Statistics abound to indicate fraud is an ongoing problem: According to the 2015 APF Payments Fraud and Control Survey, 62% of financial pros indicated their organizations had been subject to payments fraud in 2014.
Payment methods most targeted in fraudulent attempts were checks (77%), credit/debit cards (34%), and wires (27%).
Types of fraud attempted and committed are evolving with technology although, of course, not all fraud is limited to crimes associated with payment method.
“In 2015, every $100 of fraud, costs a merchant $223,” according to the Lexis Nexis True Cost of Fraud 2015 Study. This equates to a 1.32% loss of revenue to fraud in 2015; in 2014, fraud losses comprised 0.68% of revenue.
The study further observes that it is “up to 7 times more difficult to prevent fraud in remote channels than in person.”
Meanwhile, “Identity Fraud Cost US Consumers $16 Billion in 2014,” notes a Javelin study. It is estimated that 12.7 million U.S. consumers experienced identity theft in 2014; although the number declines as 13.1 million were victims of identity theft in 2013.
This week, discover important fraud trends and consider what you might do to remain one step ahead of crime.
‘Rather fail with honor than succeed by fraud.’ --Sophocles
Fraud reports from 2015 seem “not to have changed substantially,” says Javelin. But, this disguises the way fraud is changing.
“As EMV becomes more ubiquitous, fraud at physical storefronts becomes very different—driving a movement from counterfeit fraud to new account fraud.”
This is important for both retailers and financial providers as mishandled fraudulent activity “undermines financial relationships” and may create situations in which consumers are less willing to help protect themselves.
The Javelin 2016 Identity Fraud Study notes four trends in fraud:
1. More victims; smaller amounts lost. The number of consumers impacted by fraud is at its highest in six years; however, the amount stolen was at the lowest during that same time.
2. EMV prompts twice as many issues in new account fraud. New account fraud reflects a 113% hike; now 20% of all fraud losses.
3. Lack of consumer trust in financial institutions creates opportunity for additional problems should they become fraud victims. This is because such consumers are less apt to take advantage of email alerts, credit freezes, or other monitoring. This means their data is available for 75% longer to cons and they incur “a 185% greater mean consumer expense” compared to those who do trust their financial providers.
4. “Identity fraud is a global issue” and 18% of fraud committed with U.S. cards—$2.4 billion—occurs outside the country.
Indeed, “Retailers, Banks Face Surge of Account Creation Fraud,” notes an article at cardnotpresent.com. Here, “Fraudulent account origination aimed at banks increased 40% during Q4 2015” over the previous year.
Account creation is becoming a favored technique of fraudsters, and the situation for e-commerce retailers is even worse. From October to December, more than 58 million fraudulent transactions were recorded—up 124%--from Q4 2014.
“What’s Ahead for Online Fraud in 2016”? asks mobilepaymentstoday.com. Despite the fact that EMV cards mitigate some fears of fraud, experts think online fraud will experience an uptick.
“Some reports indicate online retail fraud in the U.S. alone is expected to rise by 106% over the next three years,” the article notes.
New account fraud is more damaging for consumers, according to an article at cnbc.com.
Losses from this type of fraud are up from $2 billion to $3 billion from 2014 to 2015.
And, consumers who fall prey to new account fraud “spend three times as long unraveling the problem as victims of existing account fraud (15 versus 5 hours), and have out-of-pocket costs almost five times as high (a mean $252, versus $52).”
New account fraud, too, is more difficult to identify; the responsibility to prove the account is false falls upon the consumer.
‘Things gained through unjust fraud are never secure.’ --Sophocles
The literature reveals new account fraud is not the only security risk that bears monitoring.
The Wall Street Journal recently identified “Three Big Risk Issues for Banks in 2016.” In addition to country de-risking and terrorism finance, the article names synthetic identities as a bothersome issue.
In this instance, fraudsters steal personal data and reassemble it to create false identities used to get mortgages and manage other transactions. Cons can create fake pay stubs, scam references, and illegitimate businesses; “that…means a higher level of diligence needs to be done when deciding whether an application is real or a fraud.”
And, the Association of Certified Fraud Examiners lists “8 Scams to Watch Out For in 2016.” Among them: Credit repair fraud in which scam artists find consumers with large debt loads, pledging to eliminate debt for a fee—they fail to do so, and may instead sell social security numbers of trusting consumers.
Bank draft scams are also problematic, notes the article, as is internet money laundering and of course, identity theft—“one of the fastest growing financial frauds.”
Also note “5 Top Fraud Risks for Financial Institutions in 2016,” according to Security Today.
1. Mobile banking fraud increases as smart phones are attacked for the information they contain and targeted with malware.
2. Social engineering fraud grows as fraudsters impersonate security specialists, customer support workers, and others.
3. Social media platforms create venues for good consumer interactions but also create opportunity for risk; apps are one example that allow money transfers.
4. Increased account takeovers and identity thefts.
5. More fraud rings that are increasingly difficult to find; they may specialize in one type of fraud.
The good news is that consumers can help protect themselves. Forbes lists “11 Tips To Protect You From Identity Theft & Related Tax Fraud.”
Consult the list and consider important takeaways for members. Remind them that public Wi-Fi access is vulnerable to hacking; private documents should be protected; mailing addresses need to remain up-to-date; passwords should be updated; and members should not easily offer Social Security numbers.
In addition, when making online purchases, consumers should only provide data necessary for the transaction; be aware of phishing attempts; and watch credit reports.
Finally, consumers need to be attentive to fraud alerts. Such notices may be inconvenient during the course of legitimate transactions, “but it’s loads better than having your card actually compromised and not knowing about it.”
New types of fraud are a reality, and there are others emerging on the horizon. Keep your members abreast of problems and alert them of ways to remain diligent.