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Anti-fraud scheme saves retailers £2m

Early Warning

An online scheme designed to forewarn UK retailers about patterns of fraudulent activity has saved its members more than £2 million in loses after less than 18 months in operation.

Early Warning, which commenced operation in September 2002, is focused on sharing information to prevent CNP (cardholder not present) fraud.

The company boasts several hundred active members including many IT dealers.

Early Warning manages an online database of known CNP fraud attempts. Members can check their own online credit card orders against a database of known frauds, as well as contributing information on frauds that they have discovered themselves. Email alerts for all new frauds are sent to subscribers.

"We are enormously pleased to have prevented over £2 million of fraudulent transactions going through our member companies, but this is really just the tip of the iceberg," said Early Warning managing director Andrew Goodwill.

Merchants hardest hit by CC fraud

CNP fraud has been growing rapidly over the past five years, with losses on UK-issued cards reaching £ 110.1 million in 2002, a 15 per cent increase from 2001, according to Cardwatch.

Despite recent attempts by the card issuers to establish more secure verification systems, the growth of CNP fraud shows little sign of slowing. There are even concerns that the wider use of the Chip and PIN scheme could lead to increased CNP fraud, as criminals find it harder to perpetrate their crimes in high street shops and turn to online retailers instead.

Merchants carry the liability for fraudulent online or direct order transactions and Goodwill is critical of the failure of credit card companies to crack down on the problem. According to Goodwill, complaints from merchants to the police about fraudulent transactions are rarely investigated and commonly treated as "only a reporting exercise".

Fraudsters are employing ever more sophisticated techniques to catch out unsuspecting online retailers and the police are so under-resourced that only the most serious of offences are usually investigated.

"When you report these crimes to the police the attitude is ‘give us the details and we’ll put it in the file’," Goodwill told The Register.

Because of the lack of help from credit card companies or law enforcement, merchants are obliged to take active steps to protect themselves from fraudulent activity or else risk leaving themselves exposed to potentially devastating loses. The impact of fraud is felt most keenly by smaller companies, a factor that spurred Goodwill (a former IT reseller himself) to set up Early Warning 18 months ago.

London is UK Hot Spot for CNP fraud

The Early Warning fraud database now runs to several thousand entries, with members of the scheme contributing hundreds more each month. An analysis of the last 12 months reveals that Manchester, Coventry, Nottingham and Paisley, Scotland all feature in Early Warning’s Top 10 Hotspots for fraudulently delivered goods.

These areas are also-rans, however, to the UK’s premier hotbed for online fraud: Greater London. Six London areas filed the other places in Early Warning’s Top 10 list. The worst area was South East London. ®

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