Is fraud in the UK getting better or worse?

As we enter 2010, the picture of fraud across the UK is somewhat mixed. On one hand we have figures from The UK Cards Association showing card fraud decreasing 23 per cent to £232.8m in the first half of 2009. The reduction in fraud is largely due to the reduction in Card-Not-Present (CNP) fraud (fraud over the internet, phone or mail order) and counterfeit fraud. However, losses from online banking fraud due to the proliferation of phishing scams and Card ID fraud from account takeover showed double-digit growth.

On the other hand, statistics from CIFAS – the UK’s Fraud Prevention Service, said fraud at the end of the third quarter had continued its inexorable rise. Overall fraud was up 11 per cent and contained within this total is a 37 per cent increase in the numbers of victims of impersonation (people who have fallen victim to identity theft) and an 18 per cent increase in account takeover.

What is clear, however, is that fraud is not here and gone tomorrow and fraudulent activity should never be viewed out of context. If the economic slowdown of the last eighteen months goes hand-in-hand with an increase in fraud, then it also influences the type of fraud. The increase in the numbers of identity fraud victims confirm this as tighter lending and a restriction on new lines of credit has forced criminals to target people with existing bank accounts rather then fabricating new identities to defraud financial institutions.

Every year, CPP conducts its annual card fraud index to look at the issue of fraud and this year’s findings confirm fraud remains a problem. 26 per cent of the UK adult population now claim to have been a victim of card fraud – up 6 percentage points on 2007 – equating to 3 million additional victims. Worryingly, nearly half of card fraud victims only knew they had been a victim when their bank contacted them. Those aged 16-24 are the least likely to identify fraudulent transactions by reading their bank statements; a worrying trend as new financial consumers are taking the least responsibility to monitor their financial transactions and fight fraud.

Consistent with the growth of cybercrime, 32 percent of victims said they had been defrauded online with 17 per cent saying their cards had been cloned at an ATM or Chip and PIN device. Recent reports from security providers have identified social networking sites as platforms for emerging threats as users become more vulnerable to attacks that blindly distribute rogue applications across their networks and cybercriminals take advantage of friends trusting friends to get users to click on links they would otherwise treat with caution.

Although a fifth of consumers report to be more concerned about fraud compared to last year many people confess to behaviour that puts them at considerable risk. One in six adults (16%) has committed the cardinal sin of letting their cards disappear out of sight in a restaurant or shop putting them at risk from counterfeit or CNP fraud, 19 per cent admit to writing their PIN numbers down and leaving their payment cards behind the bar to open a tab.

However, the concept of personal responsibility does seem to be on the agenda for some consumers. A third claim they will check their bank statements more regularly and thoroughly this year, and some have reported to be planning to reduce the number of cards in their possession. The rationalisation of payment cards by consumers has not previously been linked to the threat of fraud, so this is an interesting development and one we should watch.

The next set of UK fraud statistics is published in March 2010, so it will be interesting to see whether the results mirror the decrease in financial losses reported across the six months of 2009, or conversely whether the recession has had a direct correlation on making fraud worse as predicted by some commentators.