Figures reveal the bleak and complex reality of fraud in the UK today

At the end of the third quarter of 2010, data provided by the 265 Member organisations of CIFAS – the UK’s Fraud Prevention Service, demonstrates that fraud remains rife:  

• Despite a slight decrease from the same period last year, nearly 168,000 confirmed cases of fraud were recorded in the first 9 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,
• and the continuing scourge of identity fraud, which now directly impacts more than 70,000 victims of impersonation (a 17.56% increase from the first three quarters of 2009).

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

Fraud decrease only part of the story

In the first nine months of 2010, nearly 168,000 confirmed cases of fraud were recorded by CIFAS Members. While this represents a decrease of 4.52% from the same period in 2009, this apparent good news must be placed in context: as it represents an increase of 6.31% since the end of September 2008. CIFAS Communications Manager, Richard Hurley, explains: “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 6% during a two-year period only serves to underline how the fraud threat is just as potent and widespread as ever.”

The continued menace of facility takeover fraud

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 (1.97%) 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 20% compared with the same period in 2008 and by 231% since the first nine months of 2007.

Richard Hurley continues: “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: how fraud trends underline the changing economic positions

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 23%) 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 explains: “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). As CIFAS revealed in Digital Thieves, fraudsters are increasingly using the internet as an enabler for their crimes. 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.”

Comment from the CIFAS Chief Executive

Peter Hurst, CIFAS Chief Executive, warns: "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.”

For further information, contact the CIFAS Press Office.

Notes to Editors:

1 –CIFAS is the UK's Fraud Prevention Service with 265 Member organisations spread across banking, credit cards, asset finance, retail credit, mail order, insurance, investment management, telecommunications, factoring, share dealing and the public sector. Members share information on frauds in the fight to prevent further fraud. CIFAS is unique and was the first data sharing scheme of its type in the world. 

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 2009, 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.

3 – Digital Thieves, a Special Report into online identity fraud, was released in October 2010. Copies can be downloaded here.

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