News Archive

Fraud IDs

by msecadm4921

According to the latest figures from CIFAS – the UK’s Fraud Prevention Service, identity fraud continues to be a huge fraud threat, which now directly impacts more than 70,000 victims of impersonation (a 17.56 per cent increase from the first three quarters of 2009).

Leigh Bates, Head of Financial Services, SAS UK, commented: “Given the current state of economic downturn, it’s no surprise to see that levels of identity fraud and impersonation are increasing. Fraud in general is an unrelenting battle for the retail banking industry and identity theft in particular presents an evolving challenge.

“To combat this problem, financial institutions should look at exactly what tools they have to work with and what measures are already being taken. Often it is not necessary to spend huge sums on new innovative technology; rather it’s about maximising what you already have, increasing the quality of the data you are collating about customers and making better use of it. Improving the quality of data to be analysed can have a significant effect on the results an organisation can achieve in fighting fraud.

“Because of the great variation between the security levels of online sites and the increased measures merchants can take to protect themselves, there is a growing acceptance in the banking industry that not all identity fraud in the online channel can be conquered. Instead the industry is positioning itself to pick and choose its battles, ensuring that damage can be limited and consumer confidence remains intact.

“Ultimately fraud will always move to the weakest area of defence and as payments move into new technology channels, these are the ones that are likely to become the most vulnerable. Mobile banking for example may become a target, as once a mobile device becomes a POS terminal organisations have effectively lost control of the security standards. That said, as it stands today, mobile banking has not evolved beyond low value transactions which subsequently deters most fraudsters.

“Another potential target is the wealth of new banks that are entering the market. Whilst these institutions are not hampered by legacy systems they lack corporate memory, making the job of risk management somewhat harder. Whilst technology will help new players in monitoring and identifying fraudsters it cannot act as the panacea to fighting fraud. It is only when the appropriate technology is coupled with an organisation’s data and experience that the fight against fraudsters can truly be taken on.”
According to CIFAS, despite a slight decrease from the same period last year, nearly 168,000 confirmed cases of fraud were recorded in the first nine months of 2010.

Facility takeover fraud (when a fraudster, rather than impersonating a victim, secretly hijacks and plunders a victim’s accounts) remained high, with over 16,000 confirmed cases. Products targeted by fraudsters demonstrate how fraud adapts to economic conditions. While the nearly 168,000 confirmed cases of fraud as recorded by CIFAS Members represents a decrease of 4.52pc from the same period in 2009, this apparent good news must be placed in context: as it represents an increase of 6.31pc since the end of September 2008. CIFAS Communications Manager, Richard Hurley, said: “Any decrease in the level of fraud recorded by CIFAS Members is to be warmly greeted – but the enthusiasm for a reduction in the overall level of fraud must be reined in. In a year where the ‘age of austerity’ has become a catch all term (and applications for products and services may decrease as a result) it is perhaps unsurprising to see such a reduction. The fact, however, that fraud has increased by over 6pc during a two-year period only serves to underline how the fraud threat is just as potent and widespread as ever.”

In the first nine months of 2010, there were over 16,000 cases of facility takeover fraud (also known as account takeover fraud) –a slight decrease (1.97pc) from the same period in 2010. This, however, again demonstrates that fraud is not plummeting but remaining relatively constant – and far in excess of the levels occurring during recent years. Facility takeover fraud has increased by just over 20pc compared with the same period in 2008 and by 231pc since the first nine months of 2007.

Richard Hurley said: “CIFAS has previously commented upon the increases in this kind of fraud, and warned that this was more than just a change in tactic for organised fraudsters to get them through a period of recession. With the continued prevalence of spam in people’s email inboxes, and the increasing sophistication of the phishing emails being received, it is perhaps no surprise that the level of this type of fraud remains as high this year as it was last year.”

The bigger picture

Perhaps the most surprising aspect of the frauds identified by CIFAS Members during the first nine months of 2010 concerns the variations in products currently being favoured by fraudsters. Communications products and services, and mail order accounts, are experiencing the biggest increases in fraud in 2010 to date (when compared with 2009) while frauds against bank accounts and plastic cards have decreased. A possible explanation for this is that as lenders mitigate against bad credit risks, they also counter the fraud risk – meaning applications never get past the initial lending decision before being fully examined.

In addition, when viewing these in the context of the overall pattern of application frauds (applications containing lies or supplying false supporting documentation – a decrease of 23pc) and identity frauds (the use of false identity details and cases where an innocent victim has had their identity details used fraudulently – an increase of 9.68%), the view that fraudsters specifically target the areas where they feel that they can secure most profit is strengthened.

Richard Hurley said: “The increasing attention given to certain products by fraudsters, as opposed to the more ‘traditional’ targets of bank and card accounts, demonstrates that fraudsters turn their attentions to where they believe greater success can be achieved (such as in areas where less stringent account opening procedures are required). What can be clearly seen is that the decrease in application frauds and surge in identity fraud means that fraud methods are fundamentally changing: with over 10,000 more people affected this year than in the same period last year.

“As attention turns to ensuring the UK’s economic recovery, it raises the question as to what further damage could be wreaked when businesses feel more confident to lend, and fraudsters start trying to exploit innocent identities in order to gain bank accounts, credit cards and much more.”


Peter Hurst, CIFAS Chief Executive, warned: "As the tentative steps to economic recovery continue, it is important not to lose sight of the threats that are just around the corner. Businesses, individuals, regulators and government alike are all victims when fraud goes unchecked and, as such, all have a part to play in helping to prevent fraud from increasing. There is a danger that all lenders or service providers could see the fraud floodgates open once again. In a climate where every penny counts, correctly identifying the victims and perpetrators of fraudulent transactions, sharing their details to prevent further fraud, as well as designing systems to prevent fraud going unnoticed are vital steps that all UK businesses and public sector organisations now need to start taking.”

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