Worrying fraud trends - the rise continues

At the end of June 2007, data provided by Members of CIFAS – The UK’s Fraud Prevention Service, continued to give cause for concern. Comparing the first half of 2007 with the same period in 2006, CIFAS Members have seen a sharp rise in most types of financial fraud.

Application Fraud (where fraudsters tell lies on application forms in order to obtain credit, insurance or other products) increased by nearly 19%, with 37,357 cases detected and filed by CIFAS Members.

Although the scale of Facility Takeover and Asset Conversion cases is smaller, the increase between the first half of 2006 compared with the same period this year was surprisingly steep at almost 45% and 31% respectively.

False Insurance Claims also showed an increase during the period of more than 10%.

Identity fraud stabilises but is still cause for concern

The most surprising statistic during this period is that Identity Fraud overall has stabilised when compared with the same period in 2006. That said, the number of cases identified, 39,261, is still worryingly high, with the number of victims increasing from 32,039 to 33,411. In addition, the swing towards Current Address Identity Fraud noticed during the first quarter of 2007 has been sustained, and now represents 35% of identity fraud cases, compared with 25% during the same period in 2006. Previous Address Identity Fraud now accounts for only 25% of identity fraud cases, compared with 35% during the same period last year. CIFAS Chief Executive, Peter Hurst, explains “The surge in current address fraud is particularly worrying because, in order to perpetrate it, the fraudster effectively needs a very thorough knowledge of the victim’s personal details. This indicates that fraudsters are becoming more sophisticated and are managing to access more data about their victims. This underlines the need for all of us to protect our personal details as carefully as possible, and not to take any chances.”

Current Address Fraud is a type of identity fraud where the victim lives at the same address as the “current address” given on the fraudulent application. The fraudster is often resident at the same property as the victim. In such cases, the fraudster applies for, and uses, products in the name of the victim whose property they share. The fraudster will generally have access to, or can intercept, the victim’s post (e.g. in flats where individuals share a communal mailbox with shared access). Other contributory factors to current address fraud can include abuse of Companies House data, data breaches, fraudulent mail redirections and bin raiding.

Previous Address Fraud is where the fraudster steals another person’s identity and falsely claims that the victim has recently changed address. Due to the short time at the alleged ‘new’ address, any credit reference agency checks are performed primarily against the ‘previous’ address (where, in reality, the victim is still resident). In such circumstances, the fraudster will usually apply for new products in the name of the victim and will undertake facility takeover fraud from the ‘new’ address.

Fraud losses of £1,800 per hour prevented by CIFAS Members

Members of CIFAS (e.g. banks and building societies), by detecting and recording these frauds in order to prevent further fraud, avoided financial losses during the period of £1,800 per hour, compared with £1,400 per hour during the same period in 2006.

Staff fraud filings gather pace

The CIFAS staff fraud database was launched in July 2006, to protect the integrity of CIFAS Member organisations. With the rise in staff fraud generally, its links to organised crime, and the associated reputational risks, the database is designed for employers who wish to pre-vet employees to ensure that they have no recorded history of fraud. CIFAS Chief Executive, Peter Hurst comments “Although it is too early in the life of this database to start quoting growth in percentage terms, it is clear that the rate at which filings have been made during the first half of this year is gathering pace. As use of this facility increases, the opportunities will diminish for staff fraudsters to move from one employer to another to repeat their offences.”

CIFAS Chief Executive, Peter Hurst, said “Our statistics show that the first quarter figures were not just a worrying ‘blip’, but part of a trend. Fraudulent activity is at an all-time high. Fraud departments are working harder than ever to fight what is a marked escalation in activity by fraudsters. The fact that, by detecting and recording frauds, CIFAS Members have denied fraudsters the sum of £1,800 during every hour of every day during this period is, of course, very good news. What concerns me is that fraudsters always look to exploit weaknesses, and this begs the question in my mind as to how much money is being lost to fraud by organisations who do not share fraud data in this way.”