The internet has become a playground for criminals in which highly specialised gangs steal money from bank accounts, according to a Parliamentary report published today.

A huge underground economy is making a living from e-crime, which fuels the perception of the internet as a lawless “Wild West”, the peers report said.

Millions of pounds are being lost by banks around the world as a result of online banking fraud, including £33.5 million lost by British banks last year.

Today’s report criticises the complacency of the Government, banks and software firms towards the threat posed by the increasingly lawless internet. It said that those profiting from the web must now take a greater share of the responsibility for security or risk confidence in the internet being destroyed.

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The report demands that hardware manufacturers, internet service providers, banks, the police and government take action to promote greater security for customers using the net. Banks and software firms should be forced to pay up if their customers fall victim to e-criminals because of security flaws, instead of the risk being “dumped” on customers.

Laws should be introduced to make the banks liable for losses as a result of electronic fraud and to make it mandatory for businesses to report data security breaches.

The report by the House of Lords Science and Technology Committee also calls for a review of sentences and suggests that committing a crime with a computer should add extra years to a sentence.

The Home Office is urged to create a central system for the reporting of e-crime, establish a kitemark for secure internet services and give police more cash to tackle the problem.

Lord Broers, the chairman of the committee, said: “We are firm believers in the internet. It is a huge force for good. But it relies on the confidence of millions of users.

“At the moment is seems that the internet is increasingly perceived as a sort of ‘Wild West’, outside the law.”

The report said that it was no longer realistic to expect individuals to be responsible for their own security because the criminals were too sophisticated and could “outfox” them.

It issued a stark warning: “The internet is now increasingly the playground of criminals. Where a decade ago the public perception of the e-criminal was of a lonely hacker searching for attention, today’s ‘bad guys’ belong to organised crime groups, are highly skillful, specialised and focused on profit.”

The report criticised the Government’s insistence that internet security is the responsibility of the individual. “This is no longer realistic, and compounds the perception that the internet is a lawless ‘Wild West’,” it added.

Victims suffer financial loss through fraud or can be threatened by predatory paedophiles grooming potential victims and children suffer online bullying by their peers.

An estimated $2 billion (£1 billion) has been lost by US banks through phishing, when people reply to e-mails purporting to come from their bank and provide a fraudster with details of their account. Losses in Britain through phishing were estimated at £33.5 million in 2006.

The report said that although the scale of online fraud and theft was unclear it is growing. In a single month in 2005, compromised card details for sale included 31,932 Visa cards, 13,218 MasterCards, 31 American Express cards and 1,213 Discover cards. Basic card details for British cards are on sale to fraudsters for just $2. The full information for an account including passwords, address details, dates of birth and mothers’ maiden names can cost up to $50, the report added.

Major organised crime gangs, many based in Eastern Europe, are heavily involved in e-crime, the peers said. “They are well resourced, and employ specialists to perform particular tasks such as hacking, cashing cheques, receiving goods fraudulently purchased online and so on. In summary the internet now supports a mature criminal economy,” the report added.

It said that steps currently being taken by banks and other industries to protect customers’ personal information were inadequate. The report described as disturbing the refusal of the financial services industry to accept responsibility for the security of personal information.

James Brokenshire, a Conservative home affairs spokesman, said: “This report underlines the Government’s complete failure to appreciate or address the extent of crime committed online. There is little coordination, leadership or urgency sending out a message that this country is a ‘soft touch’ on e-crime. ”