CIFAS (Credit Industry Fraud Avoidance System) is a not-for-profit membership association representing the private and public sectors.  CIFAS is dedicated to the prevention of fraud, including staff fraud, and the identification of financial and related crime. CIFAS operates two databases:

  1. National Fraud Database (NFD)
  2. Staff Fraud Database (SFD)

CIFAS’s analysis of fraud trends during 2012 reveals a 5% increase in the overall level of fraud, when compared with 2011. While the rate of the increase has slowed, further key findings present a more complex picture of the true state of the economic crime landscape in the UK:

  • Nearly 250,000 confirmed frauds were identified during 2012 by CIFAS Members, the highest number of frauds ever recorded by CIFAS Members and over 150,000 cases had an identifiable victim.
  • The continued blight of Identity Fraud accounts for over 50% of all frauds recorded in 2012.
  • The takeover of customer accounts increased by 53% from 2011, meaning that data driven identity crimes now constitute the vast majority of all fraud in the UK.
  • Conversely, frauds committed by the genuine account holder or applicant have all declined: the most notable being the decrease in fraudulent misuse of an account (Misuse of Facility fraud) which fell in 2012 by over 15% from the record levels seen in 2011. There has also been a fall in proven false insurance claims and instances of individuals submitting false details or documents in support of an application. 

The 5% increase in fraud levels recorded during 2012 serves as a reminder of the economic trials currently facing UK businesses and consumers. Nearly 250,000 frauds were identified in 2012. This represents a smaller rate of increase from the 9% surge recorded in 2011, but still constitutes the largest number of confirmed frauds ever recorded in a single year by organisations participating in the CIFAS national fraud data sharing scheme.

CIFAS Head of Communications, Kate Beddington-Brown, comments:

 “Fraud is frequently described as a victimless crime, but this is far from the truth. Whether it is an individual being impersonated, or public and private organisations losing funds due to fraudulent applications and transactions, the net effect is that the economic squeeze gets worse. Fraud acts as an impediment to business recovery and damages cashflow for us all; as losses incurred inevitably get passed on to society at large. The increase in fraud levels, therefore, might be seen as organisations getting better at rooting out fraud, but the implications are clear: increased fraud levels mean that organisations and individuals face a bigger problem than ever before.”

Identity crime: the fraudster’s biggest weapon

The fraudulent use of identity details (either those of an innocent victim or completely fictitious ones) is the biggest and most perturbing fraud threat. 50% of all frauds identified during 2012 relate to the impersonation of an innocent victim or the use of completely false identities.

Furthermore, Facility (or Account) Takeover Fraud – where a fraudster gains access to and hijacks the running of an account (e.g. theft of security details through computer hacking, interception of post details, social engineering through popular websites etc) rocketed by 53% compared with the previous year. This means that those frauds where the criminal requires identity details accounted for almost 2 in 3 (65%) of all frauds in 2012. The number of victims of both types of fraud has when combined also risen by 24% from the levels in 2011; underlining the very real cost of these crimes.

Kate Beddington-Brown notes:

 “These increases serve as a warning and a challenge to organisations and consumers equally. Organisations have invested heavily in updating and refreshing their security processes recently, ensuring that extra steps are taken to validate the identity of people with whom they are dealing. In spite of this, however, identity crimes have continued to rise – demonstrating that far more must be done. Equally, for individuals, It is obvious that fraud relating to personal data is an immense criminal trade so, fundamentally, we all have to do all we can to ensure that we also protect ourselves from becoming a victim, as well as demanding that the organisations we deal with take their security responsibilities seriously”

Frauds by account holders in decline

As problematic for organisations and the economy at large is fraud committed by the actual account holder. One piece of apparent good news, therefore, is that all frauds which come under this first party fraud heading declined in 2012: including misuse of facility fraud (where a legitimately obtained account is used fraudulently by the account holder) which decreased by 15% from the levels of 2011.

A substantial proportion of these frauds still bear the hallmarks of ‘money mule’ activity (where a criminal recruits another party to use his or her account on the fraudster’s behalf), but the decrease is encouraging in terms of consumer behaviour.

Kate Beddington-Brown notes:

“Organisations have invested effort into identifying possible victims of money mule operations and ensuring that their customers are educated about the dangers of misusing accounts, and these figures seem to demonstrate that this message is being heard. Any requests to receive and transfer funds on behalf of a person or organisation should be viewed with suspicion and reported, ultimately, to Action Fraud.”

Misuse of an account, however, is still the second largest type of fraud identified in 2012 and therefore increased attention must also be paid to ensuring that individuals are aware of this.

Kate Beddington-Brown explains:

“In these difficult economic times, the motivation to attempt fraud or the vulnerability to being duped into doing so – is perhaps understandable. Organisations, however, must do all that they can, to ensure that consumers are aware that committing fraud can have very serious consequences: from withdrawal of services to criminal charges. If organisations and consumers alike can stamp out this kind of fraud, extra effort can then be dedicated to preventing those criminals who are responsible for the rise in identity crime.”

CIFAS Chief Executive, Peter Hurst, concludes: “With the cost of living increasing, pay levels frozen for many, benefit changes taking effect and a sluggish economy, it is unsurprising that fraud has increased. Prevention remains better than cure, however, and it is time for all organisations and consumers to start reviewing their approaches to preventing fraud rather than just dealing with its effects. Investment in proper fraud prevention systems and approaches, from online security to data sharing, and education are the cornerstones of such an approach and without them the only thing that is guaranteed is an ever increasing fraud losses to organisations and society at large.”

CIFAS’s summary of  identified fraud cases in 2011 and 2012:

  2011 2012 % Change
Fraud cases identified 236,516 248,325 +5.0%

CIFAS’s summary of the types of fraud undertaken is below:

Fraud Type 2011 2012 % Change
Identity Fraud – Total 113,259 123,589 +9.1%
Application Fraud – Total 43,263 39,868 -7.8%
False Insurance Claim 396 279 -29.5%
Facility Takeover Fraud 25,070 38,428 +53.3%
Asset Conversion 532 337 -36.7%
Misuse of Facility 53,996 45,824 -15.1%
Victims of Impersonation 96,611 112,179 +16.1%
Victims of Takeover 25,250 38,686 +53.2%

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