Are We Doing Enough to Fight Economic Crime?

Is the banking sector doing enough in its fight to combat economic crime? Could it do more? Generally, it’s thought that whatever approach the banking sector takes, as long as financial crime is still taking place, it can never be enough; more needs to be done. The consensus across all parties is that a collaborative approach needs to be taken, with all players working together more effectively to win the battle against criminals.

The Rising Threat of Economic Crime

Economic crime is often underreported and continues to increase. According to Action Fraud, they received 875,000 incident reports last year, marking a 27% increase. About 90% of those reports were from individuals, while around 10% were from companies. Furthermore, 80% of these incidents were cyber-enabled. These figures are stark: consumers are being targeted like never before, and the widely recognised solution to this problem is collaboration.

The Importance of Collaboration

The public-private partnership advocated by the UK’s Economic Crime Plan is crucial, with data sharing being the most important piece of the plan. Data is key, and the removal of various silos and subsequent sharing of that data is recognised as probably the most powerful tool against criminals.

The Sophistication of Fraudsters

Fraudsters are becoming ever more sophisticated in their techniques to trick people into sending them money. They clearly took advantage of the pandemic, which sadly created more opportunities for them to prey on the vulnerable.

Successful Measures and Further Steps

So, what has worked so far and what else can be done? Law enforcement can’t arrest their way out of economic crime; the activity needs to be prevented at its source.

Confirmation of Payee

One recognised success story is the Confirmation of Payee, which has been adopted by many banks across the UK. One of the most widespread fraud activities is APP fraud (Authorised Push Payments). This involves the transfer of funds from one account to another, which fraudsters use to receive their funds after persuading an unsuspecting individual or business to carry out the payment, perhaps through a phishing scam.

Confirmation of Payee helps prevent these crimes by showing the payer if the money is going to the correct account. Before they transfer the funds, they can verify that the name on the recipient account matches the intended recipient. Before committing to the payment, the payer is reminded by their bank to be wary of whom they are paying.

While this is clearly a success, one significant drawback is the disparate adoption of this tool. Customers receive different types of protection depending on who they bank with.

Cost of Compliance

Whilst CoP would be considered a relative success, there are many other areas for improvement in the fight against criminals. One part of the problem, and a contributor to the perceived lack of success, is the enormous cost of compliance for financial institutions.

For example, in a study conducted by LexisNexis, it was discovered that anti-money laundering compliance cost financial institutions in the UK a staggering £28.7 billion in the last financial year. The regulatory compliance, together with inefficiencies in processing, false positives, and the greater volume of customers, is proving to be a heavy burden. There is an opinion that the rules need to change to make it easier and more cost-effective for financial institutions to continue their fight.

The Importance of Boldness and Collaboration in Combatting Economic Crime

Equally, financial institutions need to be bolder and more innovative to keep pace with fraudsters’ increasingly sophisticated methods. However, even with increased boldness and innovation, the one common theme running through any kind of discussion on what needs to be done to improve the rate of success is a resounding and powerful message: collaboration and data sharing.

It may not be the silver bullet, but it would have an enormous effect on economic crime prevention overall. The recognition and the will are there; it just needs all parties to provide the impetus to get this change over the line.