UK card fraud hit from abroad

Chip and Pin fails to halt rise in card fraud

Dinah Greek, Computeract!ve 04 Oct 2007

Credit and debit card fraud continued to rise in the first half of the year, according to payments association Apacs.

The mid-year figures published by the payments association show total losses due to all card fraud rose by 36 per cent to £264m in the first six months of 2007.

This rise has been fuelled by UK-issued cards being cloned and used by criminals overseas as well as a rise in card not present (CNP) fraud as more people shop online.

The amount lost to counterfeit cards being used abroad fraud abroad went up from £48.1m in the same period, January to June, in 2006 to £108.8m this year; a rise of 126 per cent.

Introduction of Chip and Pin technology in the UK has made it difficult for fraudsters to use stolen cards in this country; shown by a fall in fraud of 11 per cent in the UK when the card holder is present. However, this has pushed up the cases of fraud involving UK-issued cards overseas.

The main danger area is now the US, where card payments and cash withdrawals can be made without a PIN. US frauds have surpassed those of France, which is now replacing cards with EU-standard Chip and Pin.

CNP fraud was up by 44 per cent to £137m in the first half of this year, according to Apacs. It said much of this was fuelled by the rise in online shopping, but Andrew Goodwill, managing director of fraud watch site Early Warning, was astounded.

"The rise in online fraud has shocked even me, and I thought my projected figures had been high. It is concerning that online fraud alone could hit around £274m by the end of the year, and I don't think the change in reporting procedures, with the police being cut out of the loop, will help," he said.

There is some good news, according to Apacs. Losses due to stolen cards being used to take out money from cash machines has fallen by 57 per cent to £17m.

Figures also show a fall in online banking fraud. Despite a huge rise in phishing attacks, up 42 per cent between the same period last year, Apacs figures show online banking fraud fell by 67 per cent from £22.4m in the first six months of 2006 to £7.5m in the same period this year.

Apacs said this decrease is thanks to increased security measures such as the introduction of third-factor authentication technology by some banks as well as consumers being better education about fraud.

Sandra Quinn, director of communications at Apacs, said: "These figures show how the fraudsters have changed tack. A couple of years ago they were mainly stealing cards and card details for use in UK shops and cash machines, but today, because of Chip and Pin, they have been driven overseas - using fake magnetic stripe cards specifically in countries which have yet to upgrade to Chip and Pin.

"During the interim we will continue to use fraud intelligence systems to tackle overseas losses and encourage those countries that are lagging behind on chip and PIN to follow our lead."

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