Current Account Frauds Fuel Rising ID Theft

Third-party or identity theft – when a victim’s identity is stolen – has risen sharply as a proportion of all detected fraud cases in the UK over the past year, according to Experian.

In its latest annual report, the global information services company reports that the trend has been developing over the period and ID theft in the UK now accounts for more than half (52%) of all detected fraud cases. The switch reflects a return to pre-downturn levels of ID theft, when it previously eclipsed first-party fraud carried out by a genuine person.

A more positive development is that fraud-detection rates have increased over the past year, with around 50 frauds being detected per 10,000 cases during the fourth quarter of 2014 against 40 frauds per 10,000 cases in the same period of 2013.

Detected first-party fraud, as a proportion of all frauds, decreased from 60% of all fraud cases in Q4 of 2013, to 48% of fraud cases as at Q4 2014, although it continues to be most prevalent for mortgage products.

“Lenders continue to make significant strides in the fight against fraud and safeguarding their customers – particularly against identity theft,” said Nick Mothershaw, UK&I director of identity and fraud at Experian. “But as more consumers access and apply for financial products across multiple channels, including online and mobile, fraud has also evolved accordingly.

“Clearly it’s not all bad news. More fraud is being spotted thanks to the vigilance, diligence and determination of the financial services sector. But are other external factors are now coming into play? Stricter affordability tests, while playing a clear role in protecting individuals from unmanageable debt, have made the process of switching mortgages more complicated and lengthy. It may be possible that they are prompting some applicants to falsify their credit commitments, earnings, or job status.”

A breakdown of the overall figures show fraud detection rates for current-account fraud jumping from 60 frauds detected per 10,000 cases in Q4 2013 to 79 frauds detected per 10,000 cases in Q4 2014.

Detected fraud among current account applications saw the largest annual rise among all financial products. They are also the fastest growing target for ID thieves. Detected current-account fraud by ID theft rose by 20 percentage points in 2014 – compared to Q4 2013, when it accounted for 27% of all detected current-account fraud. As at Q4 2014, ID theft accounts for 47% of all detected current-account fraud.

“It’s worth noting it’s now 18 months on since the formal launch [in the UK] of seven-day current-account switching, helping pave the way for more than 1.2m switches, which may have prompted more fraudsters to test application systems,” said Mothershaw.

“At the same time, more scrutiny is being put into due diligence and back-office procedures surrounding anti-money laundering [AML] initiatives, institutions’ efforts around identity verification and stronger ‘Know Your Customer’ [KYC] programmes.”

The number of card applications detected as fraudulent has increased annually, from 39 frauds detected per 10,000 cases in Q4 2013, to 44 cases per 10,000 as at Q4 2014.

Cards remain the product most targeted by identity fraudsters, but the number of identity thieves targeting cards remained static at 79% of all detected card fraud from Q4 2013 to Q4 2014.

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