The true cost of financial crime isn’t financial – it’s personal

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When fraud takes place, individuals lose money. Investors are affected because their returns in financial firms are reduced. Retailers have to deal with sorting out stolen cards or identities. These are all personal experiences.

Financial Services has had a number of achievements in the fight against financial crime in recent years. Chip and PIN, tokenisation of card details, and more recently, Confirmation of Payee and Strong Customer Authentication, show how far we’ve come. 

But there is still more that can and should be done to prevent and reduce the impact of financial crime.

In its recent report “Facing up to Financial Crime”, the Emerging Payments Association (EPA) looks at the state of financial crime and its impact on the payments market. 

The ambitious use of technology and greater industry collaboration have been identified as the two key enablers to achieving further success. The EPA is uniquely placed to drive industry debate across its members and other payments stakeholders, including customer groups, law enforcement, government and regulators.

Here’s a summary of the EPA’s key recommendations where the financial services industry can take a more proactive approach to mitigating the impact of financial crime: 

Digital identity: an industry approach

Identity linked fraud has a significant cost to the industry – authorised push payment fraud cost  £236 million  and card not present ecommerce fraud £310 million in 2017.

The opportunity to build an industry led digital identity scheme should be explored via collaboration across the financial services industry combined with engagement with government and regulators. 

UK Finance has endorsed the BSI Code of Practice on Digital Identification & Authentication (PAS499) which creates a framework for the industry to build on.

Really knowing who the customer is

Customer verification can build on existing processes to use additional data points like location, device, mobile usage and spending patterns. More points of reference raises the level of assurance around a customer’s identity.

Transaction analytics

Network level analysis of all payment transactions across all payment service providers between given points in time would be a powerful tool in the detection of financial crime. Pay.UK and Vocalink have had some early success in this area detecting mule accounts.

The EPA’s findings support the results of the research GBG commissioned last year with Forrester. The report found that 84 % of UK financial service organisations are concerned about their ability to identify customers correctly. Moreover, a third believe they are ‘seriously lagging behind competitors’ when it comes to fraud checks.

The EPA’s findings, together with its influence in the payments industry, creates a new opportunity in the fight against financial crime. 

This article was originally published on the GBG website.

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