Here, we ask Dominic Yacoubian, MD of


, about the continuing problem of online fraud, how his company is affected by it and what he feels needs to be done to better combat the problem.


How big a problem is online fraud?

Online fraud is a massive problem for retailers as they take the hit for the costs of the crime. Customers who report the problems can get their money back from the card companies, but retailers have no protection at all.

There seems to be very little backing from the Home Office over the issue. For instance, Sergeant Howard Shaw recently set up an e-crime unit, but he has a very small budget with which to combat a large problem.


How does it affect your company?

Our online fraud rate is around 0.3% of turnover, which is relatively low for the industry. Other retailers have a more serious problem, losing as much as 6/7% of turnover to fraud.

This does not cover the extent of our losses though, as we have to turn down orders which may or may not be fraudulent, so there is potential loss of income there.

It also costs us money to combat fraud, the automated tools we use are expensive, and we also employ 2/3 people full time to manually review orders. Automated tools are useful, but there is no substitute for manual review.


Can you review every order?

We have had problems with this in the past. For instance, we used to only review orders over £50, but fraudsters began to realise this. We were hit with a large amount of orders for items under this threshold and ended up losing £12,500 in the space of a few days.

Online fraud tends to come and go in bursts as criminals tend to concentrate on a retailer for a short time, and then move on when they have been figured out.

They also tend to target e-commerce sites that are running sales and special offers, as they know this will lead to an increase in traffic, making it harder to spot fraud.


How much fraud do you manage to prevent?

Through manual review and other tools, we prevent fraudulent orders worth thousands on a daily basis. Our turnover is relatively small, at around £15m, so this is a huge problem for us.

With bigger online retailers, I have heard that they are preventing fraud worth upwards of £60,000 every day.


Is this a major problem for electrical retailers?

It can be, because these are high value items. For us, with margins on electricals being so low, losing items like LCD TVs to fraudsters is a big loss.

I know of other shoe and fashion retailers who have issues with online fraud, but because their items are cheaper, it is easier to spot fraud when someone places a large order.


Where is this fraud coming from?

There is a lot of smaller scale fraud which originates in the UK, but much of the larger instances of online crime seems to be coming from Eastern European gangs, and is being used to fund organised crime.


How many instances of fraud have you reported to the police?

We used to report fraud every day almost, and up to around a year ago sent 30/40 reports a month to the police.

We haven’t bothered to report any instances of fraud for over a year, as the time spent filling out online forms and sending reports just isn’t worth it.


How do the police respond to these reports?

We have had very little response from the police over the issue, and have found it hard to find anyone to take the reports. The police set up a website for people to report online fraud, and we have used this, but the reports seem to end up in a black hole.

Of all the reports and information we submitted to the police, there has been only one occasion when this resulted in an arrest, and even this was due to a separate crime, but as a direct result of online fraud.


What do you think is behind the lack of response?

Police forces around the country are measured in terms of reducing crime such as burglary and violent crime, and none of their KPIs relate to the online fraud problem. This means that police forces have no benefit from investigating instances of online fraud.

The blame lies with the Home Office because it does not hold Chief Constables responsible for reporting and recording this kind of crime under its current Key Performance Indicators rules.

In addition, the fact that internet crime is relatively easy and carries less risk means that some criminals may have moved from offline to online crime, thus reducing other crime stats. This situation suits the government to a certain extent.

Retailers would like to see more action taken, and more convictions for online fraud as, at the moment, it is seen as an easy and relatively risk free crime.

This means that policing of online fraud is left to online retailers. This is easier for larger retailers with the staff and resources to fight fraud, but smaller retailers are extremely vulnerable to this type of crime.


How does this affect consumer confidence?

Online shoppers are led to believe that they are at risk from fraud when shopping online, and this makes some reluctant to do so, but at least they are protected by credit card companies, and can claim money back in most cases.


What does 247 do to reassure customers?

We have visible signs of security, such as Verisign, and the ‘Internet Shopping is Safe’ logo. We also provide lots of information about our security procedures, and make sure our brand is as well known as possible.


Related research:

Internet Statistics Compendium – May 2008

Related stories:

Q&A: PayOffline’s Steve Berry on etail and trust

House of Lords calls for action on online security

Police limit online fraud investigations