Fraud Continues Unprecedented Climb Higher

Are we at the beginning or end of a dramatic spike in fraud across all industries?  It might be open for debate but clearly, all signs are pointing to the fact that we may be in the very early stages of a long and treacherous climb upward.

I reviewed the Top 10 Reported Fraud Losses last month and determined not only were reported losses higher in 2016, but that fraud losses across all 10 types of fraud would continue to increase through 2017.

Javelin Research Concludes Fraud is Up Everywhere

Javelin Research just published results of their recent fraud survey and analysis and determined that fraud exposure was higher than ever.  In fact, Identity Theft in 2016 reached it’s highest reported level in history as 15.4 million US consumers reported becoming a victim.

identity-fraud-statistics-2017

Other key conclusions they reached were:

  • 1 in 16 American’s were victims of Identity Theft last year (That’s up 6% over the prior year)
  • $16 Billion in identity theft losses occurred last year
  • While the rate is higher than ever, the losses have dropped considerably down from a high of $22 Billion in 2012.

While there were some glimmers of good news, the conclusion’s reached by Javelin were mostly bad.

Anywhere we looked, we saw that there was just more fraud,” said Al Pascual, head of fraud and security at Javelin.

With so many industry statistics and experts all siding with the opinion that fraud losses are bad and getting worse, it’s difficult to see a path were 2017 improves that much from last year.

3 Big Drivers Account for The Problem

There are 3 big drivers pushing fraud to its highest level.  These are the 3 reasons why fraud is at it’s highest level and will continue it’s unprecedented climb higher.

#1 –  Data Breaches and Fraud Industrialization –  In a connected world, data breaches have become commonplace.  Data is being stolen at an unprecedented pace and it is being monetized quickly on the dark web.   Fraud has become an industry.  An efficient industry where fraudsters focus on boosting the profits each year.

#2 – Banking Convenience –  Banks and Fintech companies are rushing to provide more and more convenience.  This convenience delights customers but also delights fraudsters and scam artist who have a growing array of methods to defraud customers.  Years ago, checks were the only way to steal from customers, now there are dozens of ways to get money from a customer’s bank account.

#3 – Competition –  Banks are being pushed into riskier markets and lending.  As they push into new and riskier markets and products, their risk profile increases.  This competition is driving riskier behavior which fraudsters take advantage of.

Up Up and Away

I truly believe we are in the infancy of fraud globally.  The losses that we experience today are but a fraction of what we will see in 20 years.   We could and might be dealing with Trillions of Dollars in fraud in 20 years not billions.

Thanks for reading!

Frank McKenna is the Chief Fraud Strategist for PointPredictive and a Fraud Consultant based in San Diego California

  • YKR

    Identity fraud and cybercrimes are growing so fast only
    because we rely on unreliable signature, PIN and password systems.

    Fraud in the
    UK costs more than £193 Billion pounds every year and with more than 5 Million
    fraudsters the problem is getting even worse because our signature, PIN and
    password systems are unreliable.

    As this
    report shows, anyone of us could fall victim to identity fraud.

    Britons are at most risk
    of identity fraud

    https://www.ft.com/content/8423e214-0d4d-11e2-99a1-00144feabdc0

    Identity
    fraud and cybercrimes are proving that our signature, PIN and password
    systems are all unreliable and until we use reliable systems
    described below fraud will continue to remain the fastest growing crime.

    SIGNATURE system – the current way is
    unreliable because in the event of a crime it
    does not even expose fraudster’s gender. To make a signature reliable all
    we have to do is to use Personalised Signature System (PSS) system. It works by
    applying an ID sticker with the person’s photo, name and logo of bank printed
    on the ID sticker to the document and then countersigned so that the signature
    is shared between the sticker and document. In the event of a crime a
    personalised signature would expose a fraudster’s photo, traces of his
    thumbprint, signature and the logo of bank from where police would find fraudster’s
    personal details. This system will also eliminate the need for us to protect
    our personal details or rely on photo IDs because we will deter fraudsters by
    getting them exposed and prosecuted every time they do fraud.

    Personalised
    signatures a) on delivery notes will deter mail-order fraud b) on cheques
    will deter cheque fraud c) on receipts will deter bogus trader fraud d) on
    contracts, agreements etc. will deter identity fraud e) on medications and medical reports and
    will prevent fatal accidents.

    Current
    signature system is like a passport without a photo and that is why it is so
    difficult to deter and prosecute fraudsters.

    PIN system is unreliable because
    fraudsters have several options to obtain and misuse them. To make the PIN
    system reliable all we have to do is to change it to an electronic PIN called
    EPIN where the PIN will be stored encrypted on a thumbprint activated key size
    memory stick. To improve security this EPIN will be changing to new values
    after each transaction. This system will make card transactions at retail
    outlets and ATMs virtually 100% safe and fool proof because fraudsters will
    never be able to obtain EPIN the way they obtain PIN. To protect
    countries, security authorities should be able sell ID stickers and
    personalised ID memory sticks to visitors at the point of entry.

    PASSWORD system is unreliable because
    hackers can obtain them easily. To solve this problem all we have to do is to
    use EPIN as secured password to a) activate bank account and b) authorise card
    payment online the way we use PIN to conclude card transactions at retail
    outlets and ATMs. This system will make online fraud and cybercrimes a thing of
    past because these criminals will not be able to obtain EPIN.

    PSS and EPIN systems are virtually 100% fool proof
    and so restore honesty in entire business industry.

    · No one has yet proved why these
    systems will a) not deter fraudsters and cyber criminals and b) would ever backfire.

    To
    implement these systems all financial institutions will have to do is to
    provide us pocket size book containing say 65 ID stickers with their logo
    printed on them and proposed memory ID stick personalised with our EPIN. I
    believe to protect the public and entire business industry from becoming
    victims of these criminals government, financial institutions and the public will
    support use of these systems.

    I was
    inspired to invent these patent and copyrights protected systems after becoming
    a victim myself.

    Your
    comments and feedback on these new systems to deter fraudsters and
    cybercriminals would be very much appreciated.

    Organisations
    willing to exploit these reliable systems under licencing agreement should
    contact us directly.