs) have to compensate their depositors if their money is stolen from their bank accounts, Nepal Rastra Bank (NRB) has said. The central bank made the statement a day after Central Investigation Bureau (CIB) of Nepal Police made public three Romanian fraudsters with equipment used for stealing the data from the electronic cards. “The circumstances under which the money was stolen will be key before making BFIs liable for the compensation,” said NRB Spokesperson Narayan Prasad Poudel. “However, if the reason behind the theft is not customers’ negligence, then BFIs will be liable to pay.” Laxmi Bank CEO Sudesh Khaling agreed with Poudel. (PR)