The new Epsilon breach of customer details may be the biggest in retail history, but the problem of crooks blagging our computers is much bigger

Bent financial gains are occurring daily – and the police are out of their depth

News broke in the US last night EST of what may turn out to be the biggest ‘exposure’ of consumer personal details in retail history. A broad spectrum of companies doing business with Epsilon warned customers over the weekend that some of their electronic information could have been exposed. These included pharmacy chain Walgreen, Video recorder TiVo Inc, credit card lender Capital One Financial Corp, and teleshopping company HSN Inc. Other targets are also thought to include some of the nation’s largest banks, while some 5,900 college databanks were also compromised.

Aside from the crucial libertarian considerations, over here in the UK too this sort of thing is expensive. The average cost incurred by a data breach rose by 13% compared with 2009 to £1.9 million, with the highest loss incurred by a UK company being £6.2 million, a rise of £2.3 million from the previous year. But the biggest culprit (ie, victim) of data breaches is the NHS – an area of life where, even today, most people truly do not want anyone knowing about their problems – either through embarassment, or insurance/employer considerations. The NHS reported 305 breaches between 2007 and 2010, according to the Information Commissioner’s Office’s (ICO) figures. Of those, 116 were due to stolen data or hardware, 87 were due to lost data or hardware….but only 43 cases were disclosures due to error.

That’s a key figure that other commentators have missed. It shows pretty clearly that over 80% of data breaches are no accident: somebody, somewhere wants to know stuff about people like you. And there are plenty of petty criminals (even in the pc retail trade) more than happy to lift stuff off your hard-drive while undertaking ‘maintenance’.

We tend to think of hacking and blagging in terms of tabloid journalism, but it’s becoming clear that the spread of this cancer goes well beyond the press organs. Cloning IDs is big business now around the world, but here too – while this activity has become something of a media obsession – it shrinks in comparison to the use of hacking and blagging in the financial sector.

For the last two months The Slog has been digging into a case (by no means isolated) of three very prominent Russian business people based in the UK. The insider descriptions given to me about the equipment they have, the security at their offices – and the overheard conversations after too much vodka – leave me in no doubt that this trio is making fortunes by blagging into everything from liquidity pools to senior boardroom minutes and fund management mobile phones. In many cases, the victims know what’s happened – but are themselves operating outside the law, and thus daren’t bring in the police.

For legal (and health) reasons, I can’t name the thankful threesome. But I can tell you that the ringleader is very well known in international business and sporting circles. However, whether or not their victims call in the Met, in 99% of cases the boys in blue would need a year’s seminar crash-course simply to understand what has gone on, and how the blaggers stand to gain.

Only last November, the FT reported a Commons Treasury Committee MP telling them that the Met’s approach to City crime “is like PC Plod trying to catch Moriarty.” Last year in total, The City of London’s fraud team conceded that the force recovered only £168m from a suspected £3.7bn proceeds of fraud cases. A now retired senior CID officer told The Slog, “The police have barely scratched the surface of it, and the understanding of what’s going on is childlike. Around London there are hundreds of serious villains in suits making mind-boggling sums at this game. Their chances of being caught are near to zero”.

Efforts have been made at many levels in and outside government to alert people to the danger. But the public response on the whole is one of apathy. There may be underlying cultural reasons for this – we seem to be a society where privacy is the last thing people care about – but  some opinion leaders think only a major whistle-blower and/or high-profile capture of villains at it will make people think harder about the problem.

A former senior City trader came close to unloading some juicy details to me late last year, but then scuttled off – allegedly – to write a book about it. Let’s hope it appears soon.