Gareth Shaw: Radical action needed to fight online fraud

Working for Which?, it's my job to cut through the hyperbole of the news to give people the facts.

Frank Field: "I am concerned savers are more vulnerable than ever to unscrupulous scam artists' Photo: Anthony Devlin/PA Wire

It’s rare to write a headline soaked in apocalyptic language, save, perhaps, during the financial crisis when it really did look like the world was on the verge of collapse. But last month, when we published ‘500 identities stolen a day in fraud epidemic’, I was, sadly, reporting the truth.

Fraud protection body Cifas reported that 90,000 identities had been stolen in the first six months of 2017 – the highest level on record.

Sign up to our Business newsletter

Sign up to our Business newsletter

Four out of every five (83 per cent) cases of ID fraud had been perpetrated online.

In this column over the past few months, I’ve talked about the need for government and regulators to clamp down on the rising threat that fraud poses to our financial wellbeing.

Over the past couple of weeks, things have kicked into gear. The Department for Work and Pensions announced a clampdown on pension cold calls, texts and emails in the face of losses of more than £40m to pension-related fraud, in addition to blocking transfers of certain types of pension schemes.

And now MPs are probing 2015’s pension freedoms, to see whether they have left savers more exposed to fraud. The Work and Pensions Committee chairman Frank Field MP stated that: ‘‘I am particularly concerned that savers are more vulnerable than ever to unscrupulous scam artists. This policy must not become the freedom to liberate people of their savings.”

This is solid progress and could help limit the exposure to scams that have been blighting pension savers and investors – from the early-access scams that could see you losing as much as 85 per cent of your pension to the bogus investments that see your savings disappear into thin air.

But once you’ve been convinced by a fraudster to make a seemingly sensible and potentially lucrative investment, the money has to go somewhere. And identity fraud is driving the back end of these fraudulent transactions, with con men increasingly stealing identities to open bank accounts to get hold of their ill-gotten gains.

Most worryingly, it can be easier than you think to have your identity stolen. Our most recent investigation ‘data-swept’ 10 volunteers, combing through their social media profiles and personal websites if they had them, official, publicly available information sources such as the Land Registry, Companies House and the electoral roll, and commercial services, such as ancestry sites.

These were all source of information that were freely available, or cost us a few pounds to get at the data – and were all found online. In 50 per cent of our attempts, we were able to find full names, addresses, birthdays, mother’s maiden names and places of birth – all pieces of information, the police told us, were enough for fraudster’s to apply for a bank account online, where there’s sometimes no need to submit physical documents to open an account.

Electronic checks are robust – comparing your identity data against national databases and your credit file. All major banks say they use a variety of other sophisticated factors to ensure the person who is opening a bank account is genuine.

But even these can be duped. The police told Which? Money while online banking increases convenience for consumers, the absence of having to provide physical identification is an ‘advantage for criminals’.

We spoke to one victim, who returned home one day to find a welcome pack from a bank on his doorstop – despite never having applied for an account. An overdraft facility had been set up, with the option of being able to transfer the funds to another account. The bank told our victim that the account had been set up using their name, date of birth and address.

And almost on a weekly basis, I hear from members, colleagues and friends who have had similar experiences. One friend recently came home from holiday to find that she was more than £14,000 in debt from a variety of bank account and credit card applications taken out in her name, subsequently stolen from a shared mailbox.

Last year, the government launched a Joint Fraud Taskforce to help tackle the rise in fraud, and protect consumers and businesses from financial fraud. We’ve pressed it to have an ambitious agenda, and we’re not the only ones. In July this year, the National Audit Office said that more needed to be done to tackle online fraud in particular.

Our most recent investigation shows how our digital lives have provided a harvest for criminals to reap. And while I certainly don’t relish writing apocalyptic headlines about the financial world, I suspect there will be plenty more to come unless radical action is taken.