Customer Care:
Bank frauds beats the trends

Fraud is on the increase and fraudsters continue to exploit new technologies. But the banking industry’s continued battle against fraudulent activity is having success, reports ROWAN MORRISON.

There’s good news and bad news. First, the bad – it’s a stark truth that fraud is affecting the UK more now than it ever has done. January’s KPMG UK Fraud Barometer reported the highest level of recorded incidences of fraud since the survey began 23 years ago.

Hitesh Patel, KPMG forensic partner, believes the huge increase is explained in part by the economic issues affecting the country. He says: “In a year of austerity measures implemented by government, tax increases, the threat of rising unemployment and significant structural change, it’s hardly surprising.”

Professional criminals remain both the biggest threat to the UK as a whole and the largest group of perpetrators of fraud, recording a total of £709m in 2010 equating to 51% of losses.

“Professional gangs are the chameleons of the fraud world,” adds Hitesh. “They constantly change their colours to remain one step ahead of technological development, and continue to exploit business evolution for nefarious ends.”

And the most frightening thing is anyone, anywhere, can be a victim. There are hundreds of shocking fraud cases reported in the UK media each year, from the London-based gang stealing millions from online bank accounts using ‘trojan’ viruses to capture online bank customers’ log in details; to the lone teenage mastermind of a website selling 100,000 stolen credit cards.

Identity fraud is a particularly concerning trend, with CIFAS identifying and supporting more than 85,000 victims in 2009 alone. Social networking sites are making it much easier for people to obtain detailed information, which can then allow them to gain access to products or services, and the CIFAS website is packed with information on how best customers can protect themselves and spot signs of identity fraud. They also provide, for a fee, a CIFAS Protective Registration, which alerts lenders to a fraud so they take extra care when dealing with applications in your name.

But is it up to customers to take measures to protect themselves, or is there more that the banks could be doing to better protect their customers?

Sam Hornell, Head of Operational Risk & Compliance at National Australia Group highlights the bank’s continued vigilance: “The prevention of fraud is a constant battle for the industry and one which we continue to meet head on. The industry continues to invest heavily in both the prevention and detection of fraud. At NA G we have created one single centre of excellence that both owns and executes our fraud strategy. This has been supported by a significant investment in both people and system capability. This has had a very positive impact on the amount of fraudulent activity we have been able to identify and prevent across all categories over the past 12 months. Our overall external fraud losses are down by 41% with a knock-on positive experience for our customers.”

Banking fraud decreasing
It appears the banking industry as a whole is replicating the success of NAG and is gaining ground on the fraudsters. The good news is that, although fraud in general is on the up, banking fraud is actually decreasing. Figures released by the UK Cards Association late last year showed fraud losses on UK cards and cheques fell in the first half of 2010, compared with the same time in 2009. Online bank account fraud also fell – the first decrease in this type of fraud since 2007.

It is thought that this sustained fall is due to the success of a number of banking industry initiatives such as the increasing roll-out of updated chip cards in the UK; ongoing work with the retail community to raise awareness of the ways in which retailers can protect their chip and PIN equipment from criminal attack; greater sign-up to MasterCard SecureCode and Verified by Visa by cardholders and retailers; increasing use of fraud detection tools by banks and retailers; and the increasing roll-out of Chip and PIN abroad.

In the past, it was usually vulnerabilities in customers’ computers that left them open to fraud – bank systems are much more difficult to attack.

Customers are becoming increasingly aware of the importance of maintaining updated anti-virus software and taking other simple measures to protect themselves against frauds such as identity fraud. Most banks provide up-to-date information and guidance on how to do this, and recent regulations have made addressing incidences of fraud more prompt.

Michelle Whiteman, Financial Fraud Action UK comments: “In terms of the customer experience, different banks will all do different things. However, the recent implementation of the Payment Services Regulations in November 2009 has meant there are final timescales the banks must work to. For example, the refund of an unauthorised transaction on any debit or electronic payment should be immediate unless there is evidence to suggest that the customer acted fraudulently or with grossly negligent behaviour. Previously, no time period for refunds had been specified.

“Banks treat matters of security with paramount importance, and given that they are the ones to bear the majority of the fraud costs, they have a vested interest in minimising fraud and ensuring maximum protection for their customers.”

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