Experian, the global information services company, today published new report revealing that frauds attempted against financial services providers increased by 11 per cent in 2010. 20 in every 10,000 applications for credit and other financial products made last year were discovered to be fraudulent, up from 18 in 2009.
Experian’s fraud report uses information collated through its National Hunter fraud data sharing scheme to detail the evolving nature of fraud in the UK’s financial services sector. It shows that in 2010 there was a significant rise in attempted first-party mortgage and automotive fraud, much of which was attempted by young, professional people.
2010 also saw a 25 per cent increase in fraudulent applications for current accounts, with almost half of new cases down to identity fraudsters. Experian’s experts suggest that that organised criminals could be increasingly looking to open fraudulent current accounts to launder money or provide a more convincing platform for targeting credit products offered by the same organisation.
Identity frauds targeting personal loans increased for the first time in four years. Seven in every 10,000 loan applications were flagged as fraudulent in 2010, up from five in 2009. Identity fraudsters were responsible for 60 per cent of these cases. Levels of identity fraud attempts to obtain new credit cards also stabilised at 19 per 10,000 applications in 2010, having fallen each year since 2006.
Experian’s analysis reveals that identity fraudsters continue to misuse the identities of the wealthiest sections of society most frequently. However, young single people living in shared and rented accommodation from all sections of society are also amongst those most targeted.
London remains the identity fraud capital of the UK, with residents Woolwich and East Ham recording the most incidents per head of population, although the fraudsters are migrating west into the Thames Valley, with areas such Reading and High Wycombe firmly on the radar.
First-party fraud, where an individual falsely portrays their personal circumstances to obtain services to which they are not entitled, now accounts for more than half of frauds attempted against credit and other financial service providers. 56 per cent of fraud detected was down to first-parties last year, up from 39 per cent in 2009. Experian’s fraud experts suggest that lower take home pay, wage freezes and unemployment may have contributed to this increase.
The biggest first-party fraud culprits emerged from the Upper Floor Living Mosaic demographic, young singles living on limited incomes, renting small flats from local councils or housing associations. This group was almost four times more likely than the UK average to attempt first-party fraud, with automotive, credit card and loans the most commonly targeted services.
There were also higher than average incidents of attempted fraud from other parts of society, in particular those classified as Liberal Opinions, a Mosaic group that contains many young, professional people who have benefited from a university education. This group attempted first-party fraud at nearly twice the average rate in 2010, primarily targeting credit cards and loans.
Experian’s geographical analysis reveals that Londoners have attempted more first-party fraud than residents from anywhere else in the UK. There were seven first-party fraud attempts for every 10,000 adults in Greater London during 2010, more than twice the rate recorded in the north west of England, the next busiest region. The London borough of East Ham was the busiest area of the UK for first-party fraud overall, experiencing 30 attempts for every 10,000 inhabitants.
Experian’s analysis of fraud data reveals that automotive finance and mortgage providers were most frequently targeted by first-party fraudsters. Automotive fraud rates were up 31 per cent on 2009 levels, with 38 in every 10,000 applications for car finance discovered to be fraudulent in 2010. More than 80 per cent of automotive fraud is first party, with more than half of it underscored by an attempt to conceal adverse credit histories.
Mortgage fraud attempts increased by 14 per cent to 32 in every 10,000 applications in 2010, with first-party fraudsters responsible for 97 per cent of cases. Attempted mortgage frauds typically involved individuals inflating the prospects or status of their employment and personal finances or not disclosing previous addresses attempting to conceal an adverse credit history.
Fraud rates in the insurance sector remain in line with full year figures for 2008 and 2009. Nine in every 10,000 policy applications and claims were detected as fraudulent, with first-parties responsible for the overwhelming majority of attempts. In 80 per cent of cases, frauds were due to non-disclosure of previous claims or other relevant information.
More than a quarter (27 per cent) of fraudulent home insurance claims made in 2010 involved a staged incident or items added to a list of otherwise genuinely stolen goods. For motor insurance, non-disclosure of claims or convictions accounted for half (48 per cent) of attempted frauds. Eight per cent of frauds involved ‘fronting’, where a parent or lower-risk friend was falsely named as the main driver.
Evidence has also emerged of identity fraudsters targeting motor insurers. More than a fifth (21 per cent) of fraudulent claims involved staged accidents where the fraudster then attempted to claim on insurance policies previously obtained using someone else’s identity.
Nick Mothershaw, Director of Identity and Fraud at Experian, comments:
“Fraud in the UK is a growing billion-pound illegal business with fraudsters resorting to innovation and inventiveness, targeting any perceived weaknesses in the system. Fuelled by the recession’s aftermath, it is likely that financial services providers could see fraud attempts rise during 2011.
“To manage the financial and reputational risk fraud presents, organisations must ensure they have the right defences in place that allow rigorous validation and verification of identities and information while still being able to provide the convenience and experience genuine customers expect.”
Product | 2006 | 2007 | 2008 | 2009 | 2010 | |
---|---|---|---|---|---|---|
Automotive finance | Frauds per 10,000 applications | 25 | 21 | 32 | 29 | 38 |
Change on previous year | – | -15% | +54% | -11% | +13% | |
Credit card | Frauds per 10,000 applications | 45 | 29 | 21 | 19 | 19 |
Change on previous year | – | -36% | -26% | -12% | +4% | |
Current account | Frauds per 10,000 applications | – | – | – | 18 | 23 |
Change on previous year | – | – | – | – | +25% | |
Insurance | Frauds per 10,000 applications | 2 | 5 | 9 | 9 | 9 |
Change on previous year | – | +195% | +57% | +9% | -5% | |
Loan | Frauds per 10,000 applications | 11 | 9 | 7 | 5 | 7 |
Change on previous year | – | -18% | -23% | -33% | 57% | |
Mortgage | Frauds per 10,000 applications | 15 | 18 | 26 | 28 | 32 |
Change on previous year | – | +17% | +46% | +6% | +13% | |
Savings account | Frauds per 10,000 applications | – | – | – | 23 | 7 |
Change on previous year | – | – | – | – | -68% | |
Source: Experian, National Hunter and Insurance Hunter |
Type | Description | Fraud risk* | % of UK pop. | % of frauds |
---|---|---|---|---|
Upper Floor Living | Young single people on limited incomes renting small flats from local councils or housing associations. Most commonly found in inner London and Scotland. | 383 | 5.18% | 19.82% |
Liberal Opinions | Young, professional, well educated people, who enjoy the vibrancy and diversity of inner city living. Found in inner London and inner areas of large provincial cities. | 170 | 8.48% | 14.40% |
Terraced Melting Pot | Young, poorly educated people living close to the centre of small towns. Some live with a partner with children. Work in relatively menial, routine occupations. | 157 | 7.02% | 11.01% |
New Homemakers | Young, single people, renting from private landlords or in starter homes for people on average incomes, often in new brown field inner city locations. | 144 | 5.91% | 8.53% |
Claimant Cultures | Some of the most disadvantaged people, many brought up in welfare dependent families. Live in large, low rise estates, often on the periphery of large provincial cities. | 111 | 5.16% | 5.70% |
Source: Experian, National Hunter and Insurance Hunter |
Town/territory | 2010: Attempts per 10,000 adults | 2009: Attempts per 10,000 adults | Year-on-year change |
---|---|---|---|
East Ham | 29.33 | 7.03 | +317% |
Stratford | 14.45 | 3.57 | +305% |
Hounslow | 13.22 | 3.61 | +266% |
Woolwich | 12.93 | 6.16 | +110% |
Ilford | 11.78 | 4.84 | +143% |
Walthamstow | 10.28 | 3.55 | +190% |
Birmingham Central | 10.27 | 5.02 | +104% |
Slough | 9.86 | 2.95 | +234% |
Ealing Broadway | 9.68 | 3.07 | +215% |
Harrow | 8.84 | 2.85 | +210% |
Source: Experian, National Hunter and Insurance Hunter |
Type | Description | Fraud risk* | % of UK pop. | % of frauds |
---|---|---|---|---|
Alpha Territory | Most wealthy and influential individuals in the UK, occupying positions of power in the private and public sectors. Many live in fashionable inner London suburbs. | 301 | 3.54% | 10.65% |
Liberal Opinions | Young, professional, well educated people, who enjoy the vibrancy and diversity of inner city living. Found in inner London and inner areas of large provincial cities. | 208 | 8.48% | 17.64% |
Upper Floor Living | Young single people on limited incomes renting small flats from local councils or housing associations. Most commonly found in inner London and Scotland. | 175 | 5.18% | 9.04% |
Terraced Melting Pot | Young, poorly educated people living close to the centre of small towns. Some live with a partner with children. Work in relatively menial, routine occupations. | 138 | 7.02% | 9.70% |
New Homemakers | Young, single people, renting from private landlords or in starter homes for people on average incomes, often in new brown field inner city locations. | 135 | 5.91% | 7.96% |
Source: Experian, National Hunter and Insurance Hunter (April 2011) |
Town/territory | 2010: Attempts per 10,000 adults | 2009: Attempts per 10,000 adults | Year-on-year change |
---|---|---|---|
Woolwich | 17.03 | 23.70 | -28% |
East Ham | 16.07 | 20.14 | -20% |
Victoria Street | 14.22 | 12.65 | +12% |
Lewisham | 13.56 | 16.37 | -17% |
Cheapside | 10.57 | 9.84 | +7% |
Reading | 9.87 | 3.30 | +199% |
Ilford | 9.68 | 9.85 | -2% |
Tooting | 9.41 | 7.05 | +33% |
High Wycombe | 9.36 | 6.10 | +53% |
Stratford | 9.08 | 10.75 | -16% |
Source: Experian, National Hunter and Insurance Hunter |
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 their 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.
Lansons Communications
Chantal Heckford / Jennifer Comerford / Duncan Skehens
020 7490 8828
chantalh@lansons.com / jenniferc@lansons.com / duncans@lansons.com
Experian is the leading global information services company, providing data and analytical tools to clients in more than 65 countries. The company helps businesses to manage credit risk, prevent fraud, target marketing offers and automate decision making. Experian also helps individuals to check their credit report and credit score, and protect against identity theft.
Experian plc is listed on the London Stock Exchange (EXPN) and is a constituent of the FTSE 100 index. Total revenue for the year ended 31 March 2009 was $3.9 billion. Experian employs approximately 15,000 people in 40 countries and has its corporate headquarters in Dublin, Ireland, with operational headquarters in Nottingham, UK; Costa Mesa, California; and São Paulo, Brazil.
For more information, visit www.experianplc.com