Global fraud rocketed in H1 2023, reveals new report

BY Fraser Tennant

Despite efforts to thwart scammers through regulation and government action, fraud levels are continuing to increase across the globe and rocketed in H1 2023, according to a new report by NICE Actimize.

In its ‘Delving Deeper: 2023 Fraud Insights Second Edition’, the financial crime solutions provider reveals that FIs are under mounting pressure due to the surge in fraud attacks, rising transaction volumes, and the ever-evolving landscape of regulatory and consumer liability requirements.

The report’s key findings include: (i) total payment volume is up 22 percent when compared to H1 2022; (ii) the value of these payments and fraud value has increased by 18 percent; (iii) the attempted fraud rate for international payments increased 31 percent in H1 2023; and (iv) for international transactions, 60 percent of the fraud was conducted using money mules rather than traditional peer-to-peer (P2P) methods

According to the report, the rise in fraud and scams can be traced back to the increase of real-time payments, which are quick and easy ways for scammers to find their victims. Also adding to the pressure on FIs is the April 2024 liability shift deadline for compliance with new, mandatory regulatory rules.

“FIs should not wait until April 2024 to act,” said Chad Hetherington, vice president and head of product at NICE Actimize. “With the rise in real-time payments creating new opportunities for scammers, FIs and banks must act now to catch criminals quicker.

“The speed, ease, and varieties of scams gaining traction shows fraudsters are investing in new and perfecting existing scams,” he continued. “These issues all signal the immediate need for FIs to take action to adopt next generation technology to fend off the threats of tomorrow.”

The report also notes that the scale of fraud attacks along with new mandatory regulatory requirements has forced FIs to expand fraud prevention into other areas for improvement. These include changes in regulation, with fraud liability shifts top of mind, especially in the space of scams and authorised push payment (APP) fraud.

Mr Hetherington concluded: “As cooperation grows within the financial services industry, collective intelligence and innovation will be vital so FIs can protect both their organisations and customers.” 

Report: Delving Deeper: 2023 Fraud Insights Second Edition

Global e-commerce fraud “growing and mutating”, reveals new study

BY Fraser Tennant

E-commerce losses to online payment fraud are growing and mutating, financially impacting businesses across the globe, according to a new study by Ravelin.

The study, ‘Global Fraud Trends: Fraud & Payments Survey 2023’, which surveyed 1900 global fraud professionals, reveals that over the past 12 months businesses have seen a huge leap in online payment fraud, account takeover, promotion abuse, refund abuse, and customer and friendly fraud.

As a consequence, businesses are spending more on expanding fraud teams in a bid to mitigate losses. Globally, three-quarters of all online businesses state that their fraud budgets will grow in 2023. In the UK, 62 percent of businesses will be spending more on managing fraud, with France spending 70 percent, Germany 74 percent, the US 69 percent and Canada 84 percent.

Despite this increase in spending, the study found that the funding and expansion of fraud items is only part of the solution, and new approaches are urgently needed to fight fraud and minimise losses.

“Over the years, businesses have built up fraud investigation teams which they are justifiably proud of,” said Martin Sweeney, chief executive of Ravelin. “But fraud continues to grow and mutate and simply throwing more people and money at the problem will not make it go away. Losses will continue to grow.”

When it comes to tools for tackling fraud, the study reveals that most businesses opt for in-house solutions, with machine learning and two-factor authentication two of the tools increasingly being adopted by e-commerce businesses to help with the issue. However, in-house solutions are expensive to maintain and quickly become unsustainable as a business grows, according to Ravelin.

The study also found that there is no singular ‘one and done’ fraud strategy that is most effective. Different solutions are effective at fighting different frauds, and having a robust tool stack allows teams to consider the complex nature of fraud.

“Businesses need to get on the front foot managing fraud: using automation to nip fraudulent transactions in the bud,” concluded Mr Sweeney. “Better automation helps teams scale and frees up fraud investigators from mundane tasks enabling them to focus on informing product development, identifying other sources of profit erosion, and other more important strategic tasks that drive growth.”

Report: Global Fraud Trends: Fraud & Payments Survey 2023

Shot across the bows for UK financial services’ AML practices

BY Fraser Tennant

In a shot across the bows for the UK financial services (FS) sector, a new survey has revealed that over half of FS professionals are only “somewhat confident” in their firm’s anti-money laundering (AML) practices.

In its ‘FAML Financial Services Survey’ report, which surveyed 200 FS professionals across the UK, First AML reveals that 52 percent of respondents identified an instance of money laundering in the last year, with 23 percent identifying more than one.

Respondents also selected external risks, such as the crisis in Ukraine, people trafficking, the increased focus on customer transparency and ethical customer onboarding, as well as the increased risk of fines, as key reasons why money laundering is rising up their company’s agenda.

However, although AML is moving up the agenda, many FS companies are still facing process and compliance challenges, with the top two AML weaknesses identified as document collection for individuals and companies, including passports and share registers at 27 percent,  and training staff on the latest anti-money laundering requirements at 29 percent. 

Despite this, even though many financial services organisations are facing challenges with AML processes, and the majority have found an instance of money laundering over the past year, almost a quarter (23 percent) are considering cutting AML compliance budgets in light of the expected recession. 

“Robust document collection processes and being up to date with the latest AML regulations are essential for compliance in this area,” said Simon Luke, UK country manager at First AML. “So it is shocking that AML budgets are being cut. Without the right processes in place, companies are not only at risk of fines, but also of letting dirty money pass through their organisations.” 

In terms of business priorities, respondents selected maximising returns for investors as the top priority, followed by environmental, social and governance (ESG) and improving their bottom line. 

The survey also revealed that the growth of unethical business practices is the key reason that financial services professionals care about AML compliance. This was followed by abhorrent crimes, such as drug trafficking, arms dealing and terrorism funding. 

Report: The majority of financial services professionals are only ‘somewhat confident’ in their anti-money laundering procedure

Fraud hits almost two thirds of UK firms, reveals new report

BY Fraser Tennant

Almost two thirds of UK firms have been the victim of fraud or economic crime over the past two years, according to research published this week.

PwC’s ‘2022 Global Economic Crime Survey’ found that the number of UK companies targeted by fraudsters was above the global average for this year (46 percent), as well as being higher than the last time the survey was conducted in 2020 (56 percent).

Moreover, of the types of fraud reported, cyber crime was the most frequent, with almost a third (32 percent) experiencing a cyber breach, although this is less than the number that fell victim to cyber crime in the 2020 survey (42 percent). Supply chain fraud, included for the first time in the survey, accounted for almost a fifth of respondents (19 percent).

“With increased levels of disruption being experienced, and the fact that more UK organisations have experienced fraud than in our last survey, it is surprising to see a decline in some types of fraud and economic crime, such as cyber crime, bribery and financial statement fraud,” said Fran Marwood, partner and head of digital & forensic investigations at PwC. “However, from what we are seeing in the market, I believe these trends are temporary.”

As far as who is committing fraud is concerned, just over half of UK respondents (51 percent) said fraud was committed by external fraudsters, compared to 43 percent globally. The top three external perpetrators according to those surveyed in the UK were customers, hackers, and vendors and suppliers.

Additional findings reveal that the most serious fraud was initially detected most frequently by companies monitoring suspicious activity using forensic technology and by internal audit, followed by corporate security and whistleblowing or tip-off. In terms of money lost through fraud, almost a quarter of survey respondents reported the figure to be between $1m and $5m.

“The message to organisations is clear,” concludes Mr Marwood. “With fraud now a greater and more costly threat than we have seen before, and the risk landscape continuing to undergo rapid change, it is important that organisations invest in prevention, and take the time to make sure their defences are match-fit for any attacks.”

Report: 2022 Global Economic Crime Survey

Corruption hit biggest companies hardest in 2020, reveals new report

BY Fraser Tennant

More than half of the world’s biggest companies reported “very significant” impacts as a result of the impact of corruption and illicit activity in 2020, reveals a report published this week by Kroll.

According to the ‘Global Fraud and Risk Report 2021Bribery and Corruption: The Winds of Change’, 57 percent of respondents at companies with a turnover of more than $15bn reported a very significant impact of illicit activity, such as fraud, corruption and money laundering.

Kroll also found that global organisations were feeling vulnerable to both internal and external threats, with 46 percent of respondents citing lack of visibility over third parties as the number one threat relating to bribery and corruption risk. Weaknesses in internal record-keeping was second on the list, followed by employees’ actions. 

To combat this, companies were placing an increased focus on proactive measures to manage bribery and corruption risk, including enterprise-wide risk assessments and the use of proactive data analytics. However, despite these defences, 82 percent overall still felt corruption and illicit activity were having a significant impact on their organisation. 

“It has been an unprecedented year for corporate risk,” said Zoe Newman, managing director of forensic investigations and intelligence at Kroll. “Firms have faced threats from all angles, including increasingly complex supply chains and the impact of COVID-19 measures.

“The findings from our report leave us with an important question,” she continued. “Why are bribery and corruption threats persisting and still having such a big impact? Poor record-keeping or the inability to adequately monitor frontline teams and regional offices are typical vulnerabilities that are often overlooked. Then there is the human factor.”

More encouragingly, the report found that many companies are bolstering their defences with proactive measures such as data analytics, and that bribery and corruption risk is on the boardroom agenda. 

Ms Newman concluded: “An organisation can have the best possible compliance programme in place on paper, but if the human elements of the chain are not well managed, educated or equipped to act, non-compliance or illicit behaviour will continue to prevail and go undetected.”

Report: Global Fraud and Risk Report 2021Bribery and Corruption: The Winds of Change