An ever-present threat, fraud has been rising sharply in recent years, exacerbated by the pandemic which disrupted standard behaviour and moved financial services further online. In the UK alone, fraud offences have increased by 36% since 2021. Against this backdrop, the UK’s Financial Conduct Authority (FCA) recently launched its three-year strategy to protect consumers, with a heavy focus on fraud. It plans to develop a new approach for supervising anti-fraud systems and controls of regulated firms as well as undertaking assessments to understand and evaluate firms’ ability to protect consumers from fraud.
Given this increased regulatory focus, financial institutions must be agile in responding to emerging fraud threats, adopting a proactive rather than reactive approach, and be able to demonstrate that they have taken steps to actively assess and mitigate the risks they face.
Exploiting crisis
The last few years have seen a myriad of international crises ushering in change and uncertainty. Within this chaotic climate, fraudsters have been able to thrive and exploit human and technological vulnerabilities. Frauds take different shapes and sizes, from manipulative romance scams to lucrative push payment frauds — leaning on social engineering and impersonation techniques. Online investment scams, particularly in the realm of cryptocurrency, are also booming as people look for quick ways to make money online. Criminal networks often recruit money mules with changing demographics to move the money before it can be frozen, increasingly targeting middle-aged individuals less likely to be detected.
What financial institutions need to know
In light of the whirlwind of frauds and increased regulatory focus, financial institutions need to be proactive and prepared. Moments of particular vulnerability include the launch of new products or features, which entice fraudsters to exploit potentially immature controls. However, due to the rapidly evolving world of fraud, businesses should also continuously reassess their controls to ensure they are developing along with their offerings and firmly secure detective controls and preventative measures.
At FINTRAIL, we are experts in developing and deploying counter-fraud, anti-financial crime, and risk management controls. If you would like support with building, refining or auditing your fraud controls, please get in touch; see our full range of fraud services here. We’re also here to support you in assessing and testing customer and product risk, offering remediation support, and providing context-based training to your teams. Please email us at contact@fintrail.com