Unsocial Networks: Fraudsters are using sites such as Facebook to lure victims
Smartphones and social networking coupled with illicit money transfer are making it easy for fraudsters to exploit members of the public. Figures released last week point to a growing £400m-a-year problem as naive and vulnerable individuals are being lured into cyber crime involving money transfers.
These losses make up 10 per cent of last year’s overall British fraud figure of £4bn. This covers losses to consumers targeted using social networking sites such as MySpace, Facebook and Twitter. It includes mass-marketing fraud such as online ticketing and rental as well as advanced fee frauds.
“As social networks grow in popularity, there is a risk that they become increasingly targeted for fraudulent activities,” says Toby Jones, a spokesman for MySpace.
In broad terms, fraud has increased by 25 per cent over the past five years, according to the not-for-profit organisation Cifas. In 2010, 217,385 frauds were reported to the National Fraud Database by Cifas members.
In online banking, fraud increased 14 per cent, or £60m, last year, according to the National Fraud Authority.
The Office of Fair Trading has revealed that 39 per cent of people losing money to a scam in the past year did so through advance fees or money transfer, with 7 per cent losing more than £4,000. The consumer direct division of the regulator said this topped the list of complaints about scams and it receives more than 1,000 complaints about them each year. Further down the list are prize draws and sweepstakes, ticketing and foreign lotteries.
Money transfer operators such as Western Union, Money Gram and Hifx became regulated by the Financial Services Authority in November 2009 and since then consumers have been able to complain about them to the Financial Ombudsman Service (FOS). They are a valued service used by a growing economic migrant population, more than 35,000 of whom travel from outside the EU and are given visas to work in the UK each year, according to the Home Office. Many of these workers do not have bank accounts and problems can arise with money not reaching the specified destination or the incorrect exchange rate being applied.
Complaints about money transfer operators have remained low against the background of banks and building societies. The FOS received 508 complaints about transfers carried out between banks or building societies in 2010 and 635 in 2009. It is currently upholding 43 per cent of these complaints. “During the 2010 calendar year, about 60 complaints were referred to us. This was up from 10 complaints received in 2009 – although obviously we were only able to look at complaints that arose after November 2009,” says FOS spokeswoman Emma Parker. “We upheld in favour of consumers around 47 per cent of these complaints in 2010.”
Overseas workers are statistically less likely to complain when something goes wrong financially, while, anecdotally, unregulated back-street money transfers exist. John Bownas, a spokesman for Croydon Council, says its trading standards division had stopped £100,000 worth of dodgy money-transfer activity in the past year alone. “That is fairly typical and we would advise our residents to get in touch with us as quickly as possible if they feel they have been a victim of fraud,” he says. “The first port of call for most people should be Consumer Direct, which will pass you to the correct authority for your area.”
It is a problem that is likely to grow. Companies such as Nokia are offering mobile transfers to a much wider array of destinations. Earlier this month, the handset maker rolled out a new service with Bank of India, where more than 800 million people have a mobile but more than half the 1.2 billion population do not have a bank account. Even in Britain it is fast becoming commonplace to shop, pay utility bills and top up prepaid cards using only a mobile phone.
New research from credit reference agency Equifax has shown nearly 70 per cent of smartphone users aged between 22 and 25 do not use passwords on their phones, and two-thirds of this age group use their phones regularly to access online banking. In addition, more than half of second-hand phones hold sensitive personal information which could become linked with fraud. In an experiment carried out last month by ID theft insurer CPP, 247 pieces of personal data including debit card PINs and bank account details had been left on second-hand smartphones they bought.
Janet Davis, 52, from London, sent £850 via Western Union money transfer to enter a competition to win £70,000 she thought was organised by the Royal National Institute for the Deaf. However, it was a scam; the Facebook message claiming to be from the charity was a fake. But worse was to follow for Ms Davis when the fraudsters using information she divulged hacked into her Facebook account.
“I started to get texts from friends – I had about 30 in just one day,” she says. “They’d all had messages from someone who must have hacked my Facebook account. Whoever was pretending to be me was trying to persuade even more people to give them money. I sent out a message to tell people to block me and I set up a new account, but I haven’t been able to bring myself to use it again just yet.” Ms Davis also had two people impersonating FedEx employees call at her house to ask for more money to cover what they described as “tax and insurance”.
