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APP scammers have gamed the financial system - how should you respond?

Written by Admin | Jul 12, 2024 4:50:43 PM

APP scammers have deliberately and successfully gamed the financial system. Last year, consumers lost a collective £460m to APP scams, with only 62% of illegally obtained funds returned to victims. Such high losses - and low reimbursement figures – imply that Payment System Processes must deal with APP fraud tactics differently. But what's the best way to achieve change?

Most PSPs will have spent many hours in 2024 thinking about APP scam prevention.

October's hard deadline for mandatory reimbursement – split 50/50 between the sending and receiving bank – means that PSPs can no longer afford to miss a preventable scam transaction. But the present reality is that many banks will miss a great deal of scams. And a significant number of these scams will originate from on-book customers.

The true scale of on-book customer fraud.

Several Synectics research programmes have proven that on-book fraud has the potential to thrive within current accounts.

  • One soon-to-be-published pilot detected tens of thousands of adverse SIRA matches within current accounts. These figures came from just a 10% sample of one PSP's on-book portfolio. Crucially, this risk was not present during onboarding checks and likely contained a significant amount of APP fraud, with the typology being the most common financial scam.

 

  • Another research programme discovered that money mules are often "safely boarded" customers. Mules are a major part of the APP scam ecosystem, and 75% of them wait until the onboarding period has lapsed before overtly engaging—an average of eight months.

 

  • And our pilot with Pay.UK found that even cutting-edge AI models will miss APP fraud risk in current accounts. That is unless PSPs use point of application current account data in any models used to detect or predict fraudulent transactions within on-book accounts.

 

PSPs are facing a new – and worse - type of pressure.

As part of AML and KYC, PSPs have always had a regulatory obligation to verify the legitimacy of their customers and transactions to detect and prevent financial crime and fraud. This duty remains. What has changed is the level of pressure PSPs are now under to remain compliant and resistant to fraud.

Knowing the potential scale of on-book APP fraud, and knowing that new Reimbursement Rules are mere months away, PSPs have two options:

  1. Wait to see how bad their risk (and penalty fees) really are.
  2. Kickstart a continuous on-book screening programme, beginning with a bulk retro screen for APP scam risk in current accounts.

 

Eliminate APP fraud unknowns in your on-book portfolio.

Sonar, Synectics' on-book screening solution enables banks to treat on-book parties with the same diligence as new customers. It continuously screens for need-to-know events that may affect risk levels, liabilities and defence responses. All the while streamlining the costly re-screening process that's critical to maintaining fraud and compliance posture.



There is zero guarantee that genuine customers will remain as such. Therefore, the automated screening of "as-they-happen" risk events is critical to ensure that APP scams and other frauds don't go unchecked between re-screening periods.

 

For complete confidence ahead of the PSR's October 2024 mandatory reimbursement deadline, we recommend a bulk retroactive screen for boarded customers, followed by a continuous programme tailored to your risk appetite. Click here to learn more about the options available.

With an up-to-date view of a customer's circumstances, PSPs can more effectively detect red flags for threats like APP scams. For help making the switch from periodic to perpetual current account screening, contact a Synectics Fraud Strategy Consultant here.