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Scams and computer viruses contribute to fraud increases - calls for national awareness campaign

  • Card fraud losses up 6 per cent but as a proportion of spending accounts for only 7.5p for every £100 spent
  • Warning to customers to download anti-virus software as remote banking fraud losses rise 42 per cent
  • Number of incidents of fraud published for first time as payments industry enhances picture of fraud landscape
  • Industry welcomes news of sizeable fall in card ID theft and new record low for cheque fraud

Figures published today [27 March 2015] by Financial Fraud Action UK (FFA UK) show that card fraud losses and remote banking losses rose during 2014. The figures come with advice for customers to be alert to the increasing numbers of scams which aim to trick people into disclosing financial details or transferring their money directly to fraudsters. This change of approach by fraudsters – deceiving customers, rather than directly attacking the payments technology and systems – reflects the impact of initiatives such as Chip & PIN and enhanced fraud detection measures in protecting customers’ funds.

For the first time FFA UK is also publishing the number of fraud incidents to convey more fully the dynamics of the fraud environment in the UK. The data follows much the same trend as fraud by value, with 2014 figures down on the peak of 2008. In fact, the number of card transactions has increased from 10.5 billion in 2008 to 15.8 billion in 2014 – a 50 per cent rise with the total value spent rising from £602 billion to £802 billion – a 33 per cent rise, yet in the same time period overall card fraud losses have decreased 21 per cent1.

It is important to note that number of incidents relates to the number of accounts that have been defrauded, as opposed to the number of victims. 2

The breakdown in fraud losses is as follows:

Fraud losses on UK cards totalled £479m in 2014, a 6 per cent rise on the 2013 figure of £450.4m. This is still 21 per cent lower than the peak of £609.9m back in 2008. By way of comparison, the overall value of card transactions across the UK increased by 5 per cent to £802bn from 2013 to 2014. Card fraud losses as a proportion of the value of purchases has risen slightly from 7.4p in every £100 spent, to 7.5p in 2014. In 2008, this was 12.4p in every £100. Overall, the number of incidents of card fraud rose by 5 per cent to 1.3m in 2014.

Losses on purchases made using a card remotely – those made online, over the phone or by mail order – rose 10 per cent in 2014 to £331.5m. The number of incidents rose 7 per cent from the previous year. Contained within these figures, e-commerce card fraud losses increased from £190.1m in 2013 to £217.4m in 2014 – a 14 per cent rise. For the first time FFA UK has compiled sales figures for remote purchases. In 2014 e-commerce spending in the UK was £148 billion, meaning that for every £100 spent only 9.2p was fraudulent.

Losses declined at both UK retailers and UK ATMs, with decreases of 14 per cent to £49.2m and 15 per cent to £27.3m respectively.

The overall increase in card fraud losses was driven by criminals using UK cards fraudulently abroad, which increased by 23 per cent to £150.3m. Domestic card losses remained flat at £328m. A key reason for rising levels of fraud abroad on UK cards is that criminals can circumvent their security features when using them in some overseas locations.

Fraud on contactless cards remains very low, with just £153,000 of losses over 2014 compared with total spending of £2.32bn. This represents just 0.7p in every £100 spent on contactless.

Online banking fraud increased from £40.9m to £60.4m in 2014, a 48 per cent rise. The number of confirmed online banking fraud loss incidents was 53,192, a number which is relatively modest considering the Office of National Statistics reports that 53 per cent of UK adults now use online banking, which equates to 26.9m people. 3 Telephone banking fraud losses rose 20 per cent to £13.9m in 2014.

A key driver behind increasing levels of fraud continues to be fraudsters tricking customers into revealing personal and financial information, normally over the telephone. This typically involves the criminal pretending to be calling from a bank, police or another trusted organisation and claiming there has been fraud on the customer’s account. The caller will then persuade the victim to hand over their card and PIN number for example, or to transfer money to a so-called ‘safe account’ which is actually under the control of the fraudster. Intelligence suggests that businesses have become a growing target for criminals, which is reflected in a higher average loss per case during 2014.

In response, FFA UK have launched a Joint Declaration of UK Banks, Card Issuers and Building Societies, which clearly explains those requests they will NEVER ask of you on the phone. This was the first phase of a national campaign which aims to stem the rise in deception crimes. FFA UK is now looking to build on this and raise awareness levels even further, by backing calls from Adrian Leppard, Commissioner of the City of London Police, for a ‘national fraud and cyber-crime campaign on the level of the seat belt and drink-drive campaigns of the Eighties and Nineties’.4 This campaign would encompass a wide range of organisations that are best placed to help customers spot fraudulent approaches and scams and would include UK banks, HM Government, the Police and other parties, such as telecoms companies who have a direct interest in this area.

The Joint Declaration was originally launched at the end of 2014 with a national advertising campaign and is supported by the police, HM Government, the Financial Conduct Authority (FCA) and a range of groups representing consumers.

Criminals also use malware and viruses to steal information from infected computers. They then use stolen passwords and other personal details to commit fraud on bank accounts. FFA UK continues to advise members of the public and businesses to regularly update their computer security software and to be careful not to open suspicious links or emails. Free security software is often provided by banks through their websites.

Cheque fraud losses continued to fall significantly, with £17.8m lost in 2014 down from £27.5m the previous year, representing a 35 per cent drop and the lowest ever loss since records began. This is as a result of increasingly advanced fraudulent cheque detection systems.

The payments industry regularly runs campaigns to highlight what customers can do to avoid becoming the victim of frauds and scams. The industry also funds a police unit – the Dedicated Card and Payment Crime Unit (DCPCU) – to identify, target and break up organised criminal gangs involved in payment fraud.

Since its launch in 2002, the DCPCU has saved the industry over £470m in averted fraud and continues to achieve a 94 per cent conviction rate. FFA UK also coordinates the fraud data & intelligence-sharing strategy across the industry, working closely with law enforcement and other relevant organisations. It also operates the Financial Fraud Bureau (FFB) an intelligence unit which plays a key role in helping to detect and prevent fraud.

Detective Chief Inspector Perry Stokes, Head of the DCPCU, said:

“Fraudsters can be very convincing and often target people over the phone. If you receive a phone call out of the blue, never take for granted that the caller is who they say they are, even if they seem to know a lot about you. If you’re asked for your card details, PIN number or to transfer money to another account from someone who has cold called you, my advice is to hang up the phone immediately and report the incident to your bank.

“It is also important that you don’t allow criminals access to your computer by neglecting basic precautions. To beat the fraudsters make sure that you have up to date anti-virus software to keep one step ahead.”

Advice to consumers on how to take steps to avoid becoming a fraud victim:

  • Ensure you have the most up-to-date security software installed on your computer, including anti-virus. Some banks offer free security software: check your bank’s website for details.
  • Only shop on secure websites. Before entering card details ensure that the locked padlock or unbroken key symbol is showing in your browser.
  • Always be suspicious of unsolicited emails that are supposedly from a reputable organisation, such as your bank or the tax office and do not click on any links in the email.
  • Make sure you are the only person who knows the PIN for your card.
  • Shield the PIN with your free hand whenever you type it into a keypad in a shop or at a cash machine.
  • Check your bank and card statements for unusual transactions. If you spot any let your bank or card company know as soon as possible.
  • Rip up or preferably shred statements, receipts and documents that contain information relating to your financial affairs when you dispose of them. Some banks offer paperless statements.
  • When writing a cheque make sure you draw a line through all unused space on the payee line and the amount line to help prevent the cheque being fraudulently altered.

Be aware, as per the Joint Declaration of UK Banks, that your bank or the police will never:

  • Phone you to ask for your 4-digit card PIN or your online banking password, even by tapping them into the telephone keypad.
  • Ask you to withdraw money to hand over to them for safe-keeping.
  • Ask you to transfer money to a new account for fraud reasons, even if they say it is in your name.
  • Send someone to your home to collect your cash, PIN, payment card or cheque book if you are a victim of fraud.
  • Ask you to purchase goods using your card and then hand them over for safe-keeping.

Advice to businesses on how to take steps to avoid becoming a victim of remote purchase fraud:

  • Ask your bank or card processor about the online protection offered by card schemes, such as Verified by Visa, SecureCode by MasterCard and American Express’ ‘Safe Key’, which help make transactions over the internet safer from the threat of fraud.
  • Know your customer: assess a customer’s profile, order and delivery details before accepting a transaction.
  • Be wary of high value or unusual orders from customers you do not know, particularly if the product is easily resalable.
  • Use the banking industry’s Address Verification Service, which compares the delivery address provided for the order with the billing address details for the payment card held by the card issuer.
  • Maintain a record of fraudulent accounts and transactions to prevent further breaches – fraudsters will continue to attack businesses until the window of opportunity is closed.

For the full release including the figures, please click the link below.

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