Facility takeover and application fraud continues to rise

The rises in facility takeover and application fraud seen earlier in the year are indicative of a continuing trend rather than just a ‘blip', according to data from the CIFAS - the UK's Fraud Prevention Service.

Previous figures from CIFAS highlighted the sudden rise in facility takeover fraud, and this trend has continued. From January to June 2008, facility takeover increased by 157%.

Facility takeover (also known as account takeover) occurs when the fraudster impersonates an individual in order to 'take over' and control one or more of his/her existing accounts.

Kate Beddington-Brown, CIFAS Head of Communications, notes: "This is a clear and worrying trend. Although it is difficult to pin down the precise reasons for such a rise, frauds of this kind are perpetrated through channels such as email and the telephone, scams such as ‘phishing' (the use of spoof emails and websites in order to deceive recipients into divulging personal financial data), or by the interception of credit cards and statements (for example) in order to take over an account, divert or fraudulently order goods.

"What the figures underline, therefore, is that the public's vulnerability to fraud remains, even though its form may be changing. This is reinforced by the recent APACS release, which demonstrated a similar rise in ‘phishing' incidents during the first half of 2008. We must all be vigilant in the way we respond to requests for information, the attention we pay to our statements, and the expected arrival dates of new credit and debit cards, for example."

Even the Chief Executive of CIFAS, Peter Hurst has been a victim of this fraud. He explains ‘A fraudster managed to access my Paypal account and tried to make a transfer. Fortunately Paypal's systems identified an unusual transaction and stopped it. I have also received emails pretending to be from my bank telling me a fraudster has tried to access my account but that the bank has prevented any money being taken, and that I now need to change my password urgently. One said they had tried, without success, to get me by telephone so I was being sent the email instead. When I clicked on the link they provided in the email, it took me to a false look-a-like bank website where they asked me for all my old security details. Had I supplied them, they would have been able to empty my account. Fortunately I realised just in time. The fraudsters are clever. They prey on our fears. Remember that your bank will never send you an email asking you to re-set your password.'

Application fraud figures underline the effects of the credit-crunch

Attempts to commit fraud by including material falsehoods (lies) on application forms (e.g. for loans, credit cards or insurance products), showed an increase during the first half of 2008 to 2007 of over 12%. The most frequent lie told remains the failure to disclose a previous address where the applicant's credit or insurance history has been impaired.

Within these figures, however, it is clear that the ratio of application fraud cases that are granted, to those that are not granted (e.g. those cases where the fraud was spotted after the granting of a facility as opposed to those that were spotted without the application being approved), is shifting. The number of cases granted has risen by approximately 47%.

What this may indicate is that fraudsters are becoming more astute and savvy in their attempts to defraud, and are becoming more sophisticated in the manner in which they lie on application forms as a means of obtaining credit. This, when combined with the current economic climate, may account for this dramatic rise. This, in turn, presents lenders and insurers (especially their fraud departments) with an increasingly testing workload.

Peter Hurst, CIFAS Chief Executive comments "Those who think that lying on application forms will give them any advantage need to realise that their efforts are counter-productive. Fraud data sharing and the linking of individuals' address histories by credit reference agencies means that such lies are identified, applications are turned down and the details recorded. Telling the truth, even if it is slightly less palatable, remains the best policy."

Number of identity fraud victims decreases

One piece of encouraging news, however, is that the recent trend of decreases in the number of Identity Fraud victims filed by CIFAS Members has continued. 28,500 victims were recorded between January and June 2008, compared with 33,466 in the first-half of 2007.

Peter Hurst, CIFAS Chief Executive, comments: "It is clear that the current credit crunch is leading to changing fraud trends. While it is good to note that the number of victims of identity fraud has decreased, this is more than outweighed by the migration to different types of fraud.

"In a period where fraudulent activity appears to be moving from identity theft as a means of illegitimately obtaining credit to a focus on the abuse of legitimately obtained facilities, these figures prove that complacency in the fight against fraud is not an option.

"The reasons for changing trends can be numerous, but one clear influence is the fact that credit has become harder to obtain. As a result, not only are fraudsters turning their attentions to accounts that are already in existence, but consumers and anti-fraud departments are also feeling the effects. More lies are being told to gain credit, and this creates even greater workloads on the desks of those on the front-line."