“Fraud skyrockets as cost-of-living crisis begins to deepen” reports Cifas

In the first nine months of 2022, over 309,000 cases were recorded to the National Fraud Database. That’s a 17% rise compared to last year. This also marks an 11% increase on pre-pandemic levels.

This particular increase was mainly driven by the rise in false application and identity fraud, up by 45% and 34% respectively, heralding a grim outlook for finances in the upcoming year.

Cases of false applications – where a product or service is applied for using material falsehoods, often with false supporting documents – have surged as individuals alter bank statements or fake tax returns to inflate their income in order to secure mortgages, loan products or services, as well as goods. They risk overextending themselves, defaulting and falling into an unaffordable debt spiral. This type of fraud holds serious consequences with individuals risking being added to the National Fraud Database, which can severely impact their ability to take out a future loan or mortgage.

Identity fraud

The figures also reveal that more people have reported being a victim of identity fraud, which has increased by nearly a quarter (23%) when compared to pre-pandemic levels. Given tough economic conditions as more individuals look to use credit, they may check their credit reports more often and flag suspicious activity with their lender and credit reference agencies, potentially helping to uncover the fraud earlier.

Criminals tend to target those with longer credit histories since they can illustrate repayment behaviour over time and are thought to be more credit-worthy. However, criminals are now seeking to widen their net, using phishing and smishing scams offering anything from fake energy discounts or cost-of-living payments to fake tax rebates and delivery scams. These scams harvest personal and financial information via social media posts offering people help with their finances and instructing them to access their credit files, all so that criminals can identify their victim’s credit profile.

Facility takeover – where a fraudster gains access to the accounts of innocent victims – now accounts for 8% of fraud cases, with a significant increase in criminals targeting debit and credit cards, or requesting and stealing phone upgrades under existing customer’s names. As the festive season approaches, so too established shopping events like Black Friday and Cyber Monday, consumers are advised to take a moment and exercise caution before sharing their personal and financial information.

Misuse of bank accounts remains a key concern, with 68% of cases having intelligence that indicate mule activity, mostly for those between the ages of 21 and 30. Social media platforms including LinkedIn are being abused to offer scam ‘work from home’ opportunities, targeting those in financial difficulty and in particular single parents.

Risks to business

As belts tighten, businesses also face increased risks, with figures from the Cifas Internal Fraud Database (IFD) showing cases of fraud carried out by staff against their employer up by a quarter compared to the same time last year. Examples of dishonest actions, which are up by 8% this year, include a rise in those stealing cash from their employer and manipulating accounts.

Financial pressures may have led some employees to supplement their income by fraudulently overclaiming overtime or expenses claims, all supported by false documents. Examples include cancelling hotel bookings and asking for the refunds to be directed to personal accounts or submitting false payment dispute claims.

IFD figures also reveal a 48% increase in people unsuccessfully trying to deceive potential employers by concealing adverse credit and employment histories to gain access to organisations and businesses. This year has also seen an uptick in the theft of company equipment, with devices such as laptops or phones not being returned by departing staff and, in some cases, subsequently sold via online marketplaces.

Financial tightrope

Mike Haley, CEO of Cifas, said: “As the cost-of-living crisis deepens, many households are walking a financial tightrope from month to month. Identity fraud increasingly presents a more serious risk to ordinary people, while the distress of criminals gaining access to bank accounts, cards or phone contracts continues to affect thousands.”

Haley continued: “We know that fraudsters will increase their activity to take advantage of shoppers ahead of Black Friday and the festive season. Now, more than ever, consumers must be vigilant of offers that feel too good to be true and question every time they are asked to provide their personal and financial information. Businesses should also tighten up their counter fraud processes as the economic downturn corresponds with an increase in staff engaging in fraud.”