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Abstract:The FCA UK urges financial firms to enhance anti-fraud systems and support for fraud victims, following a report of over 116,000 APP fraud cases in early 2023.
In a comprehensive review conducted by UK financial regulators, it has been strongly recommended that companies bolster their anti-fraud systems and enhance the support provided to individuals who have been deceived by fraudulent schemes. This call to action comes in the wake of a troubling report indicating that over 116,000 people were victims of authorized push payment (APP) fraud in the first half of 2023 alone, according to UK Finance's 2023 Half Year Fraud Update.
APP fraud occurs when individuals are manipulated into willingly transferring funds to accounts that they believe belong to legitimate recipients but are actually controlled by fraudsters. With the cost-of-living crisis potentially leaving more people at risk and fraud tactics becoming increasingly sophisticated, the urgency for companies to reassess and improve their fraud prevention and victim support strategies is greater than ever.
Key findings from the review highlight several areas in need of immediate attention:
Inadequate Fraud Detection Systems: Many firms need to significantly strengthen their mechanisms for detecting and preventing fraudulent activities.
Consumer Outcomes Not Prioritized: The focus on delivering positive outcomes for consumers is insufficient across numerous firms.
Subpar Victim Support: There is a clear need for firms to enhance the assistance they offer to fraud victims.
Deficient Complaint Handling: The review criticized the lengthy response times to complaints, unclear and confusing decision letters, and in some cases, the use of accusatory language towards victims.
Overlooking Customer Vulnerability: Firms often fail to fully consider the vulnerability characteristics of customers when addressing fraud claims and complaints.
Regulatory bodies are already engaging with firms to reinforce their anti-fraud approaches. All payment service providers are expected to utilize the insights from this review to better detect, manage, and mitigate fraud and its associated losses. Moreover, the treatment of customers, especially in complaint handling, must be improved to ensure consistently favorable consumer outcomes, aligning with the Consumer Duty.
Additionally, firms are urged to reflect on the insights from the recent publication “Proceeds of Fraud – Detecting and Preventing Money Mules,” which examines the systems and controls of payment account providers against money mule accounts.
Combatting financial crime remains a top priority, and a multi-faceted strategy is being employed to address it. This includes stringent entry controls for new financial service providers, proactive supervision, decisive enforcement actions, and direct communication with consumers through initiatives like the ScamSmart campaign, which educates the public on the risks of fraud.
The collective efforts of financial institutions, regulatory bodies, and consumers are imperative in creating a more secure financial environment where the risks of fraud are significantly reduced, and the support for victims is both immediate and empathetic.
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
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