Stay vigilant to avoid the fraudsters' trap

"Fraud is a serious crime that devastates lives and often funds more organised crime like drug smuggling and people trafficking," says Dr Bernard Herdan, head of the National Fraud Authority, which runs Action Fraud, a reporting centre for victims.

He says that people often feel embarrassed that they have become a victim but they should not. Nine per cent of calls to Action Fraud last month were from Yorkshire.

The most common frauds involve online shopping and auction sites, followed by advance fee frauds under which applicants are asked to pay for a service, such as a loan arrangement which they never receive.

Other fraud activities include 'boiler-room' sales of worthless shares. Recently Bernie Madoff made the headlines for creating a Ponzi scheme worth 40bn. This scam is named after Charles Ponzi who almost 90 years ago created an investment business that appeared (and was) too good to be true. It offered improbable returns that pull in fresh money from perhaps naive investors. When investors called in their money in times of crisis, the bubble burst.

Now is just the time to be on your guard. When conventional savings returns are poor and credit is tight, fraudsters have a field day.

One of the newest scams targets people who have taken out loans. The fraudsters – often from a company with a similar name to an existing loan firm – send out letters claiming the recipient has missed a repayment deadline and now owes the original debt plus more money.

Many become victims to this ruse by sending the requested money to the fraudsters but then find they still owe the original company.

Adopt some simple rules to protect against this type of fraud:

check original paperwork and contact the company you took the loan from to confirm repayment dates;

ask questions as legitimate staff should not pressurise or be elusive;

don't stay silent. If you have been targeted by a fraudster and lost money, contact Action Fraud (0300 123 2040) and the police

The National Fraud Authority, established two years ago, is the Government's strategic lead organisation on counter-fraud activity in the UK. It provides a single point of contact for fraud victims where they can both report a fraud and seek guidance.

Advance fee fraud is also on the rise. When banks decline to lend, borrowers often turn to risky alternatives. This is where exceptionally good terms are offered with the small proviso that a modest arrangement charge is paid in advance.

The source of the funds is opaque. The victim pays the up-front fee before discovering that the loan is not forthcoming.

There are even scam tax websites with 180 closed down in the last quarter. HM Revenue and Customs say they only ever contact taxpayers who are due a refund by post. Yet people fall victim to income tax 'phishing' emails.

With online banking increasingly popular, amounting to 74 per cent of the population according to a recent ICM survey, vigilance to watch for unusual activity is important. Fraud losses this way jumped 18 per cent last year to 59.7m, according to the trade body UK Payments Administration.

The cyber criminals' favourite weapons are Trojan viruses. In one recent example, the virus checked to see how much cleared money was in the account, stole it and gave the customer a fake bank balance so that the operation remained undetected for some time.

Mobile banking – free now from Lloyds TSB – is the new technology, allowing customers to check their balance and recent transactions, receive text alerts and move money between accounts. However, to combat fraud, ensure:

password-protect your mobile and lock the phone when it is not in use;

delete text messages from your bank;

never disclose personal information about your accounts via text message;

if your mobile number is changed or phone lost, immediately contact your bank.

Credit card issuers could certainly cut fraud if they stopped posting cards and required users to collect and sign for them with documentary identification, as well as placing photographs on. This would also give them an opportunity to sell another financial product.

They should also pursue all fraud through the courts and not immediately write-off sums below a certain value.

The person who committed such an activity – perhaps 20 on a petrol bill – is unlikely to make this an isolated incident. They could be managing several hundred such fraudulent transactions in one session. Since the victims are likely to have different plastic cards, the issuers are unlikely to be aware of systematic fraud.

If loss on a card occurs where the correct personal identification number (PIN) was used, a bank should not refuse to make a refund.

You can become a victim through a variety of ways including a hidden camera focused on an ATM and a device planted at a chip-and-PIN payment point.

The regulations state that a bank must provide evidence that the client was negligent or acting fraudulently. In any difficulty, quote the Payment Services Regulations (section 59.2) which replaced the Banking Code.

There is a growing fraud in online ticket sales. One in 12 who visits a festival says they have been conned into purchasing counterfeit or non-existent tickets.

The fact that a firm is at or near the top one when searching or has a sponsored link on Google is no protection. Look for positive reviews of agencies, read their own websites (including a landline number and refund policy) and check for membership of the Society of Ticket Agents & Retailers (star.org.uk). Pay by credit card in order that there is protection over 100.

Unlike a debit card, a credit one means the issuer and retailer are jointly liable above this sum. If necessary, cite the Consumer Credit Act, section 75.

If duped by a sponsored website link, ask the provider to remove it. Specific advice is available from Consumer Direct, the Government-funded service (08454 040506) and Trading Standards but the latter cannot close down websites.