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Author: Don Obrien

UK bank account and loan fraud soars in pandemic


Financial fraud updates

Bank account and loan fraud has soared in the UK during the pandemic as criminals sought to target British businesses and consumers in the lockdown and exploit government support schemes.

Loan fraud rates rose 40 per cent in the second quarter, according to Experian, their highest level in the past three years. This was almost two-thirds higher than the same period last year.

First-party fraud related to loans — when customers apply with no intention of paying or for more favourable terms using false details — rose almost a fifth.

Using data from the National Hunter Fraud Prevention Service, which monitors bank application fraud, Experian also said that fraudulent openings for savings accounts were three times the rate in the previous quarter, and five times when compared with the same quarter last year.

Eduardo Castro, head of identity and fraud at Experian UK&I, said there had been a “substantial increase in fraudulent activity”.

“Scams relating to the pandemic — such as those where individuals are duped into transferring money online — have increased and fraudsters are typically trying to open savings accounts in order to receive these deposits,” he said.

UK banks are also braced for a wave of loan fraud in the next 18 months by perpetrators that have used the government’s £47.4bn “bounce back” coronavirus support scheme.

Government-backed loans of up to £50,000 were available from high street banks with only light checks made on applicants, which is expected by many bankers to cost the taxpayer billions in fraud and defaults.

Bankers have told the Financial Times that so far between 5 per cent and 10 per cent of businesses that used the scheme have missed repayments, which could add up to as much as £5bn.

Most of this loss is seen in companies that have gone bust or struggled during the pandemic, rather than fraud. Senior bankers have told the FT they are concerned more fraud will be uncovered once government support measures such as the furlough scheme come to an end.

Experian said fraudsters were using bank accounts to facilitate criminal behaviour. The rise was also attributed to better technology that has helped businesses identify more fraud.

Castro said fraudsters assumed that a savings or current account was a “relatively straightforward” way to receive and quickly distribute illegally obtained funds, as well as giving access to other financial services.

He added: “New technologies are helping firms to flag potentially fraudulent activity right at the beginning of the application and account opening process.”



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