Eight people have been arrested in connection with the racket which has demonstrated for the first time that chip and PIN machines, which were meant to end card fraud, are far from tamper-proof.

Hundreds of customers at three Shell petrol stations have had their credit and debit card details copied and then money withdrawn from their accounts using cloned cards. It came to light when the customers noticed money missing from their accounts.

Police suspect that fraudsters posing as engineers have altered the pin pads or that employees are involved in the scam.

The developments are a huge embarrassment for the banks who assured the nation that the chip and PIN system would stop card crime.

Sandra Quinn, of the Association of Payment Clearing Services (Apacs), said: “They have used old-style skimming devices which are usually used at cash point machines in public places.

“They are skimming the cards and copying the magnetic details. There is no new fraud here, but it is the first time we have seen it used on chip and PIN machines inside a shop. They have managed to tamper with the pin pads. These pads are supposed to be tamper-resistant — they are supposed to shut down — so that has obviously failed.”

The chip and PIN machines used by Shell are made by Trintech, a company in Dublin, which has supplied terminals in thousands of shops, restaurants and other outlets across the world.

The Dedicated Cheque and Plastic Crime Unit, staffed by the Metropolitan Police, is investigating the £1 million scam. Those arrested include one person from Guildford, Surrey, and another from Portsmouth, Hampshire, according to Apacs.

The scam works by criminals implanting devices into chip and PIN machines which can copy a bank card’s magnetic strip and record a person’s pin number. The device cannot copy the chip, which means any fake card can be used only in machines where chip and PIN is not implemented — often abroad.

Shell has suspended the chip and PIN mechanism in 600 of its petrol stations across the country. Ms Quinn said that the fraud related to just three Shell outlets: “This is a specific issue for Shell and their supplier to sort out. We are confident that this is not a systemic issue.

“It’s related to a certain make of pin pad and the way it was used. Petrol stations have traditionally had a lot of problems with card fraud and collusive merchants.” There are nearly 1,000 Shell outlets in Britain, 400 of which are run by external franchisers who will continue to use the chip and PIN service.

It is hoped that the suspended chip and PIN in the remaining 600 petrol stations will be restored by today.

A Shell spokeswoman said: “In the interests of our customers, we have temporarily suspended chip and PIN availability in our UK company-owned service stations. Customers are unaffected by this action — you can still pay for your fuel, goods or services with your card by swipe and signature.”

BP is also looking into card fraud at petrol stations in Worcestershire, but it is not known if this is connected to chip and PIN.

The finance industry and retailers have spent £1 billion issuing 141 million chip and PIN cards and installing new terminals at which they can be used.

But fraud experts fear that sophisticated gangs of criminals will always find a way of beating the system.

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