IDENTITY THEFT 2

The UK government's proposed ID scheme will do little to stop identity theft. Researcher Dr Emily Finch said that criminals will be undaunted by the prospect of identity cards. She cites the recent substitution of personal identification numbers (pin) for signatures in the use of credit and debits cards as a classic example. She claims this chip and pin technology, as it is called, has not reduced the problem of fraud. Dr Finch says criminals have told her how they now look over people's shoulders to see a person's pin being entered on a keypad and then attempt to steal the card at a later date.

Dr Finch describes how she and a male co-researcher swapped chip and pin cards and carried out a number of transactions. Not once, she says, did anyone check the gender on the card or challenge them, because our increasing reliance on technology is leading to a breakdown in the vigilance we customarily exercised. She said, "Instead of using stolen cards, criminals are now taking over people's identities and applying for cards in their name. If you think about a credit card application, it doesn't actually require much information about an individual that can't be found out with a little bit of research."

Dr Finch's research leads her to doubt that any scheme for national ID cards will work, even if it is backed up by biometric data such as eye scans, because the criminals will simply adapt their strategies to try to get around the hurdle. Sandra Quinn, a spokesperson for the consortium of financial and retailing groups running chip and pin, commented, "Chip and pin has been introduced to tackle two of the largest areas of fraud - namely counterfeit and lost and stolen card fraud. As chip and pin is used more and more, criminals will look at new ways of carrying out fraud and the banking and retail industries are working together to look at new ways to tackle plastic card fraud." (Source: BBC News)

Fraudsters have begun to attack the government's £14bn tax credit system, using stolen identities that allow them to grab thousands of pounds and then disappear from view. In the first case to emerge so far, Helen Sanson's £80 a month was siphoned off using just her name, date of birth and national insurance number. Using only these three pieces of information, the fraudster, or fraudsters, were able to interrupt the existing claim, embellish details to boost the cash payouts and then redirect them. They used a different home address and a separate bank account with a different name. Neither of these "new details" triggered alarm bells on government computers, despite bearing no relation to the existing tax credit claim.

Experts in financial crime warn that the case is likely to be the first of many, as organised gangs increasingly use identity theft for financial gain and exploit loopholes in the phenomenally complicated tax credit system. Taxation experts said Inland Revenue staff are struggling to cope; helpline staff are not trained to handle enquiries that might result from fraud and will, as in this case, mislead claimants about the way to deal with their claim. Several MPs, including former social security minister Frank Field, Conservative front bencher David Willetts (until recently spokesman on welfare issues) and Liberal Democrat spokesman Lord Oakeshott, said the sheer size of the tax credit welfare system will attract fraudsters.

Mr Field says he expects that rings of organised criminals, that target housing benefit, will now turn their attention to tax credits. Mike Warburton of accountants Grant Thornton added, "I suspect this case is the tip of the iceberg. The Arthur Daleys of this world will be looking at the tax credit system and thinking 'that's a nice little earner'." The newly-created tax agency HMRC, formed from a merger of the Inland Revenue and Customs & Excise, pays tax credits to 5.8m families. It concedes that fraudsters have targeted tax credits, but says it is taking fraud seriously. A spokesman said the agency is tracking the changing methods being used by criminals and continually reviewing its IT systems.

He said, "If a claim demonstrates known features of organised fraud, we do follow this up, stopping payments and terminating the claim where appropriate. Where we suspect organised fraud, but evidence is so limited that it is not possible to take criminal proceedings, we do terminate claims preventing further payments being made. However, no system, no matter how technologically advanced is immune from attempts at abuse." The tax credit system has come in for repeated criticism since it was revamped in April 2003. Critics say that a huge number of errors and overpayments is undermining the entire system. The Inland Revenue has delayed publication of official figures for several months detailing how and why errors are made.

It says the figures need further analysis and promises to publish them before the end of the year. Helen Sanson and her partner Nick Wrate of south London have spent six months trying to find out what happened to the tax credit money that stopped arriving in their bank account. The IR promised them the tax credit cash would begin again, but they have no idea how the tax agency plans to repay the missing cash they are owed, or the details of how the money came to disappear in the first place. However, they have more insight than most fraud victims after Ms Sanson was invited to visit the tax agency's anti-fraud unit in central London. She was told that someone using a Barclays bank account with a different name and an address in Bishop's Stortford, Hertfordshire had hijacked her claim.

She first contacted the tax credit helpline when she received a statement demanding she repay some of her tax credits. When she rang to query the amount, she was told an inputting error was to blame. A new form was to be sent. It never arrived. Several phone calls later and Ms Sanson was told someone else was receiving her tax credits. "It didn't add up. I began to pursue it out of principle. I just felt there was something wrong and it could be so much worse for people who relied on tax credits more than us." Her persistence paid off. She received a call from the agency's anti-fraud office in London, which acts as a hub for criminal investigations officers. "They explained a little of how it was done. I was totally shocked. I didn't know this kind of thing could happen. I thought there would be tighter controls." (Source: The Guardian)

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