Security Briefing – 6th April 2009

Internet fraud reached record highs in 2008, with complaints 33 percent higher than in 2007, according to a report in the United States. The Internet Crime Complaint Center (IC3), a partnership between the Federal Bureau of Investigation (FBI) and the National White Collar Crime Center (NWC3), stated that the total reported loss linked to online fraud in 2008 stood at $US265 million ($369 million). The report identified the non-delivery of merchandise and/or payment as the most reported internet fraud complaint.

Internet fraud likely to be far higher than reported levels

John Kane, research manager at NWC3, warned that 2009 internet fraud complaints were at a higher level than ever before, with a 50 percent rise in March alone. Social networking sites and instant messenger services were identified as increasingly popular locations for scams. Mr. Kane estimated that only about 15 percent of cyber-fraud cases are reported to crime control agencies, meaning that the IC3 report only shows the tip of the iceberg in regard to the scale of online fraud. FBI Cyber Division Assistant Director Shawn Henry warned that online fraud schemes would continue to flourish as more financial data migrates to the internet.

The UK’s Association for Payment Clearing Services (Apacs) announced on 19 March that losses on cards rose by 14 percent in Britain in 2008, while online banking fraud increased by 132 percent. Losses on cards totalled £610 million ($1.27 billion) in 2008, up from £535 million ($1.11 billion) in 2007. Apacs stated that the most significant increase in card fraud had been with fraudsters using British cards in countries without chip-and-pin services (such as the United States).

Meanwhile, the assistant governor of the Reserve Bank of Australia, Philip Lowe, stated on 24 March that internet fraud involving cards had increased by over 50 percent in the past year. Lowe called for security improvements to online payment systems, warning that consumer confidence in online transactions would inevitably decline if the current high levels of fraud continued.

International Operations Group - Analysis

The economic slowdown has led to an increasing temptation for consumers to seek online financial deals in an environment where there are a rising number of online fraudsters. There has been an enormous increase in the number of people making online purchases and conducting internet banking and therefore a huge increase in the potential for online fraud to occur. However, the figures show that consumers are not paying enough attention to the security risks involved with online financial transactions. Businesses and individuals should remain constantly vigilant of the increasing risk of internet fraud. Effective and up-to-date security procedures should be enforced as fraudsters will react to technology developments faster than consumers.

International Operations Group provides intelligence and security support for corporate and individual clients across the globe. Our team includes experienced specialists in fraud detection, fraud recovery and fraud risk management. Please email intel [at] interopsgroup [dot] com for further information.

For more information on our fee-based intelligence updates or bespoke reporting, please email Rob Stevenson - rob [at] interopsgroup [dot] com. Rob can also be telephoned on +61 [0] 420 244 909.