2008 fraud figures announced by APACS

- Card fraud losses total £609.9m, online banking fraud losses £52.5m and cheque fraud losses £41.9m
- Main driver for growth in card fraud is on those transactions without chip and PIN protection
- Payments industry welcomes today’s launch of the National Fraud Strategic Authority’s “The National Fraud Strategy – a new approach to combating fraud”

Fraud loss figures released today (19 March 2009) by APACS, the UK payments association, show that card fraud losses totalled £609.9m in 2008. The two main areas of fraud were on transactions not protected by chip and PIN: specifically internet, phone and mail order fraud; and fraud abroad - committed by criminals using stolen UK card details in countries yet to upgrade to chip and PIN - which has nearly doubled in two years.

Although card fraud losses have increased, losses as a percentage of plastic card turnover amounted to 0.12% in 2008 – equating to around a tenth of a penny lost to fraud in every £1 spent on cards – less than the 0.14% figure in 2004. This reflects the positive effect of chip and PIN as well as the fact that we continue to use our cards more and more each year.

Card-not-present fraud losses have increased by 13 per cent over the last year and account for 54 per cent of all card fraud losses. Tackling this fraud is a priority and the industry continues to encourage cardholder and retailer take-up of MasterCard SecureCode and Verified by Visa - secure online payment systems that help prevent online shopping fraud¹. Furthermore, the increase in fraud through online and phone transactions should be seen alongside growing use of these shopping channels, as well as increasing numbers of businesses accepting cards remotely. From 2001 to 2008 card-not-present fraud losses rose by 243 per cent; over the same time period, the total value of online shopping transactions alone increased by 524 per cent (up from £6.6 billion in 2001 to £41.2 billion in 2008).

Counterfeit fraud losses increased by 18 per cent in 2008, but the growth is markedly down on last year’s 46 per cent rise. The vast majority of this fraud is due to criminals stealing card details in the UK to make counterfeit magnetic stripe cards for use in countries yet to upgrade to chip and PIN. The industry continues to apply pressure on those countries such as the US where chip and PIN has still to be rolled out. Increasingly effective use of intelligence systems and the ongoing global rollout of chip and PIN have contributed to this slowdown.

Card ID theft losses have increased by 39 per cent to £47.4 million. This is due to a rise in account takeover², whereby criminals take over the running of another person’s credit or debit card. This fraud typically involves a criminal obtaining a genuine card and a genuine PIN, and has contributed to the fraud increases seen at UK shops and cash machines.

Lost and stolen card fraud losses decreased by 4 per cent to £54.1 million. Thanks to the introduction of chip and PIN this fraud type is now at its lowest total since the industry collation of fraud losses began in 1991.

Online banking fraud losses totalled £52.5m in 2008 – a 132 per cent increase from 2007 losses. Although phishing incidents continue to increase, online banking customers are increasingly being targeted by malware³ attacks, which is why the industry continues to remind customers to ensure that they have their computer’s firewall switched on and anti-virus software installed and kept up-to-date.

The Metropolitan Police Service Police Central e-Crime Unit (PCeU), as the lead force for e-crime, will help tackle these losses by coordinating the work of police forces, the National Policing Improvement Agency and other agencies to: improve standards of training; develop national proceedings; and improve the police response to e-crime across the country. The PCeU will also work with the National Fraud Reporting Centre (NFRC) to provide an enforcement response to technologically-enabled serious crime, and support other police forces on receiving intelligence data from the NFRC.

The new Faster Payments Service is not believed to have impacted last year’s online banking fraud losses. The system was only introduced from the end of May – and the online banking fraud losses in the second half of 2008 more or less match those in the first half of the year.

Following significant year-on-year reductions in 2005 and 2006, cheque fraud losses have risen over the past two years and increased by 25 per cent last year, amounting to £41.9m. However, in 2008 attempted cheque fraud totalled £573m – meaning that the overwhelming majority of attempted cheque fraud was prevented by the banking industry.

As part of its multi-layered approach to tackling fraud, the industry fully supports the National Fraud Strategic Authority (NFSA), which today launched the first National Fraud Strategy, with the goal of reducing the harm caused by fraud in the UK. The payments industry has worked with the NFSA since its establishment last October to share best practice, and APACS is also working with the City of London Police on the establishment of the National Fraud Intelligence Bureau (NFIB) and the associated National Fraud Reporting Centre. This intelligence sharing initiative will provide the vehicle for relevant organisations to work together to tackle fraud. Confirmed fraud data from the payment industry’s existing and successful Fraud Intelligence Sharing System will feed into the NFIB.

ENDS

For further information contact the APACS Press Office on 020 7711 6251

Notes to editors:

1 Verified by Visa and MasterCard SecureCode are secure online payment systems that enable cardholders to authenticate themselves when shopping online at participating merchants by using a password. More information is available at www.becardsmart.org.uk

2 Account takeover involves a criminal fraudulently using another person’s credit or debit card account, first by gathering information about the intended victim through such techniques as social engineering, then contacting the relevant bank or credit card issuer whilst masquerading as the genuine cardholder. Typically the criminal will then change the address on the account and arrange for new or replacement cards and PIN reminders to be sent to the new address.

3 Malware includes computer viruses that can be installed on a computer without the user’s knowledge, typically by users clicking on a link in an unsolicited email. Malware is capable of logging keystrokes thereby capturing passwords and other financial information. To help avoid malware attacks, always ensure you have up-to-date anti-virus software installed, and ask for technical support if your computer starts acting oddly. Make sure you download from trusted internet sites the latest security updates, known as patches, for your operating system and application software. Set your computer to automatically download these updates if possible. Help and further prevention advice is available at www.banksafeonline.org.uk.

4 “The National Fraud Strategy – a new approach to combating fraud”, was launched by the National Fraud Strategic Authority and the Attorney General on 19 March 2009.  To download a copy, please go to www.attorneygeneral.gov.uk.

In line with NFSA’s statement that “Fraud costs every person in the country £231 per year”, if you were to apply our figures in the same context:

Card fraud costs every person in the country £10 per year

Online banking fraud costs every person in the country £0.87 per year

Cheque fraud costs every person in the country £0.69 per year

5 APACS is the trade body that gives banks, building societies and card issuers a forum where they can work together on non-competitive issues. We help manage the way that businesses and individuals in the UK move their money around - this covers cash, credit and debit cards, cheques and automated payments such as Direct Debits, salary payments and online/phone transactions. We lead the fight against banking fraud and twice a year we publish figures on payment industry fraud losses. Further information and advice for consumers and retailers regarding how to avoid being a victim of all types of card fraud is available at www.cardwatch.org.uk.

The payments industry continues to work with law enforcement, retailers, the Home Office and bodies such as Crimestoppers to combat all types of banking fraud. This reflects the joined-up approach needed to tackle the organised criminal gangs behind the majority of card fraud losses.

6 The Dedicated Cheque and Plastic Crime Unit (DCPCU) is a squad of specialist police officers and civilian staff set up in April 2002 to tackle the organised gangs responsible for much of the UK's card and cheque fraud. It is fully sponsored by APACS on behalf of the banking industry.

7 The Payments Industry and Police Joint Intelligence Unit (PIPJIU) was officially launched on 10 March 2008. It is an enhanced intelligence unit - the result of the amalgamation of the banking industry’s Fraud Intelligence Bureau (FIB), the body that formerly distributed information between the banking industry and law enforcement throughout the UK – and the intelligence section of the DCPCU. In addition to the creation of the PIPJIU, APACS has also established a Fraud Intelligence Sharing System (FISS) which, through the PIPJIU, enables the banking industry to share fraud information in a central, shared database.

8 Crimestoppers is an independent charity helping to find criminals and solve crimes. Crimestoppers can be contacted on an anonymous phone number - 0800 555 111 - or at www.crimestoppers-uk.org.