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Fraud: the chameleon of crime

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By Corinna Venturi, Director, Financial Crime, Cosegic

Fraud is like a chameleon, as fraudsters constantly change to blend with the environment. As financial institutions enhance their security protocols, fraudsters adapt, developing new methods to exploit the next weak link. This continuous evolution makes it challenging for firms to stay ahead of the curve and protect their customers effectively. This article will examine the catalysts of fraudulent activities and the innovative tools that firms can now utilise to fortify their defences against such threats. 


The catalysts of fraud


Fraudsters are opportunists who prey on vulnerabilities within financial systems and customer interactions. Fraud in the UK financial services sector is often driven by impersonation and deception scams, as well as digital attacks. Commonly, this involves the exploitation of new payment firms and electronic money institution with weak onboarding controls.  


For example, Authorised Push Payment (APP) fraud [1] [2] [3] is a growing problem, in which victims are deceived into authorising payments to fraudsters. One example of APP fraud is where victims are misled into transferring money for investment opportunities that do not exist. Another prevalent form is remote banking fraud [1] [4] which includes internet, telephone, and mobile banking frauds, where fraudsters gain access to accounts through phishing or hacking. The COVID-19 pandemic has also heightened fraud risks due to abrupt changes in working practices and increased pressure on organisations and their customers. 


Fraudsters are becoming more sophisticated by leveraging technology and psychological tactics. They may use advanced artificial intelligence (AI) tools to conduct fraud more effectively and at a lower cost, or they might manipulate personal and financial details through methods like malware and data breaches. For instance, Barclays Bank [5] recently highlighted how scammers create illusions of scarcity or authority to socially engineer victims.  


Defeating the fraudsters 


AI and machine learning are at the forefront in the fight against fraud, providing the ability to analyse behavioural patterns and detect anomalies that may signal fraud. These tools can process vast amounts of data in real time, offering a proactive approach to fraud detection. Below are what I believe to be the top three tools and actions that firms should utilise to increase their defences against fraud: 


1. Blockchain: A shield of transparency 

Blockchain technology emerges as a powerful ally in the fight against fraud. By creating a decentralised and transparent ledger for transactions, blockchain can significantly reduce the risk of tampering and falsification, making it an effective tool for securing customer data and transactions. 


2. Behavioural biometrics: Beyond the password 

Behavioural biometrics is another innovative tool that can enhance security by analysing the unique ways in which customers interact with their devices. This technology can detect inconsistencies in behaviour that may indicate a fraudulent actor is at work, even if they have the correct credentials. 


3. Educating customers: The first line of defence 

While technology plays a critical role, educating customers on fraud prevention is equally important. Financial institutions must invest in awareness campaigns to inform customers about common fraud schemes and best practices for safeguarding their information. 


A unified front 


The battle against fraud requires a unified front, combining advanced technology with informed customers. Firms must not only invest in technological defences but also foster a culture of vigilance among their clientele. It is through this dual approach that the financial services industry can create a more secure environment for all. 

Corinna Venturi is Director, Financial Crime at Cosegic, one of the UK's leading compliance consultancies that provides assistance with FCA authorisation, ongoing consulting, prudential services, online training and compliance software. Cosegic employees work together in industry specialist teams that actively work with clients to build compliance into what they do on a day-to-day basis, rather than a bolt on, or an afterthought, helping clients to confidently navigate regulation while ensuring they keep their vision and objectives intact.