Local credit cards are among some 40 million cards to be exposed to the largest ever security breach of credit card payment data.

The breach on Friday occurred when a hacker penetrated the computer network of CardSystems Solutions Inc., which processes transactions for more than 40 million cards of all brands, including MasterCard and Visa. The hacker gained access to names, account numbers and verification codes.

While Capital G Bank reports that neither its MasterCard debit card nor its Visa credit card were affected, Wayne Pimentel, manager of the Card Processing Centre at Bank of Bermuda said that his bank has received notification from MasterCard and Visa that, as a result of the recent security compromise in the United States, a number of Bermuda based credit and debit card numbers have been exposed to possible fraud.

?We are working to safeguard our customers by contacting our affected clients, closing the compromised accounts and issuing replacement cards. Approximately 1,600 Bank of Bermuda cards have been affected. As yet, we have seen no evidence of fraud on any Bank of Bermuda cards.?

Susan Mylchreest, vice president Electronic Banking, Butterfield Bank said they also have had information from MasterCard and Visa that a number of transactions made on Butterfield?s cards were on the CardSystems database, and may have been compromised.

?We will contact customers immediately if we feel their cards are at risk. It appears that only a small portion (less than one half of one percent) of the database was actually exported by the hackers which will limit the exposure,? she said adding that CardSystems is a merchant processor in the US and Butterfield Bank?s systems were not in any way compromised.

?As part of Butterfield Bank?s pro-active plan to safeguard customers? cards, we constantly monitor card activity for possible fraud. To date we are confident that there has been no suspicious activity related to the breach of the database.?

The banks, however, remind clients to review their statements vigilantly for fraudulent transactions and to report anything suspicious.

CardSystems, which processes more than $15 billion annually in transactions made online and with credit card issuers Visa, MasterCard, American Express, and Discover has already taken steps to improve the security of its system.

Banks and credit card companies like Mastercard and Visa have, in recent years, spent millions of dollars to prevent and identify illegal transactions.

Security features like the the three digit number on the back of the card are one example and statistics actually show that improved systems to detect bogus transactions have caused a decade-long decline in fraud as a percentage of overall dollar transactions.

In 2004, illegal credit-card purchases totalled $788 million in the US, down from $882 million in 2003, according to Nilson Report, a trade publication. That represents just 4.7 cents for $100 worth of purchase, down from a high of 15.7 cents in 1992.