Life has been completely unpredictable in the last 18 months. But one of the few things you can predict is the rising incidence of financial crime. As new technologies coalesce with increasing consumer dependence on this technology, banking services moving online and the drive of the financial crime fraternity to extort money from its victims, organisations are facing an uphill battle in the fight against financial crime. We think these will be key themes in H2 2021:
• Dear CEO – in its most recent ‘Dear CEO’ letter to UK retail banks, the FCA has once again highlighted concerns over the financial crime control frameworks in many organisations that it regulates. Despite years of warnings, prosecutions and some eye watering fines, some organisations are still not investing sufficient time and energy into combatting financial crime. The banks are once again on a warning that the FCA expects to see progress and have until the 17th September 2021 to conduct a gap analysis to identify any weaknesses.
• Increased regulatory scrutiny – the European Commission has recently announced the set up of a new body to police financial crime activity in the EU. It is hoped AMLA will improve the detection of suspicious transactions and activities and close any loop holes used by criminals to launder money or fund terrorist activities. The body will be formed in 2024 and will have regulatory powers by 2026. Banks should expect an uplift in regulatory scrutiny.
• Investment fraud – banks refusing to pay: in the last year, we have seen a steep increase in the incidence of investment fraud, where fraudsters set up bogus investment or pension front ends that cleverly mimic real financial services providers. They can trick unsuspecting victims out of tens or hundreds of thousands. Where banks had been compensating customers, we are now starting to see a refusal to pay. HSBC has recently refused to pay back defrauded customers. We anticipate regulatory bodies cracking down and insisting that banks and finance companies improve their front-end controls and detection methods.
• The rise of layering: this is a practice financial criminals are deploying more and more in order to test and then exploit a fraud channel. You might initially receive a text – the Royal Mail has been a popular brand fraudsters have hijacked – to say you have to pay a small payment for a parcel. Victims then receive a call from their bank (actually a fraudster) to say that original text was fraudulent and telling them to quickly move their money to a ‘safe account’. The victim will then get stung for much larger sums. The criminals’ strategy is to test the route and then to hammer it.
• Push back on fraudulent ads: at last we are seeing movement from the regulators and the Government on banning fraudulent ads. Criminals often use fake ads they pay to post on Google, Facebook etc to phish for details from victims. To date, there has been no legislation to prevent the tech giants from running these fake ads – it’s down to the consumer to really do their homework to figure out what is real and what is fake.
• Systems are only as good as the data they run: your organisation’s attempt to stem financial crime activity is only as good as the quality of the data in the system. Having up to date mobile numbers and email addresses as well as more traditional home addresses and dates of birth allows the legitimate organisations to tell when an imposter is trying to defraud an account. If your bank does not have up to date info then they cannot contact you to check where an issues is identified – help them to help you by keeping your data up to date and using the latest apps and online tools.
The fight against financial crime is far from won
The financial criminals are increasingly incentivised to throw resource at financial crime – the wins are far larger compared to small time drug running or burglaries, so increasingly we are witnessing organised gangs getting in on the act. The only way the good guys will win is to collaborate and work together, to invest in technology and do their level best to predict where the next target for financial criminals is.
P2 FinCrime have the experience and capability to support you and your business today, please email me at firstname.lastname@example.org or call +44 (0) 7798 666 454.