Fighting rising tide of fraud

Do you feel as if everyone you know has been affected by credit card or bank account fraud? It's not surprising - you have a one in three chance of being the victim of a credit card fraud. According to Mastercard, the UK has become the fraud centre of the world.

The Association for Payment Clearing Services (APACS) blames the rate of fraud on the high number of cards in issue and the amount we use them. Spokesman Mark Bowerman adds: 'Organised crim inals regard it as low-risk, high-return crime. Improvements in technology have made it an arena they can use to get money to fund other more serious crimes.'

Our credit card technology is 11 years behind that of France, which cut card counterfeiting dramatically by introducing microchips to its cards in 1992. Even Eastern European credit card customers benefit from chip and Pin technology that is only just beginning to be introduced in the UK. This, combined with our carelessness in the way we use credit cards and treat financial documents, has made Britons easy targets for fraudsters.

Counterfeiting of cards is still the biggest source of fraudulent transactions, costing £161 million in the year to June. But 'card not present fraud', where a fraudster uses your card numbers on the internet or over the telephone, is catching up fast, costing £109.6m over the same period. It is expected to become the main focus of fraudsters next year, when the widespread introduction of chip and Pin cards makes counterfeiting impossible.

To carry out this type of fraud all a criminal needs is a statement, counterfoil or receipt - any paper that provides your name and account numbers. 'It's easily done,' says Mark Bowerman, a spokesman for APACS. 'Bin-diving is probably the most common source of this information - sorting through people's rubbish to find all the information that they should shred or burn rather than throw away.'

Sometimes the details can be bought from corrupt shop assistants. Mary, a mother of two from Streatham in South London, recently had £300 stolen from her current account after she went shopping in Croydon. That evening someone used her Switch card details to order an Indian takeaway from a Croydon restaurant - and repeated the order on three further occasions that week. Mary says: 'We like curry, but not that much. We normally only spend about £20 if we order a takeaway.'

Provided cardholders remain vigilant and spot fraudulent transactions on their statements, their bank or credit card company will refund the money. But the cost is inevitably passed on to them in other ways. In the case of 'card not present' transactions, the card companies hold retailers responsible. No doubt the citizens of Croydon are now paying a few pence more for their Indian takeaways.

Fraud also causes great inconvenience and stress to the victim. In Mary's case, her debit card was cancelled and she was unable to withdraw cash for 10 days until her new card arrived.

Some credit card companies and banks are working hard to reduce the opportunity for fraud. Barclaycard, which has a 250-strong team working on the detection of it, has developed technology that enables the retailer to check the last three numbers on the card's signature strip and whether the card holder's address is the same as the one given by the person making the purchase. However, the technology costs £10 to £20 a month - which many retailers consider too high.

Mastercard is working on a new chip and Pin system which involves slipping the card into a machine the size of a calculator and typing in a Pin number. This generates a special six-figure number that the cardholder reads out to the retailer over the phone or types on to the computer, enabling the retailer to check with the credit card company that the transaction is valid.

First Direct uses a system that monitors customer spending patterns and compares them with the patterns of identified fraud. If a suspect transaction crops up on a customer's account, First Direct contacts the customer to confirm whether the transaction is genuine. In some cases it may place a block on the card so that transactions can not be authorised unless the person presenting the card has been verified by answering security questions.

There is also an increase in the theft of new cards and cheques from the post. Bowerman says: 'Organised criminals may be putting people into positions of trust in the postal service.' A working party of banks, the Post Office and secure delivery companies is trying to tackle this problem.

In the meantime Barclaycard is using several techniques to limit thefts. Spokesman Ian Barber says: 'Cheques are only mailed to one in five customers in any given month. This means fraudsters would have to intercept a large amount of post to find what they are looking for.' The company sends out new cards and chequebooks to areas that have high incidence of theft - such as London, Manchester and Birmingham - in disguised envelopes, or uses secure-delivery firms to make sure the envelopes reach their destination.

How to get your own back

There is plenty that customers can do to reduce
fraud. Experian suggests the following steps:

1. Shred or burn your financial statements and
receipts once you have finished with them.

2. Check your receipts against your statements. If
you find an unfamiliar transaction, contact your
bank or credit card company immediately.

3. Never disclose your personal or financial details
to anyone who cold-calls or emails you, even if
they purport to be from your bank. No genuine
bank will ask for this type of information from you
in this way now.

4. Use different passwords for different accounts.
Even if a fraudster gets hold of one password, it
won't give him access to all your accounts.

5. If you move home, redirect your mail from day
one. The new occupants will probably just bin
your mail, making it vulnerable to fraudsters.

6. Check your credit report from time to time to
make sure a fraudster has not opened an account
in your name. Experian's Consumer Help Service
costs ?2. Call 0870 241 6212.

7. If you are expecting a new credit card or
cheque book through the post and it hasn't
arrived, report this to your bank or credit card
company.

8. Beware anyone standing too close or using a
mobile phone while you are using a cash
machine. Mobiles are often used to record PINs. If
there is anything wrong with the machine, or a
stranger starts trying to give you advice about
using it, walk away.