Financial services sector faces increased risk from organised fraud

Synectics Solutions analyses 2015 fraud records and identifies spike in organised criminality targeting financial sector organisations.

Synectics Solutions provides software services to the finance and banking industries. Its syndicated enterprise financial crime prevention and detection solutions, SIRA and Orion, are increasingly relied upon by Global Top 50 organisations.

To support clients in the development of their 2016/17 counter fraud strategies, the company has interrogated and analysed the National SIRA database, comprising 1/3 billion insurance and financial services records, to review 2015 fraud trends and identify emerging fraud risks.

Synectics Solutions reports a 23% overall increase in fraud against the financial services sector in 2015. The company warns of increased activity from organised criminality targeting the sector. Organised fraud perpetrated against financial services organisations grew from 54% in 2014 to 65% in 2015. This compares to 45% of insurance claims fraud linked to organised criminality and 13% of insurance policy fraud. Organised fraudsters are increasingly sophisticated, informed, joined up, and industrial in their tactics; with the ability to readily target and scale their efforts on identifying weaknesses in an organisation’s counter fraud defences.

Current Account fraud specifically was up 60% in 2015 compared to the previous year and, although the fraud rate on Basic Bank Accounts remained relatively stable, both product lines saw significant shifts in the type of fraud being committed. In fact, the financial services sector as a whole saw the rate of identity fraud increase by 57%. Initiatives to improve customer account security and account transaction monitoring have seen fraudsters adapt by opening accounts using false identity and current address impersonation methods. This change in fraudster behaviours signals an increased risk for the sector with new EU legislation such as the Payment Accounts Directive, on the provisioning of basic bank accounts with increased cross border accessibility, due for implementation in 2016.

Positive action by the industry, in relation to mortgage fraud, has seen a 20% decrease in fraud in this line of business, resulting from more rigorous affordability checks implemented at new business and credit stages following the Mortgage Market Review.

Matt Stanton, Head of Product Management at Synectics Solutions commented: “Organised criminality is well informed and has the operational flexibility to exploit perceived vulnerabilities, including any arising from the new EU regulations due to be implemented in 2016. Financial services organisations will need to be vigilant and innovative in 2016; responding dynamically to new financial crime risks to protect their genuine customers and their reputation. We are working closely with our clients to develop cohesive counter fraud strategies with tactics aligned to existing and emerging risks."