Phishing scams cost UK banks £12m in 2004

Phishing scams cost UK banks £12m in 2004

Direct fraud losses from online phishing scams in the UK reached £12m in 2004, according to statistics from the Association for Payment Clearing Services (Apacs).

Research into the the potential cost of phishing on banks has varied widely. In 2003 Gartner estimated that direct losses from ID fraud against victims of phishing attacks cost US financial services firms about $1.2bn, but electronic payments association Nacha later estimated the monetary losses to victims of phishing incidents to total $500 million.

But a more recent study by TowerGroup claimed that the value of potential fraud losses from phishing has been exaggerated and will total just $137.1 million globally in 2004.

Phishing scams mainly involve customers receiving scam e-mails which claim to be from legitimate banks but direct recipients to a replica Web site. Fraudsters also use Trojans to capture security credentials through keystroke logging.

Total losses for online banking fraud were recorded for the first time in the UK last year and at £12m were considerably less than losses from card frauds.

Overall UK card fraud losses were up 20% in 2004 to £504.8m, compared to £420.4m in 2003. Apacs says the rise is becuae of an increase in illegal activity before the security benefits of chip and PIN are fully realised.

Card-not-present fraud (CNP) was up 24% to £150.8m in 2004 compared to £122.1m in 2003 and continues to be the biggest category of fraud. ID theft on cards has also increased over the last two years and is up 22% from £30.2m in 2003 to £36.9m in 2004.

Cash machine fraud also continued to grow rapidly and was up 81% to £74.6m, from £41.1m in 2003. Counterfeit card fraud increased 17% to £129.7m in 2004 from £110.6m in 2003, and there was a two per cent rise in fraud on lost and stolen cards.

Fraud committed on cards intercepted in the post grew sharply and was up 62% to £72.9m as criminals took advantage of the high number of cards posted to customers by banks prior to the rollout of new chip and PIN.

Together fraud on lost and stolen cards and counterfeit cards accounted for almost half (48%) of all losses. But Apacs says chip and PIN is set to have a major impact in these two areas.

Sandra Quinn, director of corporate communications, Apacs, says: "When the banking industry decided to introduce chip and PIN in the UK our fraud forecasts showed that without it card fraud losses would top £800 million by 2005. So while we still have a battle on our hands, we are on track to see a significant reduction in this amount."

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