After eight arrests last month, two more — Mohit Jain, a dealer of cosmetics, and Amit Batra, a jeweller — were arrested this week. Between themselves, Jain and Batra defrauded banks up to Rs 12 crore, sources in the Crime Branch said. The total fraud made by the racket could be as big as Rs 20 crore, the sources said.

The others arrested are Jaspal Singh, Amit Shukla and Pankaj Aggarwal (said to be the masterminds), Suresh Goel, Anil Singhal, Rajesh Kalra, Gurpreet Singh and Rajesh. All 10 are into different businesses, the police said.

According to a source, the businessmen showed purchases through Electronic Data Capturing (EDC) machines — used to swipe credit cards — with fake and stolen cards. They reportedly took the cash percentage (5 per cent for customers, 4 per cent for shops/merchants) from different banks.

The police have recovered 206 fake and stolen credit cards of different banks from their possession. The accused got EDC machines issued in the name of seven non-existing companies, the source said.

The source said the con game has been going on since 2007, though the first complaint made by a bank (officers refused to divulge names of the banks) came to the police as late as last November.

Customers usually get cash back up to 5 percent from banks or card providers on shopping through credit cards. Shopowners swipe the cards in EDC machines and send the invoices of purchases to respective banks — the business/service owner usually gets 4 per cent of sales amount, while 2.5 per cent goes to the bank.

The accused, police officials said, took both the 5 per cent cash-back for customers and 4.5 per cent meant for the business owner; and since there were no sales, their articles also remained intact. The police found out that the seven firms they had apparently set up to get the EDC machines also did not exist.

Based on a complaint made by a bank, the Crime Branch registered an FIR in November 2008 under Indian Penal Code Sections related to cheating and forgery. Crime Branch officials said they suspect more persons are involved and the fraud is much larger in scope.

HOW CREDIT CARD PROCESSING WORKS
EDC processing: When a customer pays for products or services with a credit card, the card information is recorded-either by manual entry, a card imprinter, point-of-sale (POS) terminal, or virtual terminal-and then verified so that the merchant can receive payment for the transaction

Purchase:The cardholder pays for the purchase and the merchant submits the transaction to the acquirer. The acquirer verifies with the issuer almost instantly that the card number and transaction amount are both valid, and then processes the transaction

Batching:After the transaction is authorised it is then stored in a batch, which the merchant sends to the acquirer later to receive payment (usually at the end of the day)

Clearing and settlement:The acquirer sends transactions in the batch through the card association, which debits the issuers for payment and credits the acquirer. In effect, the issuers pay the acquirer for the transactions