Fraud trends continue upwards

At the end of the third quarter of 2007, data provided by Members of CIFAS – The UK’s Fraud Prevention Service, continued to give cause for concern.

Continued growth in most types of fraud

Comparing the first three quarters of 2007 with the same period in 2006, CIFAS Members have seen a 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 23%, with 57,321 cases detected and filed by CIFAS Members.

Although the scale of Facility Takeover and Asset Conversion cases is smaller, the increase during the first three quarters of 2007 compared with the same period last year was surprisingly steep at almost 34% and 24% respectively.

False Insurance Claims also showed an increase during the period of just below 9%.

Identity fraud shows slight decline but is still cause for concern

The most welcome statistic during this period is that Identity Fraud overall has declined by over 1% when compared with the same period in 2006. That said, the number of cases identified, 57,302, is still worryingly high, with the number of victims increasing by nearly 2% to 52,167. In addition, the swing towards Current Address Identity Fraud noticed during the first half of 2007 has been sustained, and now represents almost 29% of identity fraud cases, compared with 19% during the same period in 2006. Previous Address Identity Fraud now accounts for only 21% of identity fraud cases, compared with 25% during the same period last year.

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.

Identity Fraud hits hardest within the M25

CIFAS has identified the 20 UK postcodes that have suffered the highest incidence of identity fraud during the last 12 months. This reveals that 16 of the 'Top 20' postcodes were located within the boundary of the M25. The remaining 4 were in Brighton, Grays, Southsea and Swindon.

Top Five False or Stolen Documents Used in Identity Fraud

Analysis of the CIFAS database reveals that 33% of the false or stolen documents used to commit identity fraud during the period were Non-UK Passports; 16% were Utility Bills; 10% were Bank Statements; 10% were UK Passports and 7% were Photo card Driving Licences. CIFAS Chief Executive Peter Hurst comments "This underlines the need for all organisations to be vigilant, and to take all possible steps to check the validity of documents presented to them."

Fraud losses of £1,900 per minute denied to Fraudsters

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 £1,900 per minute, compared with £1,400 per minute during the same period in 2006.

Opportunities for Insider Fraud Diminish

Use of the CIFAS staff fraud database, which was launched in July 2006 to protect the integrity of member organisations, continues to grow. With the rise in insider fraud generally, its links to organised crime and the associated reputational risks, the database is designed for any employer who wishes to pre-vet employees to ensure that they have no recorded history of fraud. It has received support from the Financial Services Authority and while it is too early in the life of the database to quote growth in percentage terms, it is clear from the rate at which organisations are registering to use the database, and at which filings have been made during the first three quarters of 2007, that this facility is meeting a very definite need. CIFAS Chief Executive Peter Hurst comments "As use of this facility increases, the opportunities will diminish for staff fraudsters to move from one employer to another to repeat their offences.”

Summary by CIFAS Chief Executive

CIFAS Chief Executive, Peter Hurst, said “Our statistics for the first three quarters of the year show a clear and worrying trend. Fraudulent activity is at an all-time high. Fraudsters are becoming more sophisticated and fraud departments are working harder than ever to protect their organisations from the onslaught.”