Fraud has evolved and so must consumers

01 July 2009 11:45:20

Written by: Emma Skinner

Fraud is changing - and if consumers want to avoid being victims, they need to be alert in new ways.

Motivated by recession and armed with new techniques and sophistication, those who commit fraud with plastic cards are switching tactics and going international.

“Fraudsters are becoming increasingly savvy,” says Cifas, the UK's fraud prevention service. "The economic slowdown and fraud go hand in hand."

In a document titled Fraud: The Facts 2009, published this month by Apacs, the UK payments association and responsible for raising awareness of card fraud in the UK through Card Watch, were recent statistics showing how fraud trends, and the way fraud is carried out, have changed over the past 12 months.

Apacs said it had found that the methods fraudsters are using to commit their crimes are also changing.

“Over the last few years we have seen their techniques change. For example in 1998, the greatest losses were through lost and stolen card fraud as it accounted for 49% of all fraud (this fraud made up only 8% of total card fraud last year). This pointed to the fact that most card fraud was opportunistic (ie handbag thefts, etc.) but now, in 2008, criminal gangs are involved and card fraud is much more organised and targeted,” said Michelle Whiteman, spokeswoman for Apacs.

“That said, when looking at specific types of fraud there are still similarities. The growth in fraud abroad can be seen as an old style fraud (essentially cloning cards) being applied in a new way. Whereas before a fraudster would have cloned a card using the magnetic stripe data and then use it in cash machines and shops in the UK, now they are having to go abroad to make use of the fraudulent cards.”

The association also found that the techniques being used when the fraudster can skip the chip and pin process, namely in Card Not Present (CNP) fraud and counterfeit card fraud, were on the increase.

“Since the introduction of chip and pin we have seen more of the fraud taking place abroad - in non-chip and PIN countries - we are also seeing an increase in card-not-present fraud (internet, phone and mail order fraud) as this channel is not protected by chip and pin,” Ms Whiteman added.

CNP fraud

This type of card fraud is the largest in the UK and is the cause of over 50 per cent of all card fraud losses. It is only recently that this took the title of being the largest type of card fraud.

Apacs said: “The increase in fraud through online and phone transactions should be seen alongside growing use of these shopping channels, as well as increasing numbers of businesses accepting cards remotely. From 2000 to 2008 card-not-present fraud losses rose by 350%; over the same time period, the total value of online shopping alone increased by 1077 % (up from £3.5 billion in 2000 to £41.2 billion in 2008)

It occurs when a fraudster uses genuine card details, which have been stolen from the genuine cardholder, to make a purchase over the internet, by telephone, or via mail order. In these cases a pin is not required to confirm a transaction and instead the consumer gives their card details and their address. The information usually required to make a purchase via one of these channels includes:

• Long card number
• Expiry date
• Issue date OR issue number
• Name as shown on the card
• Last 3 digits of the security code on the signature strip
• The postcode for the billing address of the card

“The difficulty in countering this type of fraud lies in the fact that neither the card nor the cardholder is present when the transaction happens, making it harder for businesses to carry out security checks,” added Whiteman.

Counterfeit card fraud

Counterfeit card fraud takes place when a fraudster creates a fake card using the cardholder’s compromised details from the magnetic stripe of a real card. The details will usually be obtained via a "skimming" device that the fraudster has carefully placed in an ATM or in a chip and pin reader at the point of sale. Along with these skimming devices is often a pin sized camera which will record the consumer entering in their pin.

The counterfeit card is then used to make purchases in countries where chip and pin technology has not yet been introduced because the criminal can use a forged signature to authenticate the transaction, instead of a pin. If a camera has been used, it can then be used to withdraw cash from ATMs in the UK because the fraudster will have the two elements required, the card and the pin.

The future of the fraud trend

As the above has shown card fraud trends change over time and if consumers are unaware of these changes, they could find themselves at the mercy of fraudsters. So, where will fraudsters target their efforts in the future?

Apacs predicts that another shift in trends is not likely in the near future.

“We would expect to see a continuance of the current trend which includes fraudsters targeting transactions not protected by chip and pin: specifically internet, phone and mail order fraud; and fraud abroad - committed by criminals using stolen UK card details in countries yet to upgrade to chip and pin,” said Ms Whiteman.

Card fraud story | Tips to prevent card fraud

‹ Back

All news articles

Product Offers
Please ensure that you fully read the terms & conditions of any product or policy before you decide to proceed and are fully aware of the total costs and the benefits and any exclusions or limitations applicable to the product or plan.

Please note that the product links will take you direct to the Issuer or Insurer's site direct and we cannot be held responsible for the information which they provide within their own sites. On some comparison tables we use a star rating which rates products by visitor popularity.