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Time to open up about fraud

Robert Wardle, former director of the Serious Fraud Office, has been in the press recently calling for businesses to cooperate and report fraud; I believe this is most definitely the way the industry needs to move.  Opening up this knowledge to the public allows three things to happen: public scrutiny, public pressure and cross-corporation sharing.

Firstly, and perhaps most importantly in financially unsound times such as these, when information about fraud is made public, it allows the consumer to make better judgements about the soundness of their investment or where they choose to do business.  A company with a solid exterior but shambolic internals can fool the unsuspecting public into sometimes ruinous investment.  Public knowledge of fraud will force companies to think seriously about the decisions they make internally, around anti-fraud investments, employee screening and operational structure, as they will know that the effects of these decisions will be available for scrutiny by the general populace.  When it comes to consumer focused fraud attacks, such as skimming, phishing and all the other buzzwords, the more the public know and understand, the better prepared they will be to identify threats and avoid being victims themselves.

Secondly, once members of the public are able to see the true scope of fraud, and how it changes, they will be better armed to put pressure on the law makers and government officials who are responsible for penalties and regulations regarding financial crime.  Unfortunately, in most countries, since financial crime is considered "non-violent", the sentencing and penalties associated with it can be quite mild.  I have seen fraudsters refer to certain countries as a "land of milk and honey" due to the insignificant sentences and laws surrounding this type of crime - after all, the risk of a few months in a cushy prison is greatly outweighed by the possibility of bringing in thousands or millions in a fraud attack.  The public are savvy enough to understand the deep connection that fraud and financial crime has to true violent crime and terrorist activity.  The low-level fraudsters are the people making the money to fuel these sinister activities, and a powerful way to slow them down is to cut off the source of their fuel - this can only come about once the public put enough pressure on officials to change the way these crimes are viewed and dealt with.

Finally, and probably most important in terms of advancing the fight against fraud and financial crime, is cross-corporation sharing.  As the quote says "the best defence is a good offence" and if you can learn about, and protect against, a new fraud before it hits you, the consequences will be far less than if you had to deal with it blindly.  Once the public are made aware of frauds and financial crime, it removes one of the major barriers corporations, such as financial institutions, have to sharing information amongst themselves.  Many institutions, and almost every fraud department in any company, would love to share information about frauds experienced with their peers because it allows them to be truly preventative in their fight against fraud.  Fraudsters tend to operate like electricity: they take the path of least resistance.  Because of this, they will operate their scam on a few institutions, until they catch on and figure out an effective way to block them, and then will move on to the next batch and start the process again.  Because there is very little sharing of information between peers, the subsequent targets are just as susceptible to the attack as was the first batch: hence the ease in which fraudsters can operate.  As soon as a decent amount of information sharing is in place, the second group of targets is suddenly no longer blind to the attack.  They know about the possibility of ambush and they have taken steps to prevent it.  This can dramatically reduce losses and the effects of a fraud attack and it can only be made possible if information sharing is promoted and requested by the public and the regulatory barriers are lowered. 

In a small study undertaken by our team, we compared fraudulent IP addresses from institutions in Australia with those of institutions in the UK.  The findings were that over one quarter of these Australian fraudsters were also committing fraud at UK institutions.  That means, had this info been known beforehand, at least 25% of the fraud experienced by these UK banks could have been prevented and the number can only rise from there as one IP address typically commits multiple frauds.  Fraud truly is global.

To sum things up, I wholeheartedly agree with Mr Wardle's recent requests for businesses to become transparent with their fraud reporting.  It is time the public were given the information they deserve to make decisions about their money. 


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