• Chip and PIN reduces counterfeit and lost and stolen fraud by £58.4m - down 24%
• Reduction in all card fraud types except card-not-present (internet, phone and mail order) fraud which rose by £32.4m - up 21%

Figures released today (7 March 2006) by APACS, the UK payments association, show total card fraud losses fell by 13% compared to 2004 (£439.4m in 2005 compared to £504.8m in 2004). This fall is attributed to chip and PIN which has already resulted in a reduction of nearly £60m in combined counterfeit and lost and stolen card fraud losses – a fall of 24% - and in mail non-receipt fraud, which fell by 45%.

Plastic card fraud losses on UK-issued cards split by fraud type

Fraud Type	2005 (+/-change on 2004)	2004	2003
Counterfeit (skimmed/cloned) card fraud	£96.8m (-25%)	£129.7m	£110.6m
Fraud on stolen or lost cards	£89.0m (-22%)	£114. 5m	£112.4m
Card-not-present fraud (phone/internet/mail)	£183.2m (+21%)	£150.8m	£122.1m
Mail non-receipt	£40.0m (-45%)	£72.9m	£45.1m
Card ID theft - fraudulent applications Card ID theft - account takeover	£12.4m (-5%) £18.1m (-24%)	£13.1m £23.8m	£15.3m £14.9m
TOTAL	£439.4m (-13%)	£504.8m	£420.4m

The only area of card fraud to rise was that on internet, phone and mail order transactions - known as card-not-present or CNP fraud - (to £183.2m from £150.8 in 2004 – up 21%).

However, the rate of increase has fallen for the first time since 2003* in part thanks to the increased use by retailers of checks on cardholder addresses and the three extra digits on the signature strip, and also online initiatives like Verified by Visa and MasterCard SecureCode.** 

The next significant step in further protecting these non-face-to-face transactions will be to use chip and PIN security. This could, for example, involve customers using a chip and PIN card inserted into a small handheld reader and tapping in their PIN to generate a one-off number to verify each transaction. Cardholders can also greatly protect themselves against phone, internet and mail order fraud by taking good care of card and card details in the real world, which is where fraudsters most often get hold of this information. A simple checklist for cardholders is available from www.cardwatch.org.uk.

Fraud on a card stolen before the genuine cardholder receives it (mail non-receipt) fell sharply in 2005 (down by 45% to £40m) mostly because it has become more difficult for fraudsters to use stolen cards without the PIN, but also because less cards are being sent out than at the peak of the chip and PIN rollout. Chip and PIN is also impacting on cash machine fraud - helping combat skimming and pin-hole camera fraud and, as a result, losses at cash machines fell by 12% to £65.8m (£74.6m in 2004).

Following rises in previous years, 2005 also saw a fall in the level of card ID theft. Fraud caused by either account takeover or fraudulent applications fell by 17% to £30.5m (£36.9m in 2004). Card ID theft in the UK remains a very small proportion of overall fraud at just under seven percent.

As well as card fraud, organised gangs focus on other types of financial crime, notably online banking fraud and cheque fraud. Online banking fraud losses reached £23.2m in 2005 – almost double the previous year’s losses of £12.2m. These losses are mainly the result of phishing scams, where customers are duped into disclosing personal security information. Help and advice about preventing all types of online banking fraud is available at www.banksafeonline.org.uk. The site also contains updates on the latest scams, and enables consumers to report any suspicious e-mails or websites. Cheque fraud losses fell from £46.2m in 2004 to £40.3m in 2005 (a 13% drop).***

Sandra Quinn, director of corporate communications at APACS, comments “Seeing card fraud losses come down is cast-iron proof that chip and PIN is doing its job. Back in 2002 we forecast that fraud would have risen to £800m in 2005 if we didn’t make the move to chip and PIN so it’s heartening to see total losses well beneath this figure.

Of course, whilst our cards are safer than ever before, the fraudsters clearly aren’t going to give up so neither will we. Now chip and PIN is in place the banking industry is discussing how to leverage chip and PIN to better protect card-not-present transactions and we hope this will lead to progress later this year about what this means for cardholders and retailers.”

ENDS

Sandra Quinn, Director of Corporate Communications
Tel:  020 711 6234                Email: sandra.quinn@apacs.org.uk
Mobile: 07768 044656

Jemma Smith, Head of PR
Tel:  020 7711 6340                Email: jemma.smith@apacs.org.uk
Mobile: 07811 113075

Mark Bowerman, Communications Executive
Tel: 020 7711 6251                Email: mark.bowerman@apacs.org.uk
Mobile: 07799 627256

Simon Bennett, PR Assistant
Tel: 020 7711 6316                E-mail: simon.bennett@apacs.org.uk

NOTES TO EDITORS

*           The rate of increase of card-not-present (CNP) fraud has decreased for the first time since 2003: Between 1998 and 2002 CNP fraud increased by an average of 78% per year.

CNP total losses

2003 - £122.1m (+11% increase)
2004 - £150.8m (+24% increase)
2005 - £183.2m (+21% increase

**          Verified by Visa and MasterCard SecureCode are e-commerce solutions that enable cardholders to authenticate themselves when shopping online at participating merchants through the use of a private password or code. More information is available at www.visaeurope.com/verified and www.mastercard.co.uk/securecode

***        From 2004 the collection of cheque fraud data moved to APACS from British Bankers’ Association and because of some slight membership differences between the two organisations (APACS collects from more institutions) the annual figures from 2004 are not directly comparable

1.         APACS is the UK payments association. It provides the forum for the UK's financial institutions to come together on non-competitive issues, to develop banking systems for the future and to provide innovation and developments in payments. It is also the banking industry voice on payments issues such as plastic cards, payment fraud, cheques, electronic payments and cash and is the banking organisation coordinating chip and PIN roll-out. Card Watch is the UK banking industry's fraud awareness body that works with police, retailers and organisations including Crimestoppers to fight plastic card fraud.

2.         Plastic card fraud losses (£m) on UK-issued cards split by UK region

Region	2005 (+/- change)	2004	2003
South East (incl. Greater London)	£208.7m (-13%) £130.0m (-26%)	£239.3m £176.5m	£184.4m £134.4m
North West	£29.6m (-23%)	£38.4m	£24.8m
Yorkshire & Humberside	£27.8m (+16%)	£24.0m	£17.7m
East Midlands	£23.5m (-23%)	£30.7m	£19.0m
West Midlands	£21.4m (-14%)	£25.0m	£22.9m
Scotland	£14.1m (-16%)	£16.7m	£14.7m
South West	£11.3m (-11%)	£12.7m	£11.3m
North East	£7.5m (-7%)	£8.1m	£6.7m
East Anglia	£6.6m (-27%)	£9.0m	£6.9m
Wales	£5.3m (-28%)	£7.3m	£6.6m
Northern Ireland	£0.8m (-24%)	£1.1m	£1.3m
UK total	£356.6m (-13%)	£412.3m	£316.3m
Fraud abroad	£82.8m (-11%)	£92.5m	£104.1m
Total all UK cards	£439.4m (-13%)	£504.8m	£420.4m

3.         Fighting back – card fraud initiatives:

Chip and PIN was introduced into the UK by the banking industry and retailers to combat lost and stolen and counterfeit credit and debit card fraud.

A specialist London–based police unit (the Dedicated Cheque and Plastic Crime Unit) is sponsored by the UK banking industry to target organised card and cheque fraud gangs and to act as a centre of excellence for other police forces around the country.  By mid-2005 the Unit had made estimated fraud loss savings of over £100m.

The UK banking industry works with a number of partners to tackle, prevent and develop new technologies to fight all types of card fraud. There is ongoing work with retailers and card-accepting businesses, the Home Office, Royal Mail and law enforcement agencies to tackle identity fraud, mail non-receipt, cash machine and card-not-present fraud.

Businesses accepting CNP transactions have a number of ways they can protect their business. APACS has produced guidelines to help businesses prevent CNP fraud, available in a number of formats. The publication Spot & Stop Card-not-Present Fraud can be downloaded from www.cardwatch.org.uk. This site contains an e-learning version of the guide, which is also available to order as a CD-Rom.

More information about all of APACS’ card fraud prevention work can be downloaded from www.cardwatch.org.uk

4.            Phishing
Phishing is the name given to the practice used by fraudsters who send e-mails at random that seem to come from a genuine online bank or business, in an attempt to trick customers of those companies into disclosing personal security information, typically at a bogus website operated by the fraudsters. You can prevent yourself from becoming a victim of phishing by being wary of all unsolicited e-mails, even if they appear to originate from a trusted source. Although your bank may contact you by e-mail, it will never ask you to reconfirm your login or security password information by clicking on a link in an e-mail and visiting a website. The phishing problem is exacerbated by people who are duped into allowing their bank accounts to be used to transfer money stolen from other peoples’ accounts on behalf of bogus companies set up by fraudsters. This is a money laundering practice commonly known as acting as a “money mule”. For more information, visit www.banksafeonline.org.uk

5.         TOP TIPS FOR SAFE CARD USE AND ONLINE BANKING

Take the following steps to protect yourself from all types of card fraud and to bank online with confidence:

• Don’t hand over valuable card or bank account information to the fraudster. Fraudsters target cards and card details so try not to let them out of your sight. Don’t give away your PINs or bank passwords to cold callers or in response to unsolicited phone calls or e-mails (known as phishing scams). Never write down your PIN and keep it with your card.
• Keep your cards and card details safe in the real world. Most internet, phone and mail order fraud happens because card details are stolen in the real world, so keep them safe at all times. Despite chip and PIN you will still have a signature strip on your card and you should always sign the back of your card.
• Always check your statements. Check statements as soon as you receive them. If you find a transaction on your statement that you did not make, contact your bank or card company immediately. Tear up, or preferably shred, any documents that contain information relating to your financial affairs.
• Sign up whenever you are given the option whilst shopping online to Verified by Visa (www.visaeurope.com/verified) or MasterCard SecureCode (www.mastercard.co.uk/securecode). Increasingly when you go to pay online with your card you will be given the option of signing up to these schemes that involve you using a password. By signing up you will prevent a fraudster using your card details on participating sites as they will not know your password.
• Online shopping: Only shop at secure websites: ensure that the security icon – the locked padlock or unbroken key symbol – is showing in the bottom of your browser window before sending your card details. The beginning of the retailer’s internet address will change from “http” to “https” when a purchase is made using a secure connection. Make sure your browser is set to the highest level of security notification and monitoring: the safety options are not always activated by default when you install your computer. The most popular browsers include Microsoft Internet Explorer, Firefox and Opera. Check that you’re using a recent version – you can usually download the latest version from these browsers’ websites.
• Only ever use a protected computer. Make sure your computer has up-to-date anti-virus software and a firewall installed. Visit www.getsafeonline.org for more information.

Visit the websites www.cardwatch.org.uk and www.banksafeonline.org.uk, www.getsafeonline.org, www.identitytheft.org.uk for more information about how to shop and bank safely online.