£1.2 Billion Stolen Through Fraud in 2022 - New UK Finance Report

On May 16, 2023, UK Finance published its 2022 Annual Fraud Report detailing the extent of fraud in the country’s payments industry. The paper revealed that more than £1.2 billion was stolen by criminals through authorized and unauthorized fraud in 2022, which is equivalent to over £2,300 in losses every minute. Providing a detailed look at multiple fraud types and how they are trending – including card fraud, cheque fraud, remote banking fraud, authorized fraud, and authorized push payment (APP) scams – the report notes that bank reimbursement rates exceeded 50 percent for the first time, at an average across all typologies of 59 percent. 

The report follows the government’s 2023 fraud strategy, which sets out over 50 measures to reduce fraud and cybercrime by 10 percent by 2025. To reach this goal, the strategy considers modernizing the response to fraud using leading practices, tools, and technology – many of which are discussed in UK Finance’s annual report. 

Annual Fraud Report

UK Finance’s annual fraud report is based on data collated by its members, which operate across multiple verticals of the financial services industry, such as financial providers, credit, debit, and charge card issuers, and card payment acquirers. As a result, some of the report’s most significant insights include:

• While fraudsters stole over £1.2 billion in 2022, the banking and finance sector prevented a further £1.2 billion of unauthorized fraud from getting into the hands of criminals.
• 78 percent of APP fraud cases begin online, and 18 percent start via telecommunications.
• The number of fraud cases across the UK in 2022 went down four percent to almost three million cases.
• Authorized push payment (APP) fraud losses reached £485.2 million, representing a 17 percent reduction compared to 2021.
• Unauthorized fraud losses across payment cards, remote banking, and cheques reached £ 726.9 million in 2022, a reduction  of less than one percent compared to 2021.

While UK Finance highlights the significant progress being made in tackling fraud, the report equally notes the ongoing threat posed by fraudsters, necessitating constant vigilance and continued action from financial institutions.

Commenting on the insights relating to the origins and types of fraud, the chief executive at UK Finance, David Postings, said, “Our data makes it clear just how much fraud emanates from online platforms and through telecommunications. The government’s new fraud strategy rightly says we must focus on stopping it at source and that these other sectors need to do far more to tackle the problem they are facilitating.”

Action Points

To protect customers from fraud, UK Finance highlights the following action points that the 300+ banking and finance firms it represents have committed to undertake:

• Launch a new Industry Fraud and Scams Strategy focused on stopping fraud at the source and working with all stakeholders to collaborate to reduce vulnerabilities in each part of the fraud journey.
• Work with the government and regulators to ensure the legislative framework supports a robust response to fraud.
• Work with the government on the recently published second Economic Crime Plan.
• Share intelligence on emerging threats with law enforcement, government departments, and regulators through the National Economic Crime Centre (NECC).
• Work with text message providers and law enforcement to block scam text messages.

The Proactive Use of Technology

In our 2023 global compliance survey, we asked 100 UK C-suite and senior compliance decision-makers which area of their compliance department they plan to improve in 2023. The highest response – 45 percent – said technology, specifically referring to upgrading legacy systems. This positive attitude toward advances in regulatory technology (regtech) is echoed in UK Finance’s report, as it looks at multiple scenarios of how technology is helping fight fraud. Some examples include: 

• Global digital identity tools – Adopted by banks to help identify and prevent potential fraud by analyzing billions of real-time transactions across multiple countries. This data is then combined with historical data so firms can build a picture of a customer’s behavior so that any anomalous and potentially fraudulent activity can be identified and flagged.

• Tracking technology – Especially when reviewing money mule accounts, tracking technology can allow banks to analyze data anomalies to reveal webs of linked accounts generated by suspicious activity.

• Multi-factor authentication – Strong customer authentication (SCA) can help reduce fraud by verifying a customer’s identity. The report notes that in March 2022, requirements for SCA took effect within the context of e-commerce. 

• Real-time data sharing – The report also highlighted the success of a recent collaborative effort involving an online platform that showed great potential for real-time intelligence exchange between sectors to identify and stop advertising fraud at the source.

• Artificial intelligence – To combat telephone banking fraud, some financial institutions are using technology to profile the risks associated with calls based on network authentication, audio modulation, and AI technologies. If someone calls from an unusual environment, this can be picked up and investigated further to detect if fraud is being attempted.

Key Takeaways

To combat the rising threat of fraud, compliance teams should ensure their anti-fraud tools utilize the technology advancements mentioned above. These tools should detect common scenarios and project future risks to help compliance staff anticipate threats. This can be done efficiently and cost-effectively by implementing an AI overlay to existing tools. In addition to not requiring a total system overhaul, AI overlays allow organizations to customize their rule sets.