Experian has revealed that fraudulent applications for current accounts have fallen sharply in 2012. Current account fraud peaked in Q1 2012, with around 19 in every 10,000 applications found to have a criminal element. This has since declined to around 15 in every 10,000 by the end of the year, dropping by approximately a quarter.
While current account fraud is falling, the overall rate of fraud at point of application across the UK’s financial services sector is inching higher, with a three per cent increase in the past year. This is partly due to a rise in mortgage fraud for the sixth successive year, with a hike of nine per cent from 2011 to 2012. In addition to record mortgage fraud figures, this overall jump was also driven by growth in credit card and savings fraud.
Experian’s data shows that the majority (71 per cent) of attempted current account fraud in 2012 was down to individuals misrepresenting their personal information on applications. Typically these first party perpetrators involve an individual attempting to hide their adverse credit history when opening a current account or applying for an overdraft. The remaining (29 per cent) current account fraud attempts were down to third-party identity fraudsters seeking to open accounts as a springboard to obtain other, more lucrative credit products, or for money laundering purposes.
Nick Mothershaw, UK&I director of identity and fraud at Experian, said: “A decline in current account fraud is a positive step for the financial services industry as current account fraud is often the first step for fraudsters who later plan mortgage, loan or credit card deception. It is also important to highlight that the drop is very much the result of better systems and vigilance by financial services providers.”
Experian’s analysis of fraudulent applications using its Mosaic classification revealed that fraud was highest amongst the Terraced Melting Pot group. This group, which represents those in relatively routine urban occupations, was responsible for 21 per cent of first party fraud cases in 2012. Fraudulent applications were also high amongst the Liberal Opinion group, consisting of young, professional and well-educated people. This demographic accounted for 14 per cent of all first party fraud cases in 2012.
Mothershaw added: “Given the challenging economic climate and on-going squeeze on personal incomes, it comes as no surprise that the vast majority of frauds continue to be attempted by individuals. As a result of poor or patchy credit, more and more ‘non-professional’ fraudsters are clearly attempting to ease their position, misrepresent applications or make exaggerated claims over their income and personal finances.
“In 2012, about 70 per cent of financial services application fraud in the UK is down to first parties misrepresenting their circumstances. The insurance, automotive and mortgage industries have a significant first party fraud element to them.”
Experian predicts that fraudulent applications will rise throughout 2013. This rise will be driven by a number of factors including the on-going squeeze on household incomes and benefits, while stricter credit and lending criteria will drive more attempts.
Experian’s Fraud Index is based on data derived from National Hunter and Insurance Hunter, the UK’s leading fraud prevention systems, operated by Experian on behalf of members. These systems enable financial institutions to cross-match applications against over 100 million previous application records in order to spot commonalities and anomalies that are potentially indicative of fraud for further investigation.
Experian is the leading global information services company, providing a payment gateway, and data and analytical tools to clients around the world. The Group helps businesses with fraud investigation, managing credit risk, target marketing offers and business analytics. Experian also assists individuals with credit card protection.
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