Could poor bank KYC part the problem of fraud? (Gian Mahil)

It’s been reported recently that £4m is stolen every day by fraudsters in the UK. That’s a lot of money even by today’s highly inflated standards. Isn’t it time to ask the difficult question – are banks part of the problem?

Like the rest of us todays’ criminals/ fraudsters, don’t like cash – it’s not safe. They might get robbed!  They want their money in a safe place too – in an electronic bank account so that they can move it around quickly at the click of a mouse. Unsurprisingly they like the convenience of modern technology too. And this might the chink in their armour, and the banks have the silver bullet to stop this fraud dead in its tracks.

The Big Picture

But let’s look at the broader picture first. In total, £754m was stolen through fraud in the first half of 2021, an increase of 30% compared with the same period last year.  This makes complete sense after all, as we have all been at home during the Covid-19 lockdowns, we have been buying goods and services online, and we’ve been near our phones – not distracted by work or office politics. We have been sitting ducks for the fraudsters and scammers.

It is estimated that 70% of fraud originated via online platforms, including social media in the first half of this year. Fraud is committed when individuals are tricked into handing over money for immediate loss.

Authorised Push Payment (APP) fraud losses have now outstripped fraud losses on bank and credit cards for the first time. Impersonation scams more than doubled (up 123%), investment scams rose by 95% and romance scams were up 62%.

Another lesser known fact is that our tech savvy teenagers are able to buy kits detailing how to commit fraud online. They are able to use these to syphon money out of unsuspecting/ innocent members. The chances of being caught are slim to non-existent. The Police are simply overwhelmed, they lack the resources and tools to investigate the crimes let alone prosecute anyone. It’s a perfect storm for fraudsters and scammers.

So where is the £4m of stolen money a day going? It goes to the fraudster’s bank accounts. As explained above, fraudsters don’t like cash either! It’s true some of this money is used to finance crime and quite a lot is sitting in the small time criminal’s accounts at banks. Guess, what all money movement is electronic and tracked and audited as the money moves from bank account to bank account.

What about the banks?

Surely, one would think, the banks could do more. Yes they can!

Remember when you opened your bank account, the bureaucracy, the proving of who you are, the many questions and the time it took.  Banks though do not seem to use the information you have given them, often requesting the same information again and again.

The banks know who owns the bank account and what transactions are occurring. Banks have to abide by the regulations on Know Your Customer (KYC) and Anti Money Laundering (KYC). What banks are not doing is indicating to the account holder about to make a faster payment the chances the Payee account being fraudulent.

Each bank authorises and rules it’s own accounts. We simply rent them, often at no cost, and assume the money is safe. Once Faster Payments is used by the bank account holder (the Payer) money is moved instantly with virtually no recall.

Few banks offer Confirmation of Payee and there is no bank regulations setting standards for reimbursement of frauds: ergo a double bubble for the fraudsters. Lack of coordination and cooperation between the banks and the Police is not helping. This is highlighted by 22,000 fraud cases being closed because of lack of identity – scandalous given fraudsters need a bank account to take us to the cleaners!  It’s time we started talking about this and the banks step up to take responsibility.