The Change in Fraud Trends

THE CHANGE IN FRAUD TRENDS

Much has been made of the reduction in plastic card fraud as a result of the introduction of Chip & Pin. However, the reality is that currently the significant areas of reduction are in Cardholder Present transactions. The fraudsters are now driven towards Cardholder not Present transactions, i.e. mail order and Internet fraud.

Identity fraud is still an issue and will continue to be so despite government’s assertions that the new Identity Card bill will assist in that fight. Whilst no doubt there is a benefit to us all in Chip & Pin, make no bones about it; the card issuers are the ones who stand to gain most from the technology. They were historically the biggest losers in financial terms; identity fraud does not always impact financially on those who have their identities stolen, although the disruption to their lives is incalculable.

No amount of new technology and innovative systems will eradicate crime; the criminal will develop new methods and new approaches. Cast your mind back to those days when it was so easy to gain access to and steal motor vehicles. The manufacturers have introduced far more sophisticated security measures to reduce theft of vehicles. The down side of that is that we have seen alarming increases in the use of violence against vehicle owners; criminals have burgled houses and confronted residents in order to get hold of keys to vehicles and ‘carjacking’ is a new trend.

Cheque fraud had almost disappeared from the scene but we have seen significant increases in this type of crime. Companies are more vulnerable to this form of attack than in previous years. Nowadays there is great emphasis on ‘Customer Service’; customers want delivery of their goods as soon as possible. Many companies pride themselves on the immediacy of their delivery service but this comes at a cost that is set to rise. We know of many companies who actually despatch goods to customers before cheques have been paid into the bank, never mind cleared through the payment system. By the same token, because a credit/debit card receives an authorisation code from the card issuer, again the goods are despatched. The only thing that an authorisation code tells the merchant is that at that moment in time the card is not reported Lost or Stolen and that it is a genuine card. In reality, the transaction can be charged back by the card issuer as long as three months after the transaction if the cardholder disputes the transaction.

Forged cheques are becoming more prevalent and with today’s modern technology, the smart criminal can easily produce credible forgeries of both cheques and signatures. The modern bank clearing system is far less ‘hands-on’ than in the old days when each and every cheque had to be manually authorised. I do not advocate a return to those days but businesses need to be more alert to the possibilities of forgery. It is not much use gathering a reputation for good customer service and speedy despatch of goods, gaining a march on your competitors in the short term but ultimately seeing your losses rise in the long term. The message is ‘do not be lulled into a false sense of security’.

Peter Ferguson

Corporate Fraud Solutions LimitedMarch 2006