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Banks and FinTech hold the key to preventing fraud

People, who think they are being defrauded, will soon be able to call 159, a new initiative against fraud, supported by a number of banks, telecom and social media firms. The goal would be for 159 to immediately direct the call to the Payer Bank for fraud assessment. Approximately half of the current bank accounts will be covered by this service in 2021 with more banks joining in 2022.

This enjoins the Take Five, national campaign in helping prevent email, phone-based and online fraud particularly where criminals impersonate trusted organisations.  Both theses measures require the bank’s client to Stop, Challenge and Protect after the fraudsters have been endearing themselves to their victims’. Culturally, difficult for many people to change to quickly, and The Take Five notice is becoming as bureaucratic like the ‘request for cookies’ message on websites.  

While welcoming initiatives to prevent fraud, others such as The Confirmation of Payee (CoP), and voluntary Contingent Reimbursement Model Code (CRM Code) have seen results and yet only 5% of the banks actually have implemented them. 

CoP has been paid the honour of changing fraudsters’ techniques. Fraudsters now are opening accounts with banks not enabled with CoP.  Banks with CoP still have to make payments to non-CoP banks, making it imperative for non-CoP to comply.

CRM Code has seen reimbursements average of 40% with the client absorbing 60% of the fraud losses.  Reimbursements from banks with CRM Code range enormously, from 99% (TSB) and 74% (Barclays) and with two under 10%. 

Further reinforcement of the need to regulate standards on fraud prevention comes in the form of the Financial Ombudsman Service (FOS). Studies from 8,600 APP fraud cases showed the FOS reversed over 70% of the banks’ negative decisions against clients. This confirms, alongside much reporting of insensitive behaviour to the victims that banks’ reaction is to blame the account holders for the fraud.   

No wonder the innocent bank account holder bows to the embarrassment of the fraud and the lack of empathy from the banks by not reporting the incident. Which?, for example, believes the actual level of fraud cases could well be doubled.

Banks owns and sets rules to their bank accounts. All banks are regulated and must hold certain information about their clients to meet Anti Money Laundering regulations.  Each bank is legally required to have information on the account holder. Data from the Payer and Payee bank accounts, if clustered, before would enhance the existing protection.

Banks ask customers to identify themselves even when the bank itself initiated the telephone call. A method so successfully copied by fraudsters.

Information is the key to unravelling and identifying fraudsters. After using 159 customers should explain to the payee under suspicion that ‘my bank is requesting information’. This non-confrontational approach removes the client from the discussion.  The new payee will either provide the information or abruptly leave.

The establishment of an emergency service, in the style of the Police 999 call, reflects the seriousness of frauds to our society. The bank regulators and the Government need to make certain this is a success. Banks, together, need to protect bank accounts from the rapidly growing faster payment fraud. 

 

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John Bertrand

John Bertrand

MD

Tec 8 Limited

Member since

03 Apr 2020

Location

London

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This post is from a series of posts in the group:

Banking Strategy, Digital and Transformation

Latest thinking in respect to Banking Strategy, Digital and Transformation. Harnessing our collective wisdom to make banking better. Ambrish Parmar


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