2014: a good year for the fraudsters
2014 looks to be a good year for fraudsters as government and law enforcement struggle to come to terms with the issues and the continuing spread of mobile continues to offer them poorly-protected targets.
“Every year it gets harder to predict the trends for the coming year as the government continues to chop and change its various approaches to fraud, rather than addressing the issues and planning for the future – where there is so much happening,” said Bill Trueman, chief executive of fraud and risk management consultancy UKFraud. “Sadly, as a result, fraudsters can feel quite optimistic about 2014 as without clear plans strategies and direction to deter or to defeat them, many now believe that the UK has become an attractive and welcoming place for their activities.”
UKFraud says that the UK Cabinet Office’s Fraud, Error & Debt Taskforce “will have to work hard to deliver both a strategy and results” as it moves to replace some of the work of the National Fraud Authority, which started out in 2005 with “credible strategic targets that were eroded over the years” and will close at the end of March 2014.
Announcing the decision to close the NFA at the start of December, Home Secretary Theresa May said that the new National Crime Agency will take over strategic development and threat analysis, while other functions will be spread out among the City of London Police, the Home Office and the Cabinet Office.
May said that the changes “will strengthen the government’s fight against economic crime by concentrating effort into law enforcement bodies”.
UKFraud, however, is predicting that the police will actually investigate fewer fraud cases in 2014, and this “will hit the media as a new scandal, when we learn that a great deal more ‘lower level’ fraud will occur, such as elderly folk being increasingly scammed out of life savings – this includes the phone lines being left open for dummy calls to be made to fraudsters acting as bank staff’ scam”.
Such cases are often reported to Action Fraud, which is being taken over by the City of London Police. “It will be interesting to see what percentage of those reported are subsequently passed to and investigated by police and whether this increases or decreases over 2014,” says UKFraud.
The NFA had also set out plans for data-sharing initiatives, and some observers are concerned that some of the benefits of its approach will be lost as new initiatives emerge in 2014. “Private sector involvement will potentially be downgraded because of a fear of commercial exploitation, and with the demise of the NFA there is a chance, some believe, that elements of the public sector may even consider going-it-alone in 2014,” the company says.
Trueman said “a wholesale change in culture and the current approach” is needed to address the issues. “We are all victims as we all (except the fraudsters) pay taxes, pay for banking products and for insurance services, and we even get attacked directly too. With up to £1,000 fraud a year against every person in the UK for fraud, we have to ‘take the gloves off’ and take much more radical action as soon as possible,” he said.
To succeed in 2014, the Cabinet Office will have to focus on “setting and delivering against aggressive targets and on developing a clear strategy in all areas where fraud is found … to do this effectively in 2014 they will now feel the need to work with more fraud and risk strategists tilting the balance away from just civil servants and ex-policemen/investigators. If this happens, then there is a chance that real progress could be achieved both in the public and private sectors”.
Many of the mobile payment start-ups created in the past few years “have been created on the back of poor infrastructure” and will fail when they are attacked by fraudsters. “They will lose millions because of inadequate IT security, poor infrastructures and often a lack of effective authentication and thinking,” says UKFraud. “Many such ‘time bomb’ companies are backed by major organisations and venture groups that have rushed-in without proper or in-depth due diligence. Another minor dot.com bubble is potentially on the way.”
The good news is that the European Payments Council “is working extremely hard” to set standards for mobile payments and mobile wallets. “While [the EPC is] at the consultation stage, they do seem to understand the market issues; so 2014 should see them start to develop direction and strategy. If they do not, then by the end of the year, the chances are that others will have to take a lead – such as the UK Payments Council, the UK government or other bodies. However, there is little clear leadership in the UK on this direction at the moment.”
Authentication technologies, such as the fingerprint recognition introduced on the latest iPhones will also start to proliferate, as vendors and service providers incorporate them in their offerings. “Growth in 2014 will come from many existing sectors, as well as new sectors building the technologies into their evolving products to add new layers of checking. Early adopter and innovator customers will start to use this to validate user’s technology at the core of their financial product offerings,” says UKFraud. “This will kick start a whole new IT and mobile product development lifecycle.”
One legacy of the outgoing NFA that UKFraud would like to see cleared up is the statistical basis of many of the claims made in this area, particularly in the public sector. “Given that we have seen a supposed doubling of fraud each year for five years according to NFA figures, we will probably see a desire to clarify what the real levels are rather than relying solely on these estimates,” it says.