Organised crime vs. disorganised compliance

“Fighting organised crime with disorganised compliance” – Hugo Veazey, Financial Crime expert

Financial crime is on the rise. With well over £1bn lost to financial crime every year in the UK and increased sophistication of fraudsters, we have entered the “industrialisation” of fraud. This isn’t just the hooded figure, operating from an isolated IP address trying to con you out of your savings; or the Nigerian Prince who wants to share his wealth with you, but just needs a small deposit. Instead, we are in an era of highly organised fraud rings running like corporations, with 3rd and 4th party players embedded across the financial system. Many of you will be familiar with the experience of the employee who was scammed into transferring $26m of company money following an entirely deep-faked Zoom call, and with faster AI improvements we’ve only just scratched the surface of how fraudsters can manipulate tech to their advantage.

Sounds scary? Well, it is a daunting prospect, particularly when less than 2% of criminal proceeds are recovered, and that isn’t even considering the emotional impact of falling victim to financial fraud. So, what is the industry doing to protect consumers, and ultimately their bottom line? 

The UK’s APP fraud reimbursement scheme goes a long way to protect the man on the street. TLDR: Payment Service Providers (PSPs) must reimburse all eligible customers who fall victim to authorised push payments within five working days. However, if customers know their bank will pick up the tab (to the tune of £85,000), there comes a large risk that consumers become less vigilant; they click through the warning alerts without stopping to think; and the net result is more money lost to criminals. Not good for the consumer, and arguably even worse for the PSP.

Understandably, PSPs are therefore putting in more checks to verify transactions – but we then enter a tightrope of balancing a fast and seamless process (which customers want) with the time-consuming checks which PSPs need to undertake. We all know the frustration of waiting for a payment to land, so how can PSPs find a middle ground and enable the right payments, quickly, but be alert to the ones which are fraudulent?

The answer, it seems, is found in a collaborative industry, one which openly shares data and insights and which can action these in real time. 

This solution is focussed on blending AI technology with human oversight to understand what “normal” looks like, so that when unusual activity happens, payment providers can be one step ahead. This isn’t just the type of transactions which a customer usually makes, but knowing tiny details such as how a customer holds their phone when they make a payment, or how fast they type their password in if using a laptop. Any anomalies can start alarm bells ringing. 
It’s then about sharing this data and insight across the industry. Working together, removing some of the internal red tape, compliance blocks and Chinese walls, so that every player can protect each other from fraud, learn from others’ mistakes and implement proactive steps to get one step ahead of the fraudsters. 
And it’s working with law enforcement to ensure that criminals can be caught. Banks and payment providers are not the police, nor should they be expected to be – but a collaborative effort to combat financial crime would mean individuals are reprimanded and reprehended, not merely delayed before they find another vulnerable victim.

We’ve a way to go, particularly as one in five of us in the UK have fallen victim to a financial scam in the last year. However, with increased personal vigilance, improved use of AI and, critically, cross-industry collaboration, perhaps 2025 will be the year that organised financial crime meets its match.