Misuse of bank accounts on the rise warns CIFAS

Analysis of the frauds recorded by Members of CIFAS – the UK’s Fraud Prevention Service during the first eight months of 2011 reveals a serious rise in the number of cases of fraudulent misuse of a bank account.

While the number of bank account frauds recorded during the first eight months of 2011 has remained stable, more disturbing is the near 12% increase in instances of bank accounts being fraudulently misused.

Economic pinch and criminal activity to blame

In these difficult economic times, the re-emergence of the age-old problem of the fraudulent cheque is, perhaps, unsurprising. Over 65% of all misuse of bank account frauds relate to paying in false or altered cheques that subsequently bounce or fraudulent electronic payments.

With funds being scarce for many people, it is understandable that situations such as this may account for a proportion of such frauds. The scale of the problem, however, underlines the threat posed by financial criminals. With credit still not readily available, using somebody else’s identity details no longer guarantees fraudulent gains. Instead, criminals are looking to launder existing funds by using ‘money mules’. Money mules are individuals who either knowingly help, or are tricked, into moving money through their own accounts and then to a third party. Activity like this is often hidden under the guise of ‘payments and refunds’ or ‘commission and cost’ for the products or services that provide the cover for the criminal to recruit a mule. By using ‘mules’ in this way, the criminal can create a chain of transactions and get away with stolen money.

CIFAS Communications Officer, Dean Bové, comments: “Financial insecurity, of course, explains how victims of such ‘money mule’ activity came to be duped by criminals. This motivation is confirmed further by the revelation that the number of cases of people retaining wrongful payments made into their accounts has increased in the first eight months of 2011 (compared with the same period in 2010) and now represents over 20% of all misuse of bank account frauds. Organisations must, therefore, be alert to the fact that the difficulties facing the ‘man in the street’ may lead them to carry out actions that they would otherwise never consider. Furthermore, members of the public must be similarly aware of the ways in which criminals can prey upon their monetary insecurity, in order to make them accessories to financial crime.”

Identity fraud levels remain dangerously high

While identity fraud (the use of a false identity or an innocent victim’s identity to obtain a product or service) levels in the first eight months of this year have decreased slightly from same period of last year, these frauds still account for 47% of all bank account frauds; by far the highest overall proportion.

Dean Bové continues: “The bank account – in its various forms – is the financial services product most of us cannot do without. It is alarming to realise that organisations and members of the public alike are vulnerable to accounts either being fraudulently obtained or legitimately opened and then fraudulently abused. Whether it is due to account details being stolen physically or online, or a person’s financial worries proving the catalyst to later actions, it must be remembered that fraudulent use of a bank account has extremely serious consequences; and can even lead to banking services being withdrawn. We must all be mindful, therefore, that these vulnerabilities exist, and that we can all play a part in making sure that our details and circumstances are not abused by criminals.”

Notes to Editors

1. CIFAS is the UK's Fraud Prevention Service, a not for profit Membership organisation with over 250 cross sector Members including banking, credit cards, asset finance, retail credit, mail order, insurance and telecommunications with a number of public sector bodies preparing to join.  Members lawfully share information on frauds in the fight to prevent further fraud. 

2. The following tables show a summary of bank account fraud cases recorded by CIFAS Members, broken down by the type of fraud identified.  Definitions are given below the table.

Application Fraud relates to applications 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.

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

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

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