Identity theft is the acquisition and use of a person’s private identifying information for gain.
Generally, there are two categories of fraud, they are referred to as: first party fraud and third party fraud. In first party fraud, the fraud is committed by the owner of the account and doesn’t involve identity theft. Third party fraud happens when criminals use a stolen identity to commit fraud.
Fueled by an increase in id theft third party fraud is increasing – in 2014 it accounted for 46% of fraud cases an increase of 5% on the previous year – indications are that this trend is set to continue*.
What Kind of Third Party Fraud is Happening?
By understanding the types of fraud that are perpetrated using a stolen identity and where trends are developing, companies and people can take steps to reduce their risk.
Third Party Current Account Fraud
Typically this is where a fraudster uses a stolen identity to open a current account. They can then use this account to obtain money from the bank concerned, or in some cases run the account and use it as a gateway to access more lucrative account types to gain even more money. Fraud rates in current accounts have increased from 1.3 frauds detected per 1,000 cases in Q4 2013 to almost 1 fraud detected per 200 cases in Q4 2014.
Third Party Mortgage Fraud
This occurs when a stolen identity is used to obtain a mortgage. The rate of mortgage fraud due to third party fraud has remained broadly stable in the past two years, at about 1 case in every 130 applications. While the rate remains stable the potential losses will increase as house prices and average mortgage values climb.
Third Party Credit Card Fraud
Fraudsters applying for credit cards, using stolen identities, has remained at a steady rate, with around 1 application in 300 being made by a fraudster.
Third Party Loan Fraud
Applying for loans using stolen identities has seen an increase over the past year, peaking at 1.6 in 1,000 applications towards the end of 2014. While statistics for the first 3 months of 2015 have shown a drop to around 1 in 1000 applications, overall this is a trend that is increasing. Automotive finance, a more specific type of loan, has seen an overall increase in third party fraud to 4 in 10,000 applications by the end of 2014.
Third Party Savings Account Fraud
Instances of applying for a savings account using a stolen identity saw an increase during 2014 reaching 1 in around 300 by the end of the year The levels have since reduced to a less concerning 1 in around 750 cases.
Third party insurance fraud
The majority of insurance fraud is a first party fraud issue, with legitimate account holders claiming for losses they have not actually incurred. However, third party fraud does exist. Towards the end of 2014, third party insurance fraud occurred in around 1 in 2,000 applications, but it increased to around 1 in 1,500 applications by the end of March 2015
The cases above represent fraud that has been detected and stopped using Experian’s fraud solutions and services for application fraud. While there are many targets for fraudsters there are solutions that do protect people and businesses from the effects of identity theft.
*All statistics taken from statistical analysis of detected fraud in Experian’s customers between October 2013 and March 2015 as published in our fraud dashboard