New fraud challenges as economic pressures hit home

Analysis of frauds recorded by Members of CIFAS – the UK’s Fraud Prevention Service during the first nine months of 2011, reveals some sobering trends taking place:

• Despite lower new business volumes, there has been an overall increase in fraudulent activity of nearly 3% compared with the same period in 2010, accounted for by increases in numerous types of fraud
• A 12% increase in frauds committed by account holders who are misusing their accounts
• Over a half of all frauds relate to the theft or misuse of personal and account information, and
• Economically pressurised individuals are increasingly trying to lie their way to products and services.

(Numerical tables are included in the Notes for Editors below).

Variety of frauds push levels up once more

With overall fraud levels now higher than they were at the same time last year, organisations must be alert to the techniques being used to commit fraud. As previously reported by CIFAS, more than 1 in 2 of all frauds relate to the theft or misuse of personal or account information. But there are also increases in the fraudulent use of legitimately obtained accounts; and also in successful application frauds (where fraudsters use false information, documents etc) to obtain products and services.

Misuse of accounts – the biggest increase

A 12% increase in the level of misuse of facility fraud (where an account, policy or other facility has been legitimately obtained but is later used fraudulently) serves as a sobering reminder of the economic quagmire facing many today. CIFAS Communications Manager, Richard Hurley, comments: “CIFAS has drawn attention to criminals increasingly recruiting victims – especially young victims – into being their money mules through employment scams or fake mystery shopping sites (among others). The increase in misuse of facility frauds (for example, allowing a personal account to be used to receive fraudulent cheques or electronic payments) sadly proves that criminals involved in money laundering are happy to take advantage of others’ naivety or economic concerns simply to aid their criminal enterprise.”

Personal and account data still the cornerstone for the fraudster

The value of victims’ personal information to fraudsters has long been known: both in terms of impersonating an innocent victim in order to obtain products or services in the victim’s name (identity fraud), or facility takeover fraud (e.g. by taking over another person’s account through computer hacking, phishing or the interception of a credit or debit card).

While the value of data to fraudsters has never been questioned, the fact that 57% of all of the frauds recorded in the first nine months of 2011 relate to the theft and misuse of data must underline just how vulnerable we all are to data thieves. Organisations and consumers alike must take extra care to ensure that all steps are taken to safeguard any personal data and information.

Economic challenges as a fraud catalyst

As criminals take advantage of others’ economic woes – thereby driving up levels of misuse of facility fraud – the economic climate has also led to a substantial increase in successful application fraud (where applications containing material falsehoods, or supported by false documents etc are successful).

While the overall level of application fraud remains relatively low, the number of application frauds spotted too late – after the granting of an account or facility – increased by 70% in the first three quarters of 2011, when compared with the same period in 2010. As these are not identity frauds (and are, therefore, applications in the real name of the applicants) organised criminality is unlikely to be the sole factor. The most obvious explanation for this increase is that, with many people having long felt the economic squeeze, not only do they feel that they have no choice but to attempt to con their way into obtaining products and services, but that they have also mastered the ways to be successful.

Richard Hurley notes: “While fraud of any kind cannot be condoned, it has to be noted that when individuals experience recession or restricted lending, a well-known side-effect is that more people turn to fraud to secure funds. As a result, organisations are facing more and more fraud threats and risks daily: and not just from organised criminal networks, but from those who incorrectly perceive that they have no other option but to lie. The rise in successful application fraud sends a stark warning to organisations that their preventative efforts must be constantly reviewed and improved.”

Concluding comment from CIFAS

Richard Hurley, CIFAS Communications Manager, notes that: “In the confusing economic climate that currently prevails, a wide range of fraud trends is in evidence. This demonstrates not only that fraud responds to economic conditions, but also that organisations are increasingly vulnerable to all types of fraud. So long as the current economic challenges remain, the fraud picture will remain equally volatile. The challenge for businesses, therefore, will be to ensure that fraud departments are properly staffed and that sufficiently robust procedures are in place to weed out fraud while not impeding genuine customers.” 

Notes to Editors:

1.   CIFAS is the UK's Fraud Prevention Service with over 260 Member organisations spread across banking, credit cards, asset finance, retail credit, mail order, insurance, investment management, telecommunications, factoring and share dealing and the public sector.  Members share information on identified frauds in the fight to prevent further fraud.  CIFAS is unique and was the first data sharing scheme of its type in the world.  Other schemes modelled on CIFAS have been set up in Southern Africa and Germany.

2.  The following tables show a summary of the statistics and the number of fraud cases recorded by CIFAS Members during the first nine months of 2011, broken down by the type of fraud identified.  Definitions are given below the table.

Fraud Cases Identified refers to each proven instance of fraud identified by CIFAS Members and filed to the CIFAS database.  Members must have sufficient evidence to take the case to the police although it is not mandatory that they do so.  A fraud case can involve multiple subjects and multiple addresses.

Identity Fraud cases include cases of false identity and identity theft.

Application Fraud/False Insurance Claim relates to applications or claims with material falsehood (lies) or false supporting documentation where the name has not been identified as false.

Facility Takeover Fraud occurs where a person (the 'facility hijacker') unlawfully obtains access to details of the 'victim of takeover', namely an existing account holder or policy holder (or of an account or policy of a genuine customer or policy holder) and fraudulently operates the account or policy for his own (or someone else's) benefit.

Asset Conversion relates to the sale of assets subject to a credit agreement where the lender retained ownership of the asset (for example a car or a lorry).

Misuse of Facility is where an account, policy or other facility is used fraudulently.

< Click here to return to Press Centre