Fraud leads to huge rise in online banking losses

Online banking fraud rose a staggering 55 per cent in the first six months of this year according to the latest figures from Financial Fraud Action (FFA) UK.

Formerly known as Apacs, this UK payments organisation said online banking losses now stood at £39 m – compared to £25.2m in the same period last year.

It said the increase is largely due to criminals employing more sophisticated methods to target online banking customers through malware scams rather than vulnerabilities in the banks’ own systems.

There were also more than 26,000 phishing incidents during January to June 2009 – a 26 per cent increase on the amount seen in the same period last year.

On a more positive note however FFA said overall card fraud losses were down 23 per cent from to £232.8m and for the first time since it began records, online card fraud was also down.

These Card Not Present (CNP) transactions, made over the internet, phone or by mail order, fell 18 per cent compared to the same period last year; from £163.9m to £134m.

Katy Worobec, FFA head of fraud control said:

“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.

She also praised the work of the Dedicated Cheque and Plastic Crime Unit (DCPCU). This is a special police unit sponsored by the banking industry to stamp out organised card and cheque fraud across the UK. She said it had played its part in the encouraging fall in card fraud.

However Andrew Goodwill, director of the 3rd Man fraud screening company said banks shouldn’t take the credit for the drop in CNP fraud.

“The fall is due to the vigilance of retailers and their use of sophisticated fraud screening tools, not the work of the banks or security of initiatives such as Verified by Visa or MasterCard SecureCode. These are well known to be insecure and cyber criminals regularly get around them,” he said.

Cheque fraud was also down from £21.2m between January and June 2008 to £15.6 million in the same period this year. It said this was because the overwhelming majority of fraudulent cheque payments get stopped before money is paid out.