Despite lower new business volumes, there has been an overall increase in fraudulent activity of nearly 3% compared with the same period in 2010. That increase is accounted for by upsurges in numerous types of fraud, including a 12% increase in frauds committed by account holders who are misusing their accounts.
Over 50% of all frauds relate to the theft or misuse of personal and account information, while ‘economically pressurised’ individuals are increasingly trying to lie their way to products and services.
With overall fraud levels now higher than they were at the same time last year, organisations must be alert to the techniques being used to commit fraud.
As previously reported by CIFAS, more than one-in-two of all frauds relate to the theft or misuse of personal or account information. There are also increases in the fraudulent use of legitimately obtained accounts; and also in successful application frauds (where fraudsters use false information, documents etc) to obtain products and services.
Misuse of accounts: the biggest increase
A 12% increase in the level of misuse of facility fraud (where an account, policy or other facility has been legitimately obtained but is later used fraudulently) serves as a sobering reminder of the economic quagmire facing many today.
CIFAS’ communications manager Richard Hurley explained: “CIFAS has drawn attention to criminals increasingly recruiting victims – especially young victims – into being their ‘money mules’ through employment scams or fake mystery shopping sites (among others). The increase in misuse of facility frauds [for example, allowing a personal account to be used to receive fraudulent cheques or electronic payments] sadly proves that criminals involved in money laundering are happy to take advantage of others’ naivety or economic concerns simply to aid their criminal enterprise.”
Personal and account data still the cornerstone for the fraudster
The value of victims’ personal information to fraudsters has long been known, both in terms of impersonating an innocent victim in order to obtain products or services in the victim’s name (identity fraud) or facility takeover fraud (eg by taking over another person’s account through computer hacking, phishing or the interception of a credit or debit card).
CIFAS comments: “While the value of data to fraudsters has never been questioned, the fact that 57% of all of the frauds recorded in the first nine months of 2011 relate to the theft and misuse of data must underline just how vulnerable we all are to data thieves. Organisations and consumers alike must take extra care to ensure that all steps are taken to safeguard any personal data and information.”
Economic challenges as a fraud catalyst
As criminals take advantage of others’ economic woes – thereby driving up levels of misuse of facility fraud – the economic climate has also led to a substantial increase in successful application fraud (where applications containing material falsehoods, or supported by false documents, etc are successful).
While the overall level of application fraud remains relatively low, the number of application frauds spotted too late – ie after the granting of an account or facility – increased by 70% in the first three quarters of 2011 when compared with the same period in 2010.
As these are not identity frauds (and are, therefore, applications in the real name of the applicants), organised criminality is unlikely to be the sole factor.
The most obvious explanation for this increase is that, with many people having long felt the economic squeeze, not only do they feel that they have no choice but to attempt to con their way into obtaining products and services, but that they have also mastered the ways to be successful.
Hurley noted: “While fraud of any kind cannot be condoned, it has to be noted that when individuals experience recession or restricted lending, a well-known side-effect is that more people turn to fraud to secure funds. As a result, organisations are facing more and more fraud threats and risks on a daily basis.”
Where are the threats and risks coming from?
Those threats and risks emanate not just from organised criminal networks, but also from those who incorrectly perceive that they have no other option but to lie.
“The rise in successful application fraud sends a stark warning to organisations that their preventative efforts must be constantly reviewed and improved,” insisted Hurley.
Continuing the theme, Hurley stated: “In the confusing economic climate that currently prevails, many fraud trends are in evidence. This demonstrates not only that fraud responds to economic conditions, but also that organisations are increasingly vulnerable to all types of fraud.”
In conclusion, he said: “So long as the current economic challenges remain, the fraud picture will remain equally volatile. The challenge for businesses, therefore, will be to ensure that fraud departments are properly staffed and that sufficiently robust procedures are in place to weed out fraud while not impeding genuine customers.”