Our analysis reveals fraud detection rates have increased during the past year* with around 50 frauds now being detected per 10,000 cases during Q4 2014 – compared to 40 frauds detected per 10,000 cases in Q4 2013.
The findings also highlight a marked shift in the level of third-party or identity theft – when a victim’s identity is stolen – as a proportion of all detected fraud cases.
It’s a trend that has been developing over the past year and now accounts for more than half (52%) of all detected fraud cases.
The switch reflects a return to pre-downturn level of identity theft when it previously eclipsed first-party fraud – fraud carried out by consumers. Detected first-party fraud, as a proportion of all frauds, has now decreased from 60 per cent of all fraud cases in Q4 2013, to 48 per cent of fraud cases as at Q4 2014.
But it continues to be most prevalent for mortgage products.
Lenders continue to make significant strides in the fight against fraud and safeguarding their customers – particularly against identity theft. But as more consumers access and apply for financial products across multiple channels, including online and mobile, fraud has also evolved accordingly.
Clearly it’s not all bad news. More fraud is being spotted thanks to the vigilance, diligence and determination of the financial services sector. But are other external factors are now coming into play? Stricter affordability tests, while playing a clear role in protecting individuals from unmanageable debt, have made the process of switching mortgages more complicated and lengthy. It may be possible that they are prompting some applicants to falsify their credit commitments, earnings, or job status.
Fraud detection rates for current account fraud has soared year-on-year, from 60 frauds detected per 10,000 cases in Q4 2013 to 79 frauds detected per 10,000 cases in Q4 2014 – representing an increase of 19 fraud cases per 10,000.
Detected fraud among current account applications saw the largest annual rise among all financial products. They are also the fastest growing target for identity thieves. Detected current account fraud by ID theft has risen by 20 percentage points within the past year – compared to Q4 2013, when it accounted for 27 per cent of all detected current account fraud. As at Q4 2014, ID theft now accounts for 47 per cent of all detected current account fraud.
It’s worth noting it’s now 18 months on since the formal launch of seven-day current account switching, helping pave the way for more than 1.2 million switches, which may have prompted more fraudsters to test application systems. At the same time, more scrutiny is being put into due-diligence and back-office procedures surrounding anti-money laundering initiatives, institutions’ efforts around identity verification and stronger ‘Know Your Customer’ programmes.
The proportion of detected fraud cases for mortgages remains the highest out of all financial products, at 84 cases per 10,000 in Q4 2014. But the mortgage fraud detection rate has declined annually, from 87 frauds detected per 10,000 in Q4 2013.
While mortgage products are not generally targeted by identity thieves, they do remain a target for first-party fraudsters. In Q4 2013, first-party fraud accounted for 95 per cent of all detected cases of mortgage fraud. It now accounts for 96 per cent of all detected mortgage fraud. Almost nine in ten cases (88%) of fraud were down to a form of misrepresentation by the applicant on mortgage application documents.
The number of card applications detected as fraudulent has increased annually, from 39 frauds detected per 10,000 cases in Q4 2013, to 44 cases per 10,000 as at Q4 2014. Cards remain the product most targeted by identity fraudsters, but the number of identity thieves targeting cards has remained static in the last year – 79 per cent of all detected card fraud from Q4 2013 to Q4 2014.
The number of cases detected as fraudulent for automotive products has declined annually, from 32 frauds detected per 10,000 cases in Q4 2013, to 30 cases per 10,000 as at Q4 2014.
Identity theft as a proportion of detected automotive fraud has increased 13 per cent in Q4 2013, to 15 per cent of all detected automotive fraud in Q4 2014.
The total number of loan applications detected as fraudulent during the past year has increased from eight frauds per 10,000 cases in Q4 2013, to 17 frauds per 10,000 as at Q4 2014.
Identity theft as a proportion of detected loan fraud has also increased significantly, from 63 per cent in Q4 2013, to 73 per cent of all detected loan fraud in Q4 2014.
So far in 2015, we have seen a 50 per cent rise in the number of consumers using our Victims of Fraud support service, compared to the same period last year.
We advise six key steps to help avoid identity theft.
1. Online passwords – Always use secure, unique passwords for as many online accounts as possible, and ideally all of them. At the very least have a unique password for each type of service provider such as financial services, retails services and email.
2. Emails – Don’t be tempted to open emails and links or attachments received from people you don’t know. If an email seems suspicious, contact the relevant organisation and don’t give out personal details.
3. Account details – Don’t store account names and passwords on your smartphone, either in e-mail, as a note, or to ‘autocomplete’ when you open a website or app. It will be goldmine for fraudsters if your device is lost or stolen.
4. Social websites – Be cautious and don’t add people you don’t know. Remember what you might consider to be unimportant information like your birthday, email address or dog’s name could all be misused by criminals.
5. Be credit wise – Monitor your credit report and your bank and card statements regularly – it will help you spot any suspicious activity as early as possible and avoid financial loss.
6. Know where your details go – Finally, if you think you don’t protect your personal online information as you should, services like Experian’s web monitoring tool, available through Experian CreditExpert, will monitor the wider web for mentions of your personal information 24/7, sending you an instant notification if your information appears somewhere new online. This helps ensure you can take immediate steps to resolve any potential fraudulent activity before you are negatively affected.
For more information about fraud prevention, please click here.
* Based on Q4 2013 to Q4 2014 Experian fraud data. Experian works closely with National Hunter, the UK’s leading fraud prevention system, operated by Experian on behalf of members. It enables financial institutions to cross-match applications against more than 100 million previous application records in order to spot commonalities and anomalies that are potentially indicative of fraud for further investigation.