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UK credit card fraud down to £209.3m

But internet fraud and phishing scams continue to grow

SANS - Survey on application security programs

Card fraud losses fell by 5 per cent in first six months of 2006, according to the latest figures from banking association APACS.

Total fraudulent losses fell from £219.5m to £209.3m over the first six month of 2006, a decline APACS attributes to the introduction of chip and PIN.

However it's not all good news. Internet, phone and mail order fraud (card-not-present or CNP fraud) increased over the period, albeit at a slower rate than seen previously. CNP fraud now accounts for £95.3m (46 per cent of all losses) but grew by just 5 per cent year-on-year, compared to a 29 per cent increase between 2004 and 2005.

APACS is also liaising with banks and systems vendors on an authentication system for potential use in both online and telephone shopping, which is due to go on trial next year. The system works via a cardholder inserting their chip and PIN card into a hand-held card reader, and entering their PIN. On validating the PIN entered, the reader generates a unique, one-time only passcode, which the cardholder supplies to a merchant for verification.

Online bank fraud losses rose by 55 per cent from £14.5m in the first six months of 2005 to £22.5m in the same period this year. These losses primarily involved phishing scams, which typically involve consumers receiving bogus emails purporting to come from their bank that attempt to dupe consumers into handing over sensitive account information to fraudulent web sites run by fraudsters. Initiatives aimed at tackling these types of losses include automated cardholder address verification and security systems introduced by card issuers such as verified by Visa and MasterCard SecureCode to make online cardholder verification more secure.

Sandra Quinn, director of corporate communications at APACS, said: "These latest fraud figures show that the industry’s efforts are making their mark. However, each and every one of us can also help defeat the fraudsters, and protect our cards and online accounts, by keeping our PINs, passwords and personal information safe and secure." Recent research commissioned by APACS shows that millions of Britons are still not aware of some basic security pitfalls, such as the importance of keeping their PIN private or sharing PINs between different cards. Tips on how consumers can fight card fraud can be found at cardwatch.org.uk and banksafeonline.org.uk.

Although overall fraud losses are down, counterfeit card fraud losses are up 16 per cent to £53.0m. APACS reckons fraudsters have switched tactics. Instead of stealing cards they are increasing copying magnetic strip details using techniques such as skimming before using hidden miniature cameras to capture PINs at cash machines. Criminals then create fake magnetic stripe cards for use at cash machines and tills that have not been upgraded to chip and PIN. These losses are expected to decline in the UK in the second half of the year as all UK cash machines and the vast majority of tills get upgraded.

On a more positive note, fraudulent losses in shops decreased 43 per cent to £42.1m, following on from a 35 per cent fall the year before, a trend credited to the introduction of Chip and PIN as a alternative to signatures as a means to authorise card payments. Card fraud abroad increased by 16 per cent as fraudsters - thwarted by the introduction of chip and PIN at home - targeted countries that have not yet upgraded to the technology. The European banking industry plans to roll out chip authorisation technology across the continent by 2010 in a bid to stem these losses. The UK itself was rather late to the Chip and PIN party itself, of course. Similar technology has been in use in France, for example, for years. Cheque fraud is down to £16m, compared to £21.6m during the first half of 2005, a decrease of 26 per cent. ®

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