Addressing fraud in vehicle asset finance

In the UK, the economic effects of fraud are increasing each year and a recent study by Crowe, Clark and Whitehill in Association with Portsmouth University found that in 2017 fraud cost the UK economy over £190 billion.

As a share of this figure, private companies were estimated to represent over £140 billion and as a result are increasingly finding it a challenge to deal with this problem.

"By adding intelligence from trusted partners into their application vetting processes not only can companies significantly enhance their ability to reduce false positives but they also reduce their vulnerability to being targeted.”

With the current UK government austerity measures adding a real squeeze on Local Authority funding, public sector services are also finding that the growing problem of public sector fraud (estimated at around £40 billion by the same study) is eating into their reduced budgets and increasingly risks affecting their ability to maintain high levels of service.

Despite these problems both private and public sector organisations are often blind to the scale of problems that are potentially inherent in their own organisations.

In a 2016 study by Kroll and the Economist Intelligence Unit over 75% of companies surveyed had been victims of fraud – despite often having no real organised solutions in place to address fraud.

75% of companies have been victims of fraud in 2017

So investing in solutions to try and address this issue is critical if organisations, both in the public and private sector, are to avoid losing ever greater sums to this type of crime. However, one of the reasons why fraud is so difficult to tackle is that it is a constantly evolving problem in nature - as criminals are constantly coming up with new methods and scams to try and get around defences that are put in place.

Additionally for financial services companies, the sheer volume of transactions that they are having to cope with, along with the speed at which new technology allows fraudsters to operate, makes it a very difficult issue to deal with.

One business sector that has been experiencing a significant range of fraud for many years is the vehicle asset finance marketplace.

The Finance Leasing Association (FLA) estimated the motor finance sector to be worth £41 billion3 in 2016 (in terms of new lending to consumers and businesses) and with 86%4 of car purchases now made with consumer finance, the opportunities for fraud in this specific sector of asset finance is colossal.

The types of fraud that this sector experiences are many and range from opportunists who engage in small scale application fraud to secure their car finance, right up to large scale organised crime gangs who are leasing fleets of cars and then shipping them overseas to sell them. It has been estimated by some in the car finance market that potentially in excess of 40% of motor finance could have been impacted by some type of fraud.

To help address this issue increasingly vehicle asset finance providers are investing in solutions that can help them to address what many fear is a problem of an unknown scale.

Roger Potgieter from leading consumer finance law firm Shoosmiths commented in a recent article for Business Money about the importance of asset finance companies sharing intelligence about fraud to tackle the problem. He commented: ”“Unless we are talking about this, sharing information and statistics, we haven’t really got a hope in defeating this.”

The case study below helps to describe how an award winning motor finance company have been able to enhance their fraud detection and prevention solution to enable their investigations teams to work much more efficiently and deal with their growing case volumes more effectively.

Databases such as the National SIRA database provide opportunities for Insurers, Banks, Telcos and Retailers to gain access to a much wider view of known fraud risks that they couldn’t hope to have visibility of on their own.

By adding intelligence from trusted partners into their application vetting processes not only can companies significantly enhance their ability to reduce false positives but they also reduce their vulnerability to being targeted – as a result of the umbrella of protection afforded them by the sharing of intelligence on fraud risk.

CASE STUDY: MOTOR FINANCE

An experienced non-prime motor finance lender have been successfully using the SIRA fraud prevention solution from Synectics Solutions, as a core component of their fraud defences for over 10 years. SIRA provides them with a fully integrated rules based decision engine that allows the ability to leverage a vast repository of shared intelligence to help them achieve their fraud prevention strategy. Since its inception with our client SIRA has helped them to rapidly and effectively increase their fraud detection rates, reduce losses and remove vulnerability.

However, after 10 years of using SIRA, it was evident that the lender required enhancements to the way their SIRA decision and workflow management modules were configured, to allow them to maximise their operational resource - while at the same time helping them to improve their ability to identify and prevent fraud. Ultimately, this would help them to reduce their losses and keep.

REDUCING LOSSES VIA ENHANCED RULE CONFIGURATION

To meet these challenges, the SIRA client engaged with the Financial Crime Intelligence (FCI) team at Synectics to improve their fraud team’s operational efficiency and reduce their losses even further. The SIRA optimisation consultancy began with the Synectics FCI team working with the lender’s own fraud team to understand and analyse their requirements. Taking those requirements, the team at Synectics were able to focus on optimising the SIRA Solution in a number of ways; delivering results that aligned with the company’s overall fraud strategy, mitigating their resource and prioritisation challenges, and improving their ability to prevent fraud.

Initially the optimisation required an analysis and re-configuration of the lender’s SIRA decision rules that would help them to reduce false positives. This was achieved by removing or improving non-performing rules and ensuring that the fraud typology segmentation was appropriately configured. Rule-based decision engines provide a baseline for compliance and suspicious activity detection and for many financial services providers and is their primary method of fraud detection. However, fraudsters often analyse and take inventory of combinations of rules and are skilled at minor modifications of behaviour to circumvent them.

"When it comes to combating fraud one of the most challenging things to get right, regardless of which business sector you’re working in, is understanding how to minimise the amount of false positives being generated.”

By assisting our client to develop and tailor a refreshed set of complex and nuanced rules, they took their existing system and transformed it in to a system that has helped them address the challenges and ever growing threats that fraud brings. The reconfiguration also helped them to weed out fraudsters earlier in the application process because of more appropriate, up front rules, scores and checks at the point of application. They have seen a 46% decrease in the number of applications referred for investgation, because of this configuration.

SYSTEM OPTIMISATION SEES INCREASE IN FRAUD DETECTION RATES

Although this number has significantly decreased, the lender’s investigators saw a 9% increase in the number of worked referrals and a 14% increase in number of cases of fraud identified. These excellent results were down to the restructuring of their SIRA workflow referral configuration settings. By transforming the workflows and rules, investigators were able to identify and intelligently focus their caseload on the most urgent and actionable fraud alerts before any other investigations.

These changes have assisted in significantly reducing the amount of fraud they are exposed to and increased workload efficiencies, resulting in reduced losses to fraud. Furthermore, the new processes allow good customers to be boarded more efficiently and without friction.

Additionally the fraud investigation team leveraged their matching capabilities by integrating extra data sources from across a range of sectors including Cifas data. This helped them to increase their identification levels of potential fraud across sectors. By working collaboratively with organisations from various sectors and sharing knowledge and intelligence via the National SIRA database, our client is proactively working to defeat the intellectual nature of fraudsters.

Furthermore by consolidating their additional data sources into one single view via SIRA, they are able to increase productivity and efficiencies allowing them to streamline their investigations and make significant savings.

Our client’s Financial Crime Investigator said: ”“By restructuring our tasks and workflows in SIRA, the FCI team at Synectics have transformed how we use SIRA and how it works for us. Although the number of enquiries loaded into SIRA has increased, we’ve seen a significant reduction in the number of referrals. More importantly, an increase in the number of fraudulent cases identified. The optimisation has allowed us to focus our investigators more intelligently and identify more fraud by working less referrals.”

FURTHER INFORMATION

For more information about Synectics Solutions and SIRA please call 01782 664000 or email info@synectics-solutions.com