Back to basics – the oscillating nature of card fraud

Criminals who commit fraud will go to any length to earn a quick buck at another's expense, and are constantly searching for alternative ways to get around fraud prevention measures. They ramped up the technical fight over fraud — and now that they're losing that battle, they're switching tack, writes Daniel Melo

Criminals who commit fraud will go to any length to earn a quick buck at another’s expense, and are constantly searching for alternative ways to get around fraud prevention measures. They ramped up the technical fight over fraud — and now that they’re losing that battle, they’re switching tack, writes Daniel Melo

It seems to be working. A recent report from Financial Fraud Action UK reveals that losses due to fraud in 2012 grew to £388 million, after falling from £610 million in 2008 to a 10-year low of just £341 million in 2011.

The criminal fraternity knows they can’t beat today’s advanced technology, so they have returned to some surprising low-tech methods. ATM shoulder surfing and high-street confidence tricks (i.e., "let me help you with that") are now coming back strong. And there’s no doubt that these con artists can be very persuasive – particularly when it comes to the vulnerable (such as the elderly, or tourists).

One new wrinkle is the recent proliferation ofcourier fraud. At first, you get a phone call from a person who says they are a representative of your bank, and that there has been suspicious activity on your card. The person then asks some "security questions" before divulging any specific account information. Some unsuspecting customers provide answers in good faith; others unwilling to do so are encouraged to phone their bank back on the phone number printed on the back of their card.

However, the fraudster keeps the line open so even though you have called the bank, the call doesn’t go through. Instead, you are unknowingly still talking to the fraudster, who will proceed to collect your particulars, including your address, bank details and PIN. In some cases, youmay betold that the card will be stopped and replaced with a new one, and that the old card needs to be collected as "forensic evidence for investigation." The card is then collected by either the fraudster or an innocent collection agent. Farewell money.

Banks need to do more to educate their customers and warn them about evolving threats. Adopting both a proactive and reactive approach to fraud prevention, with a massive increase in communication between banks and consumers, is perhaps the only way to win this battle. Fortunately, mobile banking platforms and technology are increasingly helping to facilitate this development.

FICO is always on the lookout for information on how fraud is occurring. Are you aware of any you’d be happy to share?