Online banking fraud losses decline in the UK

Fraud detection software and increased consumer awareness have helped cut losses

Online banking fraud losses in the U.K. fell 32 percent in the first half of the year, according to figures from U.K. banks released on Wednesday. The decline is due to the increased use of fraud detection software by banks, an industry group said.

Fraud losses in online banking totalled £16.9 million (US$26.2 million) for the first half of the year, compared to £24.9 million a year earlier, according to figures from the U.K. Cards Association and Financial Fraud Action U.K.

Banks are increasingly using more layers of security for transactions, said Doriena Koldenhof, spokeswoman for Financial Fraud Action U.K. For example, many U.K. banks have now issued devices to their customers that generate one-time passcodes, used to authorize some kinds of transactions.

Another reason for the drop is increased awareness of computer security among consumers, Koldenhof said. People are more aware of the need to update computers with the latest patches, she said.

The figures come as U.K. police announced earlier this week the sentencing of the last defendant in an extensive online banking fraud ring composed of 13 individuals living in the U.K. from the Ukraine, Latvia, Belarus and Georgia.

Police said the ring the ring stole at least £2.8 million from online bank accounts between September 2009 and March 2010, and attempted to steal as much as £4.3 million.

The U.K.'s Police Central e-Crime Unit said in September 2010 that the gang infected banking customers' PCs with an advanced piece of malicious software called Zeus, using it to steal their passwords as they logged in to banks including HSBC, RBS, Barclays and Lloyds. The gang then used those credentials to transfer money to accounts they controlled.

While online banking losses fell, another type of fraud rose: phone banking scams. That fraud totalled £8.6 million for the first half of the year, a 48 percent rise over the same period a year before.

The scam involves calling banking customers and tricking them into believe they are speaking to either bank staff or law enforcement and there are a few different variations. A scammer will call the victim and say that their card is due to expire, and to activate their new card, the victim should enter their PIN into the phone.

On the scammer's side, the audio tones are then analyzed to figure out the PIN. Another bolder variation is when the scammer shows up at the victim's home pretending to deliver a replacement card, which is a fake. The person's real card is collected, which is then used for fraud when the victim is tricked into divulging its PIN.

Send news tips and comments to jeremy_kirk@idg.com

Tags UK Cards Associationsecurityfinanceindustry verticalsfraudFinancial Fraud Action UK

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Jeremy Kirk

IDG News Service

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