Tim Worstall

The Cost of Fraud

You just know that this number is going to get rolled out as a justification for ID Cards:

THE Government has revised dramatically the cost of fraud to the
British economy to £40 billion a year, more than double the figure it
gave two months ago. However, the AttorneyGeneral’s deputy has admitted that the true
amount was probably higher, and one leading law firm claims that it
could be £72 billion.

When you do see it being used as such a justification, remember the other bits of information on offer at the same time:

A fraud review published in July — in which Lord Goldsmith made his
suggestions — estimated the cost of fraud at £16 billion a year, up £2
billion on 2005. The report also revealed that credit card fraud cost
£439 million a year, cheque fraud £40 million, insurance embezzlement
£1.5 billion and telecom fraud £866 million. Economic crime cost
Revenue & Customs a further £11.5 billion a year. Trading and
marketing scams account for £1 billion, and the public sector loses up
to £14 billion.

While that’s from the earlier report, there’s not actually any crime there that would be stopped by ID cards. So the 40 (or 72) billion number has no relevance at all to ID cards. Further:

Ian Johnston, the association’s head of business crime, said that
identity fraud linked to phone banking, internet shopping and transport
systems had created such a problem that it could “slowly destroy the
very fabric of our economy”. The association, he said, was broadly
supportive of identity cards but it felt their lifespan was limited
because “any card that can be manufactured can be counterfeited”.

So, other than making us helots to an all seeing State, just what is the point of ID cards?

In

6 responses

  1. ScotsToryB Avatar
    ScotsToryB

    When they started all this nonsense years ago they said, and kept repeating, words to the effect that ‘everyone carries bank cards etc.’
    Following on from that statement I went into my bank to withdraw cash, handed over my card, which was promptly examined minutely by the teller who then enquired in a loud voice ‘do you have any ID?’
    ‘You’re holding it’ quoth I to the obvious amusement of the queue.
    I go my money.
    ScotsToryB

    Reply
  2. Bob B Avatar
    Bob B

    I’ll readily concede outstanding cost issues with ID cards as there have been with many previous large government computer projects. But there are far greater genuine privacy concerns over the Connecting for Health project to create one gigantic database of personal medical records than there are over the mooted project for national ID cards. Personal biometric data will be necessary for passports in future regardless of ID cards.
    The fact is that identity fraud has become a major criminal business. If ID cards can help to curb identity fraud that will be a major bonus.
    On a Saturday morning in January, just before 9 am, I had a call from a guy asking why I hadn’t sent the computer memory he had bought from me for £109 on eBay. I don’t use eBay let alone sell computer memory there but whoever had sold the guy computer memory had posted my name and telephone number as the vendor contact details in the transaction.
    Fortunately for me the money had been paid into a PayPal account and I don’t have a PayPal account – although last year, coincidently or not, I did receive several email phishing attempts asking me to confirm PayPal account details, failing which my account would be suspended. After telling the guy who phoned that he was evidently the victim of fraud and that, sadly, I couldn’t help him, he explained that he would be able to recover the money eventually but he was out-of-pocket in the meantime. On the following Monday, I had a phone call from an Internet security investigator who asked a lot of probing questions about the case which I answered as best I could and I’ve heard nothing more about it since.
    Three weeks ago I received a phone bill through the mail made out in my name and to my address but for a phone number that is not mine and for an account with a mainstream phone company with which I have never opened. I contacted the phone company to inform them that they are a victim of fraud, my bank to block any payment to that phone company by direct debit, and the police. The last said that as I hadn’t paid the bill no crime had been committed so far as I was concerned.
    It seems to me that almost any system which enables an indiviudal to readily establish or confirm their personal identity is to be welcomed for thoroughly practical reasons. I’ll start taking the opposition to ID cards seriously when they refuse on principle to apply for or use passports when they travel abroad.

    Reply
  3. Nigel Sedgwick Avatar
    Nigel Sedgwick

    As has been pointed out on NO2ID, £40 billion is 4% of the UK’s GDP.
    Do we actually believe that 4% of GDP is going on one sort of crime: fraud. Also, over 65% of that fraud is, allegedly, from Government coffers.
    It’s either appalling incompetence in law enforcement and keeping the wallet closed, or it’s porkies.
    Best regards

    Reply
  4. Bob B Avatar
    Bob B

    I can’t comment on the government’s estimate of the annual amount of fraud since I don’t know about reliability of the constituent sources.
    From several commentaries, identity fraud seems to feature often in fraud cases, especially welfare benefits fraud where, by reports, perpetrators often make use of multiple identities to establish entitlements to welfare payments. Investigators then have the challenging (and costly) task of unravelling the different identities to establish how many (or how few) distinct individuals are actually involved.
    However, the social benefits of ID cards are not confined to making it more difficult to conduct fraud and easier to investigate fraud. For all sorts of regular official applications, such as bus passes, as well as collecting post, it is necessary to provide “proof of identity” and it would be easier and more secure to be able to do this with an ID card. From experience, it would seem that showing a utility bill on request is considered sufficient to establish identity at present – which seems verging on ridiculous to me.
    I really can’t understand what the fuss over ID cards is about – apart from entirely rational scepticism about whether the government is capable of managing large computer projects. If passports – and passports with biometric identitfiers – are acceptable for foreign travel then what is the objection to ID cards?
    The threat to invasions of privacy is so much greater with a national database of personal medical records yet it is doctors – very properly on behalf of their patients – who are making the running on the issue of protecting the confidentiality of patient records, not the crowd who are making so much noise about the looming threat of ID cards. But the fact is that many folks have confidential elements in their medical histories which could bring great personal distress were these to leak out or which could make patients vulnerable to blackmail.
    I note the police are saying that in their experience of investigating terrorist networks they often come across cases where particular links (or nodes) in what could be networks have multiple identities. Indeed, multiple identities and aliases are very obvious basic trade craft for obstructing police investigations of terrorist and criminal networks that this comment is hardly surprising. ID cards would make such situations easier to unravel – and less costly to unravel in terms of police resources.

    Reply
  5. Nigel Sedgwick Avatar
    Nigel Sedgwick

    I don’t think I disagree with BobB much on the issue of the National Identity Scheme (NIdS) as it should be. That is somewhat different from how the Government propose it.
    However, if the Government have to resort to serious misrepresentation of their case, or obfuscation and wriggling, might we not suspect their motives?
    Also, the issue here is fraud, not (just) the NIdS.
    It is, I think, well known that the Government are keen to do away with jury trials for (some) fraud, empower various government officials, other than the police, with arrest, etc.
    Again, if they misrepresent the evidence of problems with current legal procedures, or the extent of any sort of crime, should we not doubt their motives, or at least the strength of the case they make?
    Best regards

    Reply
  6. Bob B Avatar
    Bob B

    I’m amazed that there has been so little public support for the doctors who have repeatedly protested about the risks to maintaining patient confidentiality from the prospective gargantuan database of personal medical records being constructed on behalf of NHS Connecting for Health:
    “Auditors are to launch another inquiry into the £6.8bn NHS IT upgrade project. The National Audit Office only reported in June on the scheme to link 30,000 GPs with 300 hospitals in England, Computer Weekly magazine says. . . The project has also been dogged by criticisms from doctors, who say they were not consulted properly and that the new systems are a risk to patient confidentiality.”
    http://news.bbc.co.uk/1/hi/health/5313974.stm
    I’ve no personal axe to grind in this. My medical history is rather dull and untoward. More importantly, perhaps, I’m also of an age where it could hardly matter if my medical history was leaked but consider the plight of someone of an age when they are still trying to progress careers in highly competitive environments and they have medical histories which might include: an abortion or treatments for STDs, gastric ulcers, diabetes, cardiac problems, a bout of depression etc that could be expected to have adverse influence on promotion prospects. Hundreds of computer developers will be working on the construction of this national NHS database and even then there is uncertainty about the scope of access rights extending to, say, local authority social workers.
    In these times, potentially lucrative online business opportunities are unlikely to be passed over for exploitation so I envisage the usual suspects going on personal health record foraging expeditions in much the way that some professional criminals presently phish for personal details relating to bank accounts and passwords. Probably like many folks, I’ve experienced a continuing string of emailed requests to confirm details of accounts with banks I have no accounts with. These are plainly large scale trawling expeditions intended to pick up sufficient numbers of prospective victims to make blanket trawls worthwhile and I can readily foresee similar expeditions starting up to trawl for personal medical histories – or informers who have access to the records.
    The doctors are entirely right IMO to make a priority issue of protecting patient confidentiality.

    Reply

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