Cloning of credit cards by criminal gangs helped to increase credit card fraud by 25% recent research suggests.

The amount lost to fraudsters reached £535.2m during 2007 despite the introduction of the chip and Pin security regime, according to recent figures.

The rise was driven by a 77% jump in fraud carried out abroad using cloned versions of cards that belong to British shoppers.

Gangs have used bugging devices on till terminals to copy a card's magnetic stripe information and Pin code.

The cloned cards are then used at cash points as far away as Pakistan, India, Sri Lanka and Morocco - where machines cannot tell they are fake.

As a result card fraud abroad rose £90m in 2007 to £207.6m - 39% of total losses. In the UK, card fraud rose 6% last year, largely driven by 'card not present' fraud. This type of fraud, which involves criminals using stolen details to buy things by telephone, mail order or over the internet, soared by 37% during the year to £290.5m, possibly as criminals migrated to other types of fraud following the introduction of chip and Pin.

But the Association of Payment Clearing Services, which published the data, said while 'card not present' fraud now accounted for more than half of total losses, it should be seen in the context of the huge increase in the number of people shopping online or by phone. This type of fraud had risen by 122% between 2001 and 2006, but during the same period online transactions had soared by 358% to £30.2bn.

The success of the chip and Pin regime was demonstrated by figures showing fraudulent use of credit and debit cards on the High Street dropping by two-thirds during the past three years from £218.8m in 2004 to £73m last year.
Losses arising out of lost and stolen cards and cards that are intercepted in the mail also reached their lowest level for 10 years at £56.2m and £10.2m respectively.

Sandra Quinn, director of communications at Apacs said: 'Although card fraud levels have now begun to go up again due to fraud abroad and card-not-present fraud losses, chip and Pin has proven to be an undoubted success in reducing card fraud on the UK High Street.

'And, as more countries follow our lead and upgrade to chip and Pin, the opportunities for criminals to use our stolen magnetic stripe details overseas will decrease.'

Online banking fraud fell by 33% during the year to £22.6m, despite a near doubling in the number of so-called phishing incidents, in which fraudsters use bogus emails to try to get people to disclose their account details and passwords.

But cheque fraud losses rose by 10% in 2007 to £33.5m, following reductions during the previous two years.