Fraud threat evolving as ID theft hits the mainstream - Experian

19 March 2010 | 8192 views | 1 biometric eye

Fraud against UK financial institutions and their customers is evolving rapidly as organised criminals move into the mass-market and recession-hit consumers falsify their data, according to figures compiled by credit risk agency Experian.

Nick Mothershaw, director of fraud and identity solutions at Experian, comments: "Attempted fraud is on the increase and the nature of the threat is changing. Organised criminal fraudsters are moving into the mass-market, looking beyond those with obvious wealth towards lower-value but more vulnerable targets. At the same time, financial stress brought about by the recession is driving increasing numbers of people to commit fraud to maintain their lifestyles."

As a result, he says, financial institutions could be faced with sustained fraud attacks during 2010.

The report suggests that mortgage and insurance providers could be hit to the tune of £1.2 billion and £2.5 billion worth of fraud respectively in 2010.

Experian's analysis of fraud data reveals that while the wealthiest sections of society continue to be at high risk of identity fraud, fraudsters are increasingly looking to the mass-market for victims. Young couples, singles and rented home sharers are being hit as fraudsters seek to commit high-volumes of low value frauds using the identities of more easily impersonated victims.

Experian's report also reveals that first-party fraud, which occurs when individuals manipulate their own information attempting to obtain financial services they are not entitled to, surged from around 28% of all fraud cases in the first three quarters of 2009 to 46% in the fourth quarter, at a time when identity fraud levels also grew.

Analysis of data collected through the vendor's National Hunter fraud data sharing scheme reveals a cluster of first-party fraud hotspots around the East End of London. Shadwell, Stepney, East Ham, Walthamstow, Woolwich, Peckham and Barking saw far higher than average instances of first-party fraud attempts, as did other London districts such as Streatham and Willesden. Outside of London, there were hotspots in the less affluent parts of Chatham, Leicester, Birmingham and Bolton.

"Our report shows that fraud threat is continually evolving and the associated losses have a direct impact on profitability," says Experian's Mothershaw. "Financial institutions need to take a more holistic approach to fraud, including sharing fraud data with other firms and ensuring that robust controls are in place across the business."

Comments: (1)

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Reetu Khosla - Pegasystems - Reading | 23 March, 2010, 11:01

It is surely intuitive that the level of fraudulent activity increases at times when the economy is under pressure. In short, the Experian research confirms what we always believed.

Financial institutions will have some form of fraud detection software in place which identifies potentially suspect payments, from organised crime syndicates to individuals chancing their luck. Yet having triggered an exception, the problem with essentially manual systems is how to progress this speedily and effectively, when time is typically of the essence.

Yet proven and well established case management technologies exist which can automatically pick up these exceptions, auto-triage and create a ‘case'. Then, if integrated with an appropriate business process management system, the inherent intelligence of the software engine applies bespoke pre-set rules to prioritise suspect transactions from legitimate payments.

By creating a seamless end-to-end response backed up by a full audit trail, this ensures agreed customer service levels are maintained, fraud is stopped, operational efficiencies improved and the regulator satisfied. Win, win, win.

Reetu Khosla, director of financial crime solutions, Pegasystems

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