Feeds

US banks lose $50bn to phantom fraudsters

The Keyzer Soze effect

Build a business case: developing custom apps

Reported ID theft losses represent only the tip of an iceberg, dwarfed by fraudulent losses run up by crooks assuming completely fictitious identities, according to analysts Gartner.

It reckons ID theft will claim 10m US in 2005 resulting in losses of around $15bn from 50m accounts. By comparison "victimless" fraud - bad debt run up in the name of non-entities - will hit $50bn this year.

Avivah Litan, research director at Gartner, explained that because US banks are so keen to recruit new customers they will open up accounts on the basis of identification from only a pay-as-you-go mobile phone bill (a type of account that is even easier to open) without checks on the validity of supplied social security numbers. Once a bank account is open crooks will pay bills religiously, eventually earning enough trust to obtain credit cards with higher and higher limits. After around 18 months fraudsters will obtain cash advances on these cards and disappear, a process know as busting out. Losses of around $50K are typical, according to Litan.

Banks will pursue these funds and call in collection agencies but in the end the majority will write-off the debt without understanding the root cause of the fraudulent loss. "In many case banks don't even know about the problem so they don't have an incentive to fix the loss," Litan said. "Perhaps it's cynical to say this but banks would rather let people in and deal with fraudulent losses, which they pass on to retailers and customers anyway. There are many dedicated people in bank anti-fraud departments but institutionally they are not that motivated."

Litan said that banks in Britain were far better at sharing information and working with each other to minimise exposure to this kind of fraud. The incentive to sign up new customers is great in Europe but in the US it's even more pronounced because banks send out 1,937 pieces of marketing information for every new sign-up. "The goal is getting new customers and banks are not that hungry about eating into fraud," she said.

Litan made her comments during a presentation at the Gartner IT Security Summit in London on Wednesday. ®

Next gen security for virtualised datacentres

Whitepapers

Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Endpoint data privacy in the cloud is easier than you think
Innovations in encryption and storage resolve issues of data privacy and key requirements for companies to look for in a solution.
Scale data protection with your virtual environment
To scale at the rate of virtualization growth, data protection solutions need to adopt new capabilities and simplify current features.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?