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Online banking scams overshadow plastic fraud slide

CNP fraud shrinks for first time

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UK online banking fraud losses rose 55 per cent to hit £39m for the first half of 2009, according to banking industry figures published on Tuesday.

The rise in banking fraud was largely blamed on more sophisticated malware-orientated tactics by cybercrooks, according to Financial Fraud Action UK (formerly the anti-fraud unit of banking payments association APACS). Phishing scams also increased to 26,000 during the first half of 2009, a 22 per cent increase from the first six months of last year.

Increases in online banking fraud were the one bright spot of positive developments in the fight against banking fraud more generally.

Card fraud losses fell 23 per cent from £304.2m in 1H2008 to £232.8m in the first half of 2009. Phone, internet and mail order (customer not present) fraud fell for the first time ever, down from £163.9m in the first half of 2008 to £134.0m in the same period of 2009. Fraud abroad (related to the use of counterfeit card in overseas ATMs and the like) dropped from £122.4m to £67.1m over the same period.

Fraud Action UK credits the decline in plastic fraud to the introduction of Chip and PIN making life more difficult for fraudsters to counterfeit cards and enforcement efforts by the banking industry-funded Dedicated Cheque and Plastic Crime Unit (DCPCU). Increasing use of "sophisticated fraud screening detection tools by retailers and banks, as well as the continuing growth in the use of MasterCard SecureCode and Verified by Visa" are credited with reducing customer not present fraud.

Katy Worobec, head of fraud control at Financial Fraud Action UK, commented: "These latest fraud figures are good news but we know there’s no room for complacency. Whilst industry online security initiatives such as Verified by Visa and MasterCard SecureCode may be making their presence felt, the fraudsters are never going to shut up shop and, of course, there are emerging areas such as online banking fraud which has risen again."

Worobec speculated that part of the decline might be due to a displacement effect, with international crooks counterfeiting less secure cards issued overseas.

"Although it’s difficult to prove, we think that one of the reasons for this dip in card losses may simply be as a result of fraudsters realising that they can prosper more by targeting foreign-issued cards – particularly those without chip and PIN protection and which currently have stronger currencies than sterling.

"The fact that we’ve seen a 36 per cent increase in the first half of this year in the amount of fraud being committed on foreign issued cards here in the UK adds some weight to this theory."

The full set of figures from Financial Fraud Action UK can be found here. ®

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