22 March 2018
Modern day fraud - help is on its way
New figures released by UK Finance show that there were 43,875 cases of authorised push payment (APP) scams reported in 2017, and that the majority of victims were individuals losing on average £2,784 each. Businesses suffered greater losses of £24,355 per case, on average. In tens of thousands of cases, the stolen money was never recovered: only £60.8m of £230m was returned to victims of fraud.
How did this happen? The speed and ease of modern-day payments systems brings many benefits to consumers and businesses, such as 24/7 money transfers. Unfortunately criminals have been quick to leverage new technologies to fund their activities and launder money. They are able to move money quickly through networks of accounts, and the further money moves away from a victim’s account, the harder it becomes to trace. Many existing legacy technologies and manual processes have struggled to identify and flag suspicious transactions, while financial institutions have lacked the end-to-end visibility of payment systems necessary to target the fast-paced types of financial crime.
While this makes sobering reading, we are fighting back through the development of a number of new solutions that that could fundamentally transform the way in which modern financial crime is tackled. Vocalink Analytics is proud to be breaking new ground in developing solutions that have the capability to disrupt organised criminal activity – including APP scams - and stop it in its tracks.
The result is a suite of trailblazing ‘Financial Crime Solutions’: from identifying and tracking money laundering through mule networks, to flagging specific types of payments-related fraud such as CEO, invoice redirection and mandate fraud.
For example, until now, getting a complete picture of how mule networks (a collection of linked money-laundering accounts) connect has been extremely difficult. AML Insights has the capability to trace stolen and illicit funds, disrupt the organised criminal network activity and stop it in its tracks. By overlaying payments data with cutting-edge data science techniques, we have developed a truly ground-breaking solution that will target organised criminal activity across payments networks. It will also deliver a significant step-up in fraud decision analytics to complement existing solutions.
There’s also good news on the horizon for those people who have lost money as a result of fraud. Vocalink is investing heavily in developing the analytical capability to map the path of stolen funds across the banking network in order to repatriate money to those who have fallen victim to fraudsters. Our solution-led response to funds repatriation, in addition to changing legislation, will benefit legitimate payment systems users by helping to speed up the process of returning stolen money to victims.
Preventing fraud in the first place is, of course, everyone’s key objective and at the top of the agenda for the financial sector. New technologies that are able to confirm the intended payee at the very first step, before money leaves an account, will represent a huge step forward. Again, we are making significant investment to build a solution that will flag up when people are making both one-off and recurring payments. Called ‘Account Verification Solutions’, our solution overlays a deep payments data set made up of billions of historical payments with advanced data science techniques to discover if the account name entered either matches, or does not match, the one to which a payment is about to be made. Our product will enable financial institutions to better protect their customers from sending money to an unintended recipient, either due to fraud or simple human error.
And it’s not just consumers who are falling for scams. As the UK Finance figures show, businesses suffered losses amounting to £24,355 per case (on average); Action Fraud estimates the cost of fraud to UK small businesses alone at £18.9 billion. The impact of these losses is huge: businesses close, people lose their jobs, reinvestment in growth cannot occur, and governments loses tax proceeds to fund important initiatives. Vocalink Analytics’ Corporate Fraud Insights product specifically identifies and flags incidences of payments-related fraud against businesses and corporates, including invoice redirection, business email compromise, and CEO fraud. Using advanced, self-learning and behavioural analytics, it determines whether a payment is high risk by analysing tens of millions of transactions daily. Live in the UK, it is already stopping fraudulent payments before the money is lost to fraudsters and laundered across the network.
While the Payment Systems Regulator (PSR) has announced that it will introduce a new industry code from September this year, we are actively working with the financial services sector to quickly develop and implement practical solutions to combat a wide range of financial crimes.
The statistics from UK Finance are shocking for many, but the good news is that change is on its way and maybe 2018 will be the year that the fraudsters start to feel the heat, and consumers and small businesses are not left out of pocket.