Illustration of the latest 2021 annual fraud report findings

Fraud is (Still) On the Rise

Fraud continues to rise, which is made crystal clear in the latest Annual Fraud Report from UK Finance. The acceleration we’ve seen in fraud during the pandemic has not eased; fraudsters are, as ever, taking advantage of consumers' fears and vulnerabilities in myriad ways. Much has been written over recent years about authorised push payment (APP) fraud. In fact, some scam types such as romance scams have gotten their own Netflix specials showing the prevalence and damage such scams can do. The Annual Fraud Report sets out the scale of this growing problem in a set of very stark figures.

In total, over £1.3bn was stolen by fraudsters in the UK across 2021 for all fraud types. Over 195,000 cases of authorised push payment fraud were reported, a truly staggering number that has led many to call the situation in the UK an “epidemic of fraud” that needs drastic action.

Whilst the report has a wealth of interesting information, below are some specific points of interest,

Fraud Scams Come in Many Shapes and Sizes – and They’re Growing

Whilst news of the rise of fraud losses and APP fraud seems a constant topic, the latest report from UK Finance lays out the scale of the increase across all APP types. The 39% increase in APP fraud to £583.2m only tells part of the overall story; behind these numbers are more than 40,000 additional cases in 2021 compared to 2020. The breakdown of this number shows just how fraudsters take advantage of wider societal conditions. 

Investment Scams: The pandemic sent shockwaves through stock markets in early 2020. Still, some stocks experienced massive growth (especially in the tech sector). This, coupled with cryptocurrency price fluctuations and more individuals attempting to invest and seek these quick returns, created a large attack surface of vulnerable consumers. Fraudsters were quick to pick up on this also and exploit it by duping more consumers into falling for investment scams offering excellent returns. Investment scams losses increased 57% from £109.4m to £171.7m, making it the single largest scam type by value.

Impersonation Scams: Impersonation scams also saw huge increases as fraudsters continue to use traditional social engineering tactics and trick unwitting consumers by playing on their fears. The over 50% increase in these types of scams illustrates how critical it is to continue to educate consumers on how they can defend themselves against scams. The near £215m lost across police, bank, and other impersonation scenarios shows how important it is to keep fighting social engineering and protecting customers.

CEO Fraud: The growth of CEO fraud by 165% is another eye-opening stat within the UK Finance fraud report (even if the overall loss figure of £12.7m is one of the lower amounts). This brings into vivid focus the need for businesses to be as vigilant as consumers. Despite easing lockdowns in 2021, many organisations have moved to a fully or at least partly remote working environment. This may well have played into the hands of opportunistic fraudsters, allowing them to take advantage of the fact that colleagues are not in the same office and conversations have some level of delay. 

Reimbursement is Increasing and Providing Some Consumer Protection

The rise in APP fraud has resulted in a significantly larger level of reimbursement for fraud losses across the industry due to the voluntary Customer Reimbursement Model (CRM) code playing its role in protecting consumers. Of the £583m in APP fraud, £238m was returned to customers. 

Rethink Your View of a ‘Typical’ Fraud Victim

The stereotype of fraudsters targeting elderly customers because they are vulnerable in an ever-changing world that has moved towards digital and real-time payments no longer holds. The Annual Report makes this clear. In actual fact, people under age 35 are most vulnerable to falling for impersonation scams and potentially handing over personal information. Younger consumers share their personal information on social media, facilitating fraudsters’ ill-gotten gains.

Card Fraud is Not Gone, Even If It’s Not Getting Headlines

All of the news of APP fraud and the introduction of Strong Customer Authentication (SCA) may lead some to think that card fraud is a thing of the past. This is a dangerous assumption, however, as the report reveals. The overall card fraud figures are down 7% year on year. However, they are still a huge driver of the £1.3bn in losses across the industry. In 2021, there were still more than 2.8m card fraud cases revealing the ongoing size of the issue; consumers lost over £500m. Clearly, it remains important to build controls to protect consumers across all channels.

Account Takeover is Both Steady And Increasing

Significant investments have been made in adding security to remote banking channels such as Internet and mobile banking. The impact of this can be seen in the fact that Internet Banking fraud cases have increased 30% but losses remain stable, showing that the average loss is decreasing. However, it’s worth noting that mobile banking fraud has increased in both case and loss values. This could well be the delayed impact of the growth in consumers adopting mobile banking channels during the pandemic – creating  a far larger surface area of potential victims for fraudsters in the process.

3 Steps Banks Can Take to Reduce Scam and Fraud Losses

  • Invest in cross-channel fraud detection, leveraging a full customer view to build profiles of normal activity;
  • Create layered controls to provide added protection;
  • Offer consumers contextual advice based on APP scam types.

3 Steps Consumers Can Take to Reduce Falling Victim to Scams

  • Never give out your card or internet banking credentials to anyone;
  • Stay aware of emerging APP fraud types so you can stay vigilant;
  • Remember, if it’s too good to be true, then it probably is.

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