Online fraud has risen 8,000 per cent over the last two years in the UK, the Financial Services Authority (FSA) told a House of Lords committee.
The FSA said in a report to the Lords committee on science and technology that it was "very concerned" about the growth in phishing attacks, which it said would rise by 90 per cent this year.
The committee is running an inquiry in internet security and heard evidence from the FSA as well as representatives from payment association Apacs, Visa and the Royal Bank of Scotland. The committee is looking into financial institutions' policies on consumer protection from ID theft.
The committee heard from the FSA that in the first six months of 2005 the number of reported phishing attacks on banks was 312. This rose sharply in the first half of this year with the number recorded at 5,059. Scammers managed to steal 23.2 million from victims in the first half of this year and another 22.5 million is expected to be stolen in the final half of 2006.
Apacs security chief Philip Whitaker told the committee that criminals had transformed phishing over the last couple of years.
"The rate of growth in phishing is down to a number of factors not least that they have been able to industrialise the process by which the criminals are launching attacks," he said.
Experts said next year could be a turning point for online fraud in the UK.
"2007 could turn out to be a watershed year in online fraud, specifically for the UK," said Andrew Moloney, senior product manager at security company RSA. "Phishing attacks are not only predicted to rise significantly, but we suspect fraudsters will also shift in their choice of target."
He said that whereas the US has born the brunt of the attacks so far, most financial institutions have implemented defences in response to government legislation and consumer pressure. "This means that the focus of the fraudsters will have to change - and the indicators suggest that UK is the most likely target," he said.
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Rene Millman is a freelance writer and broadcaster who covers cybersecurity, AI, IoT, and the cloud. He also works as a contributing analyst at GigaOm and has previously worked as an analyst for Gartner covering the infrastructure market. He has made numerous television appearances to give his views and expertise on technology trends and companies that affect and shape our lives. You can follow Rene Millman on Twitter.