Financial services fraud climbs 16% in 2012

Fraud in financial services, including insurance, jumped 16% quarter-on-quarter between January and March, according to the latest figures from Experian.

The global information services firm said the rise was driven primarily by a significant surge in current account fraud.

The research revealed that 19 out of every 10,000 applications for financial services were found to be fraudulent in the first three months of 2012, up from 16 in the last quarter of 2011.

Furthermore, 44 in every 10,000 current account applications were detected as being fraudulent during the first quarter of this year, 23 per cent higher than the fourth quarter of 2011. The current account continued to be the most targeted financial product, posting the busiest period for current account fraud ever recorded by Experian.

Experian’s data shows that the majority (62%) of current account fraud in 2011 was committed by first-party perpetrators, which typically involves an individual giving a knowingly false portrait of their personal circumstances to obtain services which they are not entitled to.

Thirty eight per cent of current account frauds were due to individuals attempting to hide adverse credit histories when opening current accounts or applying for overdrafts. A further 39% of current account fraud involved product or payment abuse, which included people knowingly attempting to make payments with insufficient funds in their accounts.

Attempted insurance fraud increased by 37% quarter-on-quarter, to reach its highest point since late 2009. Thirteen in every 10,000 applications and claims were detected as being fraudulent during the first quarter, up from 10 in the fourth quarter of 2011. Fifty eight per cent of insurance fraud involved some form of product abuse, most significantly the provision of false payment information.

A 56 per cent increase in identity fraud attempts pushed credit card fraud up from 10 cases in every 10,000 applications in the final three months of 2011 to 14 in the first quarter of 2012. Attempted identity frauds on cards leapt from five to eight in every 10,000 applications over the same period.

Experian’s UK director of identity and fraud services Nick Mothershaw said: “Experian’s data shows further growth in current account fraud during the first quarter of 2012, mostly emanating from individuals providing false information attempting to open new accounts or obtain overdrafts or making payments they knowingly couldn’t afford. The threat of identity fraudsters seeking to open accounts in the names of unsuspecting third parties, for money laundering or as a springboard to attempt fraud on more lucrative credit products, also remains.

“Credit cards have seen a resurgence in identity fraud, while a growing number of financially stressed individuals consider misrepresenting their personal or payment information when applying for insurance, contributing to a significant fraud upswing in the first quarter of 2012.”