A new study released in September 2011 predicts fraud and data breaches in the retail industry will increase in 2012. Meanwhile, a senior official in the FBI, testifying before a congressional committee that same month, said the FBI is continuing to find new ways to stop cyber criminals who "can significantly threaten the finances and reputations of United States businesses and financial institutions."
A new LexisNexis Risk Solutions study conducted by Javelin Strategy & Research looked at how fraud affects U.S. retail and financial industries and consumers. It also assessed the impact of fraud on U.S. merchants doing business internationally. The report contains good news in that it found a decline in fraud rates and fraudulent transactions as total retail sales grew over the last year. Consumers saw a decline in losses.
On the negative side, consumer fraud loss still amounted to more than $100 billion in 2010, and the average dollar amount of fraudulent transactions rose. The study found cyber thieves are sophisticated and heavily involved in emerging payment markets. The report also discovered it took 57 percent longer to recover from fraud damage last year, compared with the prior year, while the cost of recovering from cyber theft rose by an average of $244.
The report also indicated merchants are becoming complacent. "Merchants report significantly higher levels of satisfaction with existing online fraud detection tools over last year, even though higher-dollar-value fraudulent transactions are seeping through this year," the report said. "They also report lowered use of these tools."
The study surveyed a panel of 1,006 merchants and more than 5,000 U.S. consumers. It can be downloaded here: http://solutions.lexisnexis.com/forms/em10retail2010tcfwebinarfall42302.
In testimony delivered Sept. 15, 2011, before the House Financial Services Committee's Subcommittee on Financial Institutions and Consumer Credit, Gordon Snow, Assistant Director of the FBI's Cyber Division, indicated cyber crime will get worse before it gets better.
"The number and sophistication of malicious incidents has increased dramatically over the past five years and is expected to continue to grow," he told the committee. "As business and financial institutions continue to adopt Internet-based commerce systems, the opportunities for cyber crime increase at retail and consumer levels."
According to Snow, improving security and risk management practices can mitigate the impact of fraud, but risk will remain high until consumers become more security conscious. He promised the FBI would continue its efforts to stop cyber crime by continuing to share information and conduct strategy sessions with government and industry to ensure cyber threats are dealt with quickly and effectively.
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