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The case is the most serious of its type in recent memory. Auctioneers in Derbyshire, Wiltshire, Avon, Sussex, Berkshire, Shropshire and London are all understood to have been duped in late October, accepting card payments for five-figure sums for which they are now liable. A Somerset auctioneer was also the subject of attempted fraud.

The same modus operandi was used on each occasion. A man using a number of different names including Alistair Goldsmith, Richard Baker and James Baker contacted the auction house requesting to bid by telephone on diamond jewellery lots and high-value watches. In addition to supplying contact numbers, he offered to provide copies of his passport and driving licence by email or fax. After bidding successfully (or in two cases purchasing unsold items after the sale), the accounts were promptly settled by part-payments on a number of different credit cards, with a courier collecting the merchandise immediately or on the following day.

Some days later, each of the auction houses was contacted by credit card services provider Streamline and told the transactions might be fraudulent (at least one of the cards used was on the cloned list).

Subsequent investigation suggested the identification documents were counterfeit and the London address provided was a derelict house in Mitcham.

As the cardholder was not present when the transactions were made, the auctioneers are liable for any losses and hold little hope of recovering the stolen goods. The diamonds obtained by this deception will be virtually untraceable when removed from their mounts and recut.

Credit card providers say the auctioneers erred when agreeing to accept payment over the telephone across various cards, some of which were declined. In these circumstances the warning bells should have rung, but in practice such scenarios are not unknown when dealing with bona fide members of the trade.

The auctioneers concerned have all expressed frustration that on such occasions competition laws and the Data Protection Act prevent them from exchanging information regarding problem bidders, and in this case allowed the fraudster to operate for two weeks and at numerous salerooms.

Moreover, to guard against similar damage in the future, they expressed the need to adopt new industry-wide protocols when dealing with 'persons unknown' asking to pay by credit card. These may be prove unpopular in a business that has long operated on trust but are wholly understandable, both in the light of recent events and the increasing popularity of absentee bidding.

In the light of the October credit card fraud, Halls of Shrewsbury have already introduced a new protocol for dealing with purchasers unknown to the firm. Other regional auctioneers should consider exercising similar precautions and contact their bank for up-to-date security advice.

Click here to view a summary the Halls protocol.

The police enquiry is in its early stages but DC Amanda Carver of the Wiltshire Police is urging auction houses to be very cautious when accepting bids from new clients who ask to bid and pay in this way.

If any auction houses have been approached with this method of operation, whether or not any offences have actually occurred, she asked if they could contact her on 0845 408 7000 ext 722544 or Amanda.carver@wiltshire.pnn.police.uk

• This comes after a case was recently heard in the High Court surrounding the issue of credit card authorisation when a London dealer took legal action against Natwest/RBS after he lost £359,000 worth of jewellery to a fraudster.

The dispute arose after Mr Casey Conway of Hatton Garden precious metals dealers Do-Buy 925 was offered a debit card as payment for a high value diamond ring and suite of jewellery. The prospective buyer provided a passport as identification but, after the chip and pin mechanism was unable to process such a large amount, Mr Conway phoned the bank to get authorisation for the transaction before releasing the goods.

After receiving confirmation from the bank, including an authorisation code for the transaction, he released the goods only to find out later that the transaction was declared invalid.

The six-day hearing for the case concluded on October 28 and both sides are awaiting a ruling. If Natwest lose the case it is expected they will appeal as the case could act as a legal precedent for banks to guarantee transactions.