Matt Williams, Financial Crime Intelligence Team Manager, Synectics Solutions
The first UK Finance Economic Crime Academy webinar aired on 2 October 2018 and its focus was ‘impersonation fraud’. During the webinar it was clear to see that many financial institutions were experiencing similar issues around this type of fraud to those being reported by the Synectics Solutions Financial Crime Intelligence team.
Catriona Still, Head of Economic Crime Tactical Partnerships at UK Finance, who was chairing this broadcast, asked the audience: “What aspect of fraud has your organisation experienced most growth in over the course of 2018?”
It was evident from the answers that ‘identification fraud’ was still a growing, and by far the biggest concern, amongst the audience of 336 finance professionals – with 42 per cent of them highlighting this as the area where they have seen the biggest growth in fraud over the last year.
This pattern was reflected in the trends analysis from the National SIRA database that we discussed for the first half of 2018, where 50 per cent of fraud classified by National SIRA members on financial products was due to ‘identification fraud’.
More interestingly, webinar participants emphasised a marked concern over ‘misuse of facility’, which is a type of fraud where an innocent victim’s genuine information or account is used to apply for credit or to transfer funds to and from illicit accounts.
Nearly 30 per cent of webinar participants thought they had seen a growth in ‘misuse of facility’ cases. Again, this was corroborated by the findings that our Financial Crime Intelligence team saw for the first half of 2018, which showed a huge 17 per cent increase in confirmed fraud marked as ‘misuse of facility’, in comparison to the same period for the previous year.
We believe this growth in ‘misuse of facility’ is due to a number of factors:
- Banks and financial providers have deployed advanced multi-layered financial crime tools and strategies to help identify, block and deny both fraudulent applications and transactions.
- This is forcing criminals to recruit mules and target vulnerable and innocent victims, to encourage them to open accounts or apply for finance using genuine details, thus allowing the facilitation of financial crime.
- The industry is also seeing a rise in authorised push payments (APP) fraud, where criminals trick victims into sending their own money, via fake invoices or phone scams, for example. UK Finance data on APP fraud shows there were 43,875 cases of APP fraud and total losses of £236 million in 2017. Unfortunately, there are limitations to protecting victims of this type of fraud, although the Financial Conduct Authority (FCA) has recently proposed changes to how complaints are handled for victims of APP fraud.
The advice for financial institutions would be to familiarise themselves with guidance and advice from the Payment Systems Regulator and the FCA and raise awareness amongst customers through campaigns. More importantly, our advice would be to share data, intelligence and analysis on transactions, suspicious activity and known adverse cases, to help spot fraudulent activity sooner, to stop it having a significant impact on customers and organisations.
Economic Crime Congress – 12 December
The Economic Crime Congress brings together top international and UK experts and practitioners to discuss the key economic crime topics in 2018. Four dedicated streams will cover anti-money laundering, financial sanctions, anti-bribery and corruption, and fraud prevention. Click here to view the full agenda.