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Fraud Updates 2008
15 August
Chip and Pin Fraud
Two men were recently arrested in Birmingham in what has turned out to be the latest threat to credit card security. The two were part of a gang who stole chip and pin machines from shops, restaurants and super markets. Devices were then installed inside the machines which recorded card and pin numbers before the machines were returned.
The fraudsters were then able to download the card and pin numbers of subsequent users to be used with cloned cards.
By the time of the raid in Birmingham, the gang had apparently been hard at work for weeks and had obtained the numbers of thousands of cards.
This new method of obtaining card and pin numbers is yet another example of the way fraudsters continue to find new and inventive methods of separating people from their money.
14 August
KPMG Fraud Barometer
The KPMG fraud barometer had found that fraud is up 50% to £630m in the first half of 2008.
The fraud barometer looks at frauds in excess of £100,000 which are being heard in the UK’s Crown Courts.
KPMG found that the main target of fraudsters had been banks and more than half of the total frauds considered (£350m), were against the financial sector.
The reach of organised gangs in perpetrating fraud was also seen, as they carried out two thirds of fraud by value.
Employee fraud is still widespread. There were 26 cases of lower level employee fraud to a value of £94m. Managers meanwhile committed £63m worth of fraud in 20 cases.
KPMG suggested the predominance of employee fraud may be the result of lack of internal control, highlighting the importance of effective systems of monitoring and reporting.
Mortgage Fraud
As mortgage fraud continues to rise, the FSA in its continuing crackdown recently handed out a £100,000 fine and banned its 18th mortgage broker this year. The broker in this most recent case was alleged to have overstated earnings and profits in mortgage applications.
The KPMG fraud barometer, referred to above, found that in the first six months of 2008, there were nine cases of mortgage fraud worth over £20m. This compares with 10 cases worth £3.7m in the whole of 2007.
The City of London Police has said that the reluctance of banks to report mortgage frauds has made it difficult for them to prosecute corrupt individuals. However, the FSA has confirmed that there are presently 24 ongoing investigations.
Some of the reluctance of banks to take action against corrupt brokers may be a result of the belief that any lost assets cannot be clawed back. However, if brokers have assets in their own names, there may be grounds for such assets to be frozen and court orders in this respect should be considered.
| September 2008 | July 2008 |