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A New Season of Fraud Statistics

industry fraud stats from the Financial Fraud Action UK and other industry trade associations are out

Well it must be nearly spring? The days are starting to get longer. The daffodils are starting to flower and the latest round of industry fraud stats from the Financial Fraud Action UK and other industry trade associations are out!!!

Yes, mad March always delivers! So what are the movers and shakers when it comes to this year’s fraud statistics?  Well, look away now if you prematurely thought that our friends on the continent had a bigger plastic fraud problem.  

Fraud by the numbers

At £450M, it looks like the ball is back in our court representing a collective rise of 16% on last year’s number on plastic fraud.  But at least the UK is more concurrent with its publicized 2013 fraud statistics results and comparative analysis over the last 7 years. 

What didn’t escape my attention was the ECB’s €1.33 billion headline number for card fraud. Unfortunately that was quoting 2012 for the SEPA region and is presumably an amalgamation of all 32 European member states fraud losses. Looks like that took some time collating. Does it real take that long to produce the statistics France purportedly had in excess of Euro 400m problem whilst the UK had north of £380. (http://www.finextra.com/news/fullstory.aspx?newsitemid=25769) Come on, it’s already 2014.  

Does it really take a whole 12 months to come out with these numbers and on reflection how valuable and meaningful are they?  France and the UK represent half of the total losses for the SEPA region. My guess is there is some under reporting and misclassification going on here across other parts of Europe. If you don’t measure and measure correctly then you don’t know how big a problem you have actually got.

I guess this leaves our North America friends scratching their heads while saying “so these are the guys who have already implemented chip and pin?” And “how big a problem have they really got”? And “are we walking the right path with EMV”?

However, take comfort. Without repeating myself again (ok, maybe a little), had we not implemented chip and pin in 2006 we would have faced an even bigger problem than we do today. We have just seen a swing in the behaviour of the fraudster. What they have in their bag now is CNP (card not present), fraud abroad (America being a hot spot) and low tech (distraction, card swaps, lost and stolen). 

Educating consumers on fraud prevention

Clearly we are continuing to educate our customers (and potential fraudsters about our weaknesses) to be security conscious: protect your PIN, be careful what websites you navigate to,  preferably manually key in the website address, do not reply to unsolicited e-mails purporting to be from you bank, or advising of a HM Revenue and Customs tax credit or refund. Again topically modus operandi used by the fraudster is to solicit account holder details or install malware around the mad month of March as we close out one tax year and start another. 

Don’t supply confidential details to a cold caller even if they say that are the police or your bank and certainly don’t key in your PIN to the key pad on your telephone handset if the caller asks you to do so for verification purposes. Nor should you hand over you card to the courier that has been sent by your bank or police to collect your card! I could go on and on here. Low tech modus operandi and social engineering are prevalent, so be careful out there.   

So were there any good news stories from the month of March? Yes well CIFAS, the UK’s Fraud Prevention Service reported a fall in ID related fraud down by 11%. This proves that industry collaboration and fraud intelligence sharing amongst +250 banks, insurance and financial service providers continues to pay dividends. However, they also cautioned their message by stating 60% of all cases were account ID or account takeover related and there had been a 24% increase in plastic card application fraud (again with the rise in plastic fraud).   CIFAS employee fraud figures are due at the beginning of April, but my hunch is we will continue to see this rise as criminals look to test and probe vulnerabilities or compromise unsuspecting employees. 

Fraud in other regions

Looking a little further I would like to augment my comments and reflect upon a little further afield. SABRIC (South Africa) reported earlier a 42% fall in debit card fraud, whilst credit card fraud showed a 22% increase. Clearly fraudsters appear to favour credit, probably because of the 28-56 statement window. 

I guess the logic amongst the fraudster here is that customers are more likely to monitor and pick up suspicious debit entries more quickly on their current account than they would if their credit card statement is mailed to them every 28 days or more depending upon when spend occurred. Clearly there are merits and advantages in encouraging more customers to adopt to receipt of electronic statement. 

What might also help is the ECB recommendations (whilst not Africa) for notifications which are tracking adoption by February 2015 for mobile, internet and ecommerce transactions.  However, I do think we should probably look to follow the South Africa example here. 

It’s really is great to see industry examples like these where there is transparency across products (debit and credit card). I have not seen this published or made available for other countries and it might help to further distinguish where the fraud problem lies by product. If we don’t this potentially could get a whole lot worse as we blur contactless payments, with mobile, e-commerce purchases with internet etc.  Food for thought for the other industry and trade body observers.

Beyond card fraud

I want to round out the conversation on the non plastic theme. We see all different types of emerging payments. Innovation is great. Mobile often grabs the headline. But spare a thought for good old cheque. Cheque has been around a long, long time. It’s not as sexy, as mobile, and will grab few headlines, but it is still a preferred payment of choice for some, and is unlikely to go away anytime soon whilst the need to manage financial inclusion remains of the agenda for the regulators and policy makers.   

Some of you old enough will also remember those old access (MasterCard) commercials with his cash and cheque friends.

Well cheque is still here and will probably be for a while longer as the UK Treasury now tries to make the scanning and exchange of cheque images via smartphone reality. But the good news here is the fall…..not in the season and not in volume of cheques issued, but the fall in fraud losses. I can remember back to the BBA days and cheque fraud losses were being reported at upwards of £80M. Now they stand at a mere £27M.  A fall of over 22% in losses from the previous year from 2012.  

Aside from the falling cheque volumes the downward trend in fraud losses may be attributed to new technology (image), signature verification, transaction monitoring solutions, as well as traditional security features seen on UK issued cheques. Or perhaps cheque fraud is actually a lost and dying art. 

Criminals are getting older the skill is being lost or may be their attention is diverted on a larger prize. Only time will tell, but where there is change there is usually opportunity. So watch this cheque story unfold in the upcoming seasons.