Now gangs are using chip and PIN technology to steal customers' bank details

Criminals have come up with a new fraud targeting the chip and PIN cards used by shop and petrol station customers across the country.

They are stealing card-reading machines, taking them apart and installing devices which record card numbers and PINs, before returning them to the store.

In some cases, detectives fear the installed devices are so hi-tech that they can transmit customers' card details to a mobile phone.

Cards are then cloned and used abroad in countries including the United States, Italy and Australia where cash machines do not have to read the unique microchip embedded in British cards.

Police have issued a warning about the fraud after arresting two men at a card-faking factory in Birmingham.

A raid on a house found stolen chip and PIN terminals, card account numbers, card readers and counterfeit magnetic stripe cards.

The criminals targeted shops by threatening or bribing staff to give them the card machines or getting a job there themselves.

In some cases, they posed as engineers and took the machines away for an 'upgrade'. Experts warned last year that chip and PIN, which was launched in 2006 to cut card fraud, is not as secure as banks claim.

A Cambridge University team said it is simple to swap a doctored machine for one in a store. While the new system has marginally cut such crime in Britain, its introduction has not stopped criminals using fake cards overseas.

Card fraud abroad has increased by 77 per cent – and cost £207.6million – in the past year. Specialist officers from the Dedicated Cheque and Plastic Crime Unit said the Birmingham factory had stolen card machines from 30 shops, supermarkets and petrol stations across the country.

The gang had been operating for weeks and thousands of cards had been read.

Detective Inspector John Folan, the unit's head, said: 'These arrests are a significant development in our fight against the organised criminal gangs responsible for this type of fraud.'

Sandra Quinn, of Apacs, which runs the payment clearing process for banks, said: 'Whereas fraudsters used to put pinhole cameras above the chip and PIN device to get hold of the number, they now manipulate the chip and PIN terminal to get that basic data. They are getting hold of the PIN from inside the reader.

'We have been aware that this has been going on because police have been getting reports that terminals are being stolen.'

The Daily Mail revealed last year that criminals had targeted petrol stations to steal card details. At one point, Shell suspended payment using chip and PIN at 400 garages.

Last week, a petrol station cashier was jailed for helping defraud an entire village.

Abdul Samad Mohamed Raik cloned more than 500 debit or credit cards to steal £175,000 in a global fraud allegedly driven by links to a guerilla group in Sri Lanka.

Barely a single household in Houghton on the Hill, Leicestershire, escaped the scam – which used a fake machine to copy card details.