The reality of fraud: Are you at risk?

According to fraud prevention service CIFAS, there were 57,302 incidents of identity theft recorded between January and September 2007 - a fall of 1.27% on the same period last year.

Incidents of other types of fraud have fallen considerably more this year, according to a report from APACS - the UK payments association - which found that online banking fraud and cash machine fraud fell by 67% and 57% respectively, in the first half of this year.

However, reports of overseas fraud rocketed by 126%, and online, phone and mail order fraud (known as card-not-present fraud) rose by 44%. "These figures show fraudsters have changed tack," says Sandra Quinn, director of communications at APACS. "A couple of years ago they were stealing cards for use in shops and ATMs, but today, because of chip and PIN, they've been driven overseas - using fake cards in countries where chip and PIN is not used."

Despite being warned to keep our personal details safe, not share information with strangers and be careful when shopping online, overall fraud figures are on the rise, and a report from the Association of Chief Police Officers (ACPO) estimates the cost of fraud to be at least £13.9 billion a year.

The reason for this rise seems to be that we are often over-cautious in areas where fraud figures are falling, but not vigilant enough in areas where fraud is rife. Incidents of phishing for example - where fraudsters send imitation emails from financial institutions to 'fish' for account details and passwords - also rose by 42%, an indication that we are not being cautious enough with unsolicited emails.

APACS also found that millions of us aren't aware of some of the basic pitfalls of shopping online. One-in-eight of us don't log out when shopping online, which leaves financial details available to others, and one-in-four don't check whether a website is secure. This is particularly important in the run up to Christmas, when retail industry body IMRG expects our online spending to smash the £10 billion mark for the first time, an increase of 57% on 2006.

So, where are the risks?

There are several different types of fraud, and criminals use a number of different methods to gather the information they need to carry them out.

Card-not-present (CNP) fraud has increased since the introduction of chip and PIN. Because only the details of a credit or debit card are required to buy products or services over the phone, on the internet or by mail order - not the actual card itself, as is required in shops - this kind of fraud is relatively easy to pull off.

Online fraud is also on the increase because it can be committed in so many different ways. Usually fraudsters find information about you online, through data posted in the public domain or by using fraudulent emails, websites or viruses to find out your passwords and log-in details. They use this information to steal from you directly or buy things with your money. Identity fraud occurs when criminals use these details to open bank accounts and get credit cards, loans, state benefits and documents such as passports and driving licences in your name.

According to online identity experts Garlik, the average identity is valued at £85,000 in terms of the amount of credit that can be applied for or stolen from the average person and the market value of counterfeit passports and driving licenses. This is why ruthless fraudsters also steal the identities of the deceased, which according to CIFAS is one of Britain's fastest growing identity theft crimes.

Overseas fraud is on the increase for a number of reasons. Fraudsters are targeting countries that are yet to put chip and PIN in place, while our more relaxed frame of mind on holiday can lead us to drop our guard and become less cautious with our cards and personal details than we are at home. Also, the internet means you don't need to be overseas for foreign fraudsters to track down your details.

The fight against fraud

In April 2007, new procedures came into effect making banks and financial institutions the first port of call if you fall victim to cheque, card or online fraud - not the police. It's then up to the financial institution to pass the details onto the police if further investigation is required.

Unfortunately, dealing with this type of fraud doesn't appear to be particularly high on the police agenda. CIFAS estimates that the police investigate just 1% of identity fraud cases. "It's a very fast-growing area and not all police officers are trained in how to deal with it," adds Tom Ilube, chief executive at Garlik.

The good news is that banks must cover any fraudulent transactions unless they can prove the customer is at fault. But where scams such as 'phishing' are concerned - where fraudsters send fake emails claiming to be from financial institutions, encouraging you to clink on a link and 'verify' your passwords or financial details - liability can be something of a grey area.

Banks aren't legally bound to reimburse victims - as security details are surrendered voluntarily - but in reality, APACS says most will pay up.

However you've been defrauded, how quickly you'll be reimbursed is something of a moot point, with some people facing severe delays. This is more than likely a sign that banks are cracking down. Emma Parker, a spokesperson from the Financial Ombudsmen Service explains: "Where fraud is reported through credit or debit card use, banks are taking a tougher line and investigating to see if consumers have somehow colluded or authorised the payments."

This means the only way you can really protect yourself is to take extra care and ensure you aren't a victim in the first place. Nobody is immune, but those who are aware of the risks and take positive action to safeguard their identity and their finances are in a much safer position than those that don't.

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