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2011 fraud trends: fraud levels surge upwards

 

The analysis of fraud trends during 2011 by Cifas – the UK's Fraud Prevention Service reveals a disturbing 9% increase in the overall level of fraud, when compared with the previous year, with further key findings presenting a stark picture of the economic crime landscape in the UK:

  • Over 236,500 frauds were identified during 2011 by Cifas Members, the highest number of frauds ever recorded by Cifas Members and over 120,000 individual cases with an identifiable victim.
  • The continued blight of identity fraud accounts for over 113,000 fraud cases (a 10% increase from 2010 levels and representing 48% of all frauds).
  • An 18% surge in facility takeover fraud (where a fraudster gains access and fraudulently uses a victim’s account such as a credit card, bank account or mobile phone), meaning that this type of fraud has rocketed by nearly 300% in just five years.
  • A 13% rise in misuse of facility fraud (where an account, policy or other facility has been legitimately obtained but is later used fraudulently).

 

Unprecedented and unwelcome heights

The 9% increase in fraud levels recorded during 2011 is a depressing enough reminder of the economic trials currently facing UK businesses and consumers. However, with over 236,500 frauds confirmed in 2011, a larger number than any previous year, this confirms that as austerity bites, economic crime continues to be a stealthy, insidious danger. Cifas Communications Manager, Richard Hurley, comments: “It is vitally important to remember that fraud and economic crime are offences with a range of motivations. Many of these frauds will undoubtedly be committed by organised criminal elements, but many will also be committed by people who seemingly feel that their circumstances leave them no choice. Equally, financial desperation leaves many susceptible to potential scammers. Untangling the mess that fraud causes, irrespective of motivation, however, is time-consuming, damaging and costly to businesses, to the public sector and to individuals. Rather than being the ‘victimless crime’ it is sometimes heralded as, fraud actually makes victims of us all.”

 

Personal data: the cornerstone of the fraudster’s art

The fraudulent use of identity details (either those of an innocent victim or completely fictitious ones) continues to be the biggest and most perturbing fraud threat. Nearly 1 in 2 of all frauds identified during 2011 relate to the impersonation of an innocent victim or the use of completely false identities.

This picture becomes more disturbing when viewed in conjunction with facility takeover fraud: where the fraudster gains access (e.g. through computer hacking, interception of post details, social engineering through popular websites etc) to another person’s account details and takes over the account. This type of fraud increased by 18% during 2011, which means that the two data driven frauds (identity fraud and account takeover combined) now account for over 58% of all frauds identified. Furthermore, the number of victims of both types of fraud has – when combined – risen by 10% from the levels in 2010; underlining the very real cost of these crimes.

Richard Hurley notes: “The value of personal data to fraudsters has never been questioned, but the continued increases in the levels of identity fraud and account takeover warn us all that not enough is done to combat fraudsters. All organisations must recognise this threat, and review how they try to prevent such frauds: whether that is by reviewing their security procedures and increasing identification requirements when dealing with applications, or by ensuring that individuals regularly change passwords and PIN numbers. It is obvious that fraud relating to personal data is an immense criminal trade so, fundamentally, it’s time for every one of us to start treating data in the same way that we would guard a prized possession; as something to be secured and protected without complacency.”

 

Misuse of accounts underlines difficulties faced by businesses and consumers

One of the most disconcerting fraud types, however, remains misuse of facility fraud: where a legitimately obtained account is used fraudulently (such as to receive stolen funds, or evade payment of monies owed). Cifas has previously highlighted that a substantial proportion of such frauds bear the hallmarks of ‘money mule’ activity (where a fraudster recruits another – often innocent – party to use his or her account to launder money on the fraudster’s behalf), demonstrating that organised criminals now have a three pronged attack on their victims’ identities: either impersonating them, hijacking their accounts or tricking them into using their own details as a shield for criminal activity. Equally true, however, is that financial insecurity and the economic pinch will have been motivating factors for many of these frauds.

Richard Hurley notes: “As if other frauds were not enough evidence of the economic distress, misuse of account has risen by 13% – representing more than 1 in 5 of all frauds recorded last year. Whether it is evading payment on an account, or using an account for a fraudulent purpose, individuals must remember that fraud can have some profoundly devastating consequences: from criminal charges or convictions, to withdrawal of services and being unable to get new products or services. Circumstances, understandably, can lead people to consider a variety of actions, but when it comes to fraud, the advice is simple: fraud is a crime, and do you really want to become a criminal?”

 

Comment from the Cifas Chief Executive

Cifas Chief Executive, Peter Hurst, concludes: “With the cost of living increasing, pay levels frozen for many, and tax and VAT changes taking effect, perhaps it is unsurprising that fraud has rocketed again. Prevention, however, remains better than cure, and it is time for all organisations and consumers to start reviewing their approaches to preventing fraud rather than trying and failing to recover losses. Not investing in proper fraud prevention systems and approaches, from online security to data sharing, is tantamount to leaving an open till unguarded. It is the same whether you are a private sector organisation, a public sector body or a charity. It will lead to only one thing: financial loss.”

 

Notes to Editors:

1.  Cifas is the UK's Fraud Prevention Service with 260 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 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 2011, broken down by the type of fraud identified.  Definitions are given below the table.

 

Jan to Dec 2010

Jan to Dec 2011

% Change

Fraud cases identified

217,385

236,516

8.8%

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.

Fraud Type

Jan to Dec 2010

Jan to Dec 2011

% Change

Identity Fraud – Granted
Identity Fraud – Not Granted
Identity Fraud – Total

66,680
35,992
102,672

69,761
43,498
113,259

4.6%
20.9%
10.3%

Application Fraud – Granted
Application Fraud – Not Granted
Application Fraud – Total

7,605
37,075
44,680

12,599
30,664
43,263

65.7%
-17.3%
-3.2%

False Insurance Claim

537

396

-26.3%

Facility Takeover Fraud

21,226

25,070

18.1%

Asset Conversion

539

532

-1.3%

Misuse of Facility

47,731

53,996

13.1%

Victims of Impersonation

89,470

96,611

8.0%

Victims of Takeover

21,322

25,250

18.4%

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.      Cifas will shortly release Fraudscape 2012: Depicting the UK’s Fraud Landscape. This report will look, in depth, at all of the frauds filed by Cifas Members in 2011 and examine the reasons behind these fraud trends, while also setting these trends in context. The report will be available on the Cifas website and in hard copy.
 

4.      Cifas Protective Registration is a service that enables individuals to seek protection against possible impersonation attempts when they have good reason to believe that their details might be used by a fraudster. A Bulk Protective Registration Service is also available for organisations who have fallen victim to a data breach. Further details can be found at www.cifas.org.uk/pr

 

 

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