Identity thieves are opening new accounts to commit fraud with much more frequency, and chip cards may be behind this shift, a recent report shows.
In new account fraud, criminals use stolen or falsified identities to open new credit card accounts with the intention of committing fraud. This crime nearly doubled in 2015, according to the 2016 Identity Fraud Report from Javelin Strategy & Research.
The reason why? U.S. financial institutions have begun issuing credit and debit cards that use an embedded microchip to authorize a transaction. Chip cards, also known as EMV (Europay, MasterCard and Visa, early advocates of the technology), are harder to counterfeit than their magnetic stripe counterparts. So criminals have begun using stolen personal information, such as Social Security numbers, to open new credit cards and run up charges in victims’ names.
“With the much-anticipated U.S. shift to EMV well underway, fraudsters are transitioning along with consumers,” the Javelin report said. “This drove a doubling in the frequency of new account fraud,” that is a 113 percent increase in incidents of new account fraud, which now accounts for 20 percent of all fraud losses.
The results are to be expected. Many experts predicted that EMV wouldn’t end fraud, but shift it to other forms, putting pressure on financial institutions and retailers to react.
“Fraud is changing in a way that makes it more dangerous,” said Al Pascual, director of fraud and security at Javelin. “There is some troubling news, but some good news, too.”
The Javelin report found other new trends related to identity theft. More than 13 million consumers fell victim to identity theft fraud in 2015, a small, 3 percent increase over the firm’s 2014 findings. And total fraud losses reached a staggering $15 billion.
And consumers are experiencing more headaches. For example, detecting new account fraud and recovering from it is much more complex than disputing fraudulent charges on an existing card.
Other important findings:
- 1 in 5 data breach victims experience fraud
- 1 in 5 fraud victims had a card misused internationally
- 64 percent more Social Security numbers were exposed in 2015 than in 2014
- 6 million consumers were victims of card-not-present fraud—when a physical card isn’t needed to commit fraud, like in online or telephone shopping.
Contact your personal banker if you suspect you’ve been a victim of fraud.