Tackling Fraud in Financial Services

A new report from UK Finance has given an interesting insight into the extent of fraud in financial services and the sector’s efforts to prevent the crime occurring. 

According to the trade association, banks and card companies prevented £1,458.6 million in unauthorised financial fraud last year, which amounts to £2 in every £3 of attempted unauthorised fraud being stopped.

The report also includes annual data on losses due to authorised push payment scams (also known as APP or authorised bank transfer scams) for the first time, and reveals that a total of £236.0 million was lost through such scams in 2017.

Extent of Fraud Revealed

Looking at the report in more detail, it reveals that for unauthorised fraud data on payment cards, remote banking and cheques in 2017:

• Combined total losses fell by 5% to £731.8 million.
• Losses due to unauthorised transactions on payment cards fell 8% year-on-year to £566 million. The industry helped prevent £984.9 million in attempted unauthorised card fraud.
• Losses due to unauthorised remote banking fraud totalled £156.1 million, a 14% rise on 2016. Banks prevented £261.4 million of unauthorised remote banking fraud, 27% more than last year.
• Cheque fraud losses fell 28% in 2017 to £9.8 million. This is the lowest annual total on record. £212.3 million of attempted unauthorised cheque fraud was prevented.
• There were 1,910,490 reported cases of unauthorised financial fraud, a rise of 3% compared to the year before.

When it comes to authorised push payment scams data, the report shows:

• There were 43,875 reported cases of authorised push payment scams with a total value of £236.0 million. 88% of this total related to retail consumers, who lost an average of £2,784, and the remainder were businesses who lost on average £24,355 per case.
• Financial providers were able to return £60.8 million (26%) of the authorised push payment scam losses in 2017.

Industry Response

UK finance has also described how the industry is responding to the ever changing threat posed by fraud and scams. Its efforts include:

• Working with Government and law enforcement to deter and disrupt criminals and better trace, freeze and return stolen funds, while calling for new powers on information sharing to allow banks to share data to detect and prevent financial crime better.
• Working with Government on making possible legislative changes to account opening procedures to help the industry act more proactively on suspicion of fraud and prevent criminals from accessing financial systems.
• Rolling out the Banking Protocol, through which branch staff can alert police and Trading Standards to suspected frauds taking place.

Increase in Technology-Enabled Crime

PwC also recently carried out research into the extent of fraud in the UK, and found that half of UK organisations say they have been the victim of fraud and/or economic crime in the last two years.

More than half (51%) of the most disruptive crimes resulted in losses over $100,000 (£72,000). Nearly a quarter of UK victims (24%) lost more than $1 million (£720,000) as a result.

It also found evidence of a shift towards technology-enabled crime, bribery and corruption, and procurement fraud. Cybercrime was the most prevalent (overtaking asset theft as the top fraud for the first time since the survey began in 2002), experienced by 49% of economic crime victims.

In addition, the PwC survey found that 55% of UK frauds were committed by external parties, such as hackers, customers, and intermediaries. Of those carried out by internal parties (33%), half were committed by senior management, up from 18% in 2016.

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