According to Financial Fraud Action UK, the snappy title of the body known as the voice of the industry for financial fraud matters (previously known by a worse non-de-plume, APACS3), says its latest report paints a picture of first the good news, then the bad.

The findings, drawn up in conjunction with The UK Cards Association and the Cheque and Credit Clearing Company, show that card fraud losses are down 23% to £232.8m in first half of 2009 (compared with same period last year); there’s been a first ever fall in card-not-present fraud losses; and, cheque fraud losses down 26% to £15.6m.

The bad news comes in the online banking fraud losses which show a rise of 55% to £39m.

The actual fraud to turnover rate on debit and credit cards amounted to 0.1% in the first half of 2009, meaning that only around a tenth of a penny is lost to fraud in every £1 spent on cards.

Katy Worobec, Head of Fraud Control, said:
“These latest fraud figures are good news but we know there’s no room for complacency. Whilst industry online security initiatives such as Verified by Visa and MasterCard SecureCode may be making their presence felt, the fraudsters are never going to shut up shop and, of course, there are emerging areas such as online banking fraud which has risen again.

“Although it’s difficult to prove, we think that one of the reasons for this dip in card losses may simply be as a result of fraudsters realising that they can prosper more by targeting foreign-issued cards – particularly those without chip and PIN protection and which currently have stronger currencies than sterling. The fact that we’ve seen a 36% increase in the first half of this year in the amount of fraud being committed on foreign issued cards here in the UK adds some weight to this theory.”

Helping the successful trend was a special police unit sponsored by the banking industry to stamp out organised card and cheque fraud across the UK. Known by the initials DCPCU, the Dedicated Cheque and Plastic Crime Unit is believed to have helped save around £13 millions of fraud in just the first six months of the year. This is in addition to the £315 million in fraud savings to the industry as a result of the DCPCU’s work since its launch back in 2002.

Other factors of course have also played a part, not least Chip and PIN which say Financial Fraud Action UK has undoubtedly continued to make it more difficult for fraudsters to commit fraud on our cards in the UK. This has resulted in losses at UK retailers down by 26% from the same period last year. Mail non-receipt fraud fell by 33%, and lost and stolen card fraud is down by 6%, its lowest level since 1991 when the industry collation of fraud losses began. Furthermore, the banking industry is continuing to work closely with retailers to raise awareness of the ways in which retailers can protect their Chip and PIN terminals from criminals.

The growth in the use of MasterCard SecureCode and Verified by Visa (online payment systems that make cards more secure when shopping on the internet), by both online retailers and cardholders has helped cut losses from phone, internet and mail order shopping fraud. They have fallen for the first time ever and now stand at £134 million. Another reason for this drop has been the increasing use of sophisticated fraud screening detection tools by retailers and banks.

Fraud abroad has also dropped, mainly because financial institutions are now more aware of unusual spending habits, which means a transaction is refused before it potentially becomes a fraudulent act.

A decline in the use of the cheque was one main reason why such fraud losses during January to June 2009 decreased from £21.2 million to £15.6 million, a drop of 26%. The majority of fraudulent cheque payments get stopped when the cheque is paid, thanks also to the financial industry’s tighter controls.

In amongst the general back slapping there was a bit of bad news, with a 55% rise in online banking fraud losses which totalled £39.0 million during the six months to June 2009.

This increase is due to criminals employing more sophisticated methods to target online banking customers through malware attacks. These target not the financial institutions’ own systems (far more difficult to broach nowadays), but go for the weak part in the chain, the customer. And there has also been more than 26,000 phishing incidents (bogus emails seeking personal details for fraudulent use) during January to June 2009. This represents a 26 per cent increase on the amount seen in the same period last year.

The financial industry, say the Financial Fraud Action UK, continues to do its utmost to raise awareness about the importance of having up-to-date anti-virus and anti-spyware software. It is working with PCeU – the Metropolitan Police Service Police Central e-Crime Unit – which was established to co-ordinate the law enforcement approach to all types of e-crime. It also provides a national investigative capability for the most serious e-crime incidents.

Guest Article by Neil Camp

It has been revealed that over eight million adults have given their chip and PIN details to someone else to make a purchase on their behalf, or get money from a cash machine for them, threatening the very viability of the system.

And of eight million people sharing such details, an alarming 24% have fallen victim to fraud.

The figures come from research by insurance company LV= which discovered that one in five UK residents tell friends and family their PIN numbers, leaving themselves open to chip and PIN fraud.

And finance experts have again warmed that such habits not only leave the person vulnerable to fraud, but threaten the credibility of the Chip and PIN system.

They also point out that ID fraudsters can quickly clock up many thousands of pounds of purchases by cloning a card and banks may refuse any kind of refund if the card owner has shared their PIN with others. Banks have a get-out clause in the event of card fraud, if they considered the card user to have acted without reasonable care and attention. Sharing personal security numbers is seen as such a case of acting without due responsibility.

The research revealed that most borrowed cards are lent for the purpose of obtaining cash from ATMs. The findings went on to reveal that almost one in ten (9%) have told someone the details over the phone, 7% have written them down and 6% have given them face to face in a public place.

Businesses should also take their fair share of the blame said the report, as they did not pay enough attention as to who was using the card at the till. This lack of attention meant that may retailers were potentially opening themselves up for huge losses and counter-claims.

John O’Roarke, managing director of LV= home insurance, said: “It’s concerning to see the numbers of card-holders who are so lax with their card details, even if they are sharing them with their friends and family. We would strongly urge all card-users not to tell anyone their PIN number. Not only does it undermine the security of your account and increases the risk of ID fraud but also card holders could end up out of pocket if they are found to have shared their card details.

“We’d urge any customers who think they might have become a victim of identity fraud, to call our Identity Fraud Helpline for help and support.”

Guest Article by Neil Camp