Launching the watchdog's new fraud policy at a conference today, Philip Robinson, FSA financial crime sector leader, says financial firms need to improve their defences against the growing threat of fraud.

Pointing to survey stats and industry reports, Robinson noted that the financial sector alone is estimated to be losing some £11 bn per year from economic crime.

"One area of those losses is plastic card fraud, where despite the industry's huge investment in clamping down on fraud Apacs tell us that losses were £402 million in 2003, as compared with £97 million in 1994," says Robinson. "There is a fraudulent transaction every eight seconds."

The FSA is calling on all involved in the fight against fraud in the financial services industry — firms, trade associations, regulators, government and the police — to work together to make life more difficult for the criminal.

As a contribution to this effort, the FSA will be taking a closer interest in how firms and their senior management tackle fraud risks.

Says Robinson: "Over the coming months we will be steadily be paying more attention to firms' arrangements for managing their fraud risks as part of our general supervising and other regulatory activities."

This will entail an examination of culture, senior management interest, staff training and investment in systems to detect fraudulent behaviour.

"We will be looking for effective and proportionate fraud management systems and controls," says Robinson. "But we will not be down like a ton of bricks on firms who have the misfortune of suffering fraud. We need a culture where senior management manage fraud risks well and learn from the frauds and near misses that they will inevitably suffer over time. We are not in a zero failure regime here. It is only with firms whose systems and controls fall far short of the appropriate standard that we might wish to use our enforcement tools."