Identity theft rises by a third

Last year saw a huge surge in financial fraud, partly due to the recession. Here's how to keep your hard-earned money away from crooks.

During recessions, businesses fail, people lose their jobs and others lose their homes. However, one group lives well during downturns: fraudsters.

This recession has proved no exception. Indeed, financial fraud is soaring, according the latest figures from CIFAS, the UK's fraud prevention service. In particular, the number of victims of identity fraud has risen steeply...

25,000 more victims in 2009

Identity fraud involves the use of a stolen or false identity to obtain goods or services by deception. This can be by impersonation (pretending to be someone else in order to obtain goods or credit in that person's name), or by takeover (when fraudsters use personal data to seize control of someone's bank or credit accounts).

As you can see from the table below, identity fraud is becoming a huge problem for both customers and lenders:

Source: CIFAS

The number of cases of successful identity fraud rose by nearly seven-tenths (69%) during 2009, reaching almost 57,400 incidents (or more than 1,000 cases a week). Unsuccessful identity fraud -- where credit was not granted -- rose by a mere 3% to nearly 45,000 cases last year.

In total, over 102,000 people were victims of identity fraud in 2009, a rise of almost 25,000 on 2008. This means that the number of cases rose by nearly a third (32%) in one year, despite lending levels crashing thanks to the credit crunch. Hence, we all need to be on our guard against financial felons!

How to keep your finances safe

How can you stop criminals -- including cyber-crooks who lurk online -- from stealing your hard-earned cash? The simple answer is to play it safe by following these ten tips:

1.    Protect your paperwork

In the wrong hands, your identity and personal information can be very valuable. So, keep yours secure by guarding your paperwork. Don't just throw out old documents, as these could be salvaged from your bin. Instead, shred statements, receipts, and anything showing your name, address or any financial details.

This includes any paperwork for savings and insurance policies, as crooks will not hesitate to cash these in if they can. Also, every six to 12 months, carry out a quick check of your personal credit file kept by the three credit-reference agencies. You can get a free credit report from Experian.

2.    Protect your passwords and PINs

Your password and Personal Identification Numbers (PINs) are the gatekeepers to your money. So, don't write them down, record or store them -- and don't reveal them to anyone, no matter how legitimate they appear to be.

Try not to use the same password for all your accounts or websites, as this means that one key will fit all of your locks. Likewise, random PINs are best, as dates of birth (and years of birth) are the easiest numbers for crooks to guess.

3.    Check your statements

To be properly in control of your household finances, you should keep a close eye on your income and outgoings. By checking your bank and card statements every month, you can see where your money's going and, at the same time, keep an eye out for suspicious transactions.

4.    Block foreign transfers

I've instructed my bank not to send any sum of money -- no matter how small -- to an overseas account without first seeking my approval. This simple step means that I don't have to fret about foreign fraudsters hacking into and cleaning out my current account. If your bank will allow you to do this, then it puts up another barrier to financial fraud.

5.    Use mobile-phone alerts

I must be one of the last remaining adults in the UK without a mobile phone. However, I know that the rest of you take your phones everywhere and rely on them completely to manage your day-to-day lives.

Therefore, if you always have your mobile with you, then it makes perfect sense to keep a close eye on your account by monitoring your balance with mobile-phone alerts. What could be easier and simpler in the fight against fraud?

6.    Watch out for 'change of address' notices

One of the first things that fraudsters will do is attempt to change the address to which your statements are sent. Once your statements have been diverted, they are free to spend madly, knowing that the only thing in their way is your credit limit.

If you suspect that your mail is being redirected, then first contact the firm concerned. To find out if a mail-redirection order has been made in your name without your knowledge, contact the Royal Mail on 08457 740 740.

7.    Don't give out information over the phone

Never, ever divulge personal or account information to anyone who calls you out of the blue -- even if they claim to be from your bank, the police or another official body. Either hang up and call the correct number, or take down their number and verify it before calling back. Your bank's employees will never ask for your entire PIN, password or security number.

8.    Watch out for phishing emails

'Phishing' emails are sent by fraudsters to seem as though they come from a bank or credit card company. If you respond to one of these bogus emails, then your security details could be used to plunder your account.

Alternatively, a virus may be introduced into your computer which records your keystrokes and passwords, enabling cyber-crooks remote access to your accounts. Therefore, don't open fishy emails and avoid clicking on the links therein. Instead, dodge dummy websites by always keying in recognised website addresses.

9.    Keep your computer clean and safe

In order to make vastly greater profits, organised criminals have moved online. After all, why mug one victim when you can steal hundreds of account details in one fell swoop? There are hundreds, if not thousands, of ways of corrupting PCs in order to steal online data.

To keep your PC healthy, read Twelve tips to keep you safe online and Spam, scams and cyber-crooks.

10. Try Protective Registration

If all else fails and you do become the victim of identity fraud, then you can reduce your risk in future by signing up to the Protective Registration Service from CIFAS. For a yearly fee of £14.10, this places a 'warning flag' in your credit files, making it much more difficult to obtain credit and services in your name.

You are the weakest link!

In summary, always remember that cunning criminals constantly change their methods in order to find a weakness in order to defraud you. Therefore, it's vital that you stay on your guard, because you are always the weakest link. In the fight against financial crime, well-informed is well-armed. Thus, for more advice, visit the government-approved and business-sponsored Identity Theft website.

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