Online identity theft has rocketed over the past couple of years as organised gangs switch to the net to commit fraud, new figures show.

A McAfee white paper on identity theft found that global internet and computer-based identity fraud had increased by 250 per cent between January 2004 and May 2006.

Hackers are using a technique called keylogging to install malicious code onto the user's computer, which tracks typing activity to steal passwords and other sensitive personal information.

The report also found that the number of phishing attacks has soared over the same period of time. The figures gathered by the Anti-Phishing Working Group show that the number of strikes has multiplied 100-fold.

In the UK, the cost of identity theft to the economy is estimated to be around £1.6 billion over the past three years, according to the paper. In the US that figure jumps to £25 billion each year.

"More and more people are carrying out transactions on the internet, and as we move online, the criminals are following us," said Greg Day, senior security analyst at McAfee.

"We will probably see a saturation of phishing attacks over the next few years. But smarter hackers will move away from targeting banks and use a more subtle approach. However, identity theft is here to stay and will evolve and, possibly, get worse."