Last year, fraud in banking and finance cost the UK over £1 billion, with more than £2,300 being fraudulently obtained every minute. The many forms of fraud account for over 40% of all crime in England and Wales. The UK government has stated that there needs to be a focus on stopping fraud at its source and that “it is other industries, especially online technology giants, who should do more to stop criminals exploiting their services.”
However, all industries can do more to prevent fraud. In an increasingly connected world, the avenues for fraudulent activities have increased exponentially, and prevention methods need to keep up. The use of mobile phones for added security in banking and online retail opens more paths for fraudsters to take over customer accounts and highlights the interconnectivity between those industries and telecommunications. By focusing on these three industries, it’s possible to highlight the relationship between them and pinpoint the vulnerabilities being exploited.
Telecommunications
The telecommunications sector, while integral to the modern world, presents a fertile ground for fraudulent activities. From SIM swapping to premium rate service scams, fraudsters exploit vulnerabilities in the system to perpetrate their schemes. SIM swapping involves fraudsters convincing a mobile network provider to transfer a victim’s phone number to a SIM card under their control, allowing them to intercept sensitive information such as two-factor authentication codes.
E-Commerce
Whilst the ever-growing e-commerce landscape has revolutionised the way consumers shop, offering unparalleled convenience and accessibility, it has also provided an easy source of income from fraudulent activities, including synthetic IDs, identity theft and account takeover. Phishing scams and social engineering attacks, wherein fraudsters masquerade as legitimate entities to trick individuals into divulging personal information, remain a significant threat to online retailers and consumers alike.
Financial Services
The financial sector is always a prime target for fraudulent activities, ranging from credit card fraud to money laundering. Identity theft, wherein fraudsters steal personal information to open fraudulent accounts or make unauthorised transactions, poses a significant threat to both financial institutions and consumers, and costs the sector millions yearly.
Unifying Defences
Correctly identifying customers during interactions is not easy in a world where social engineering is rife, and this is one of the primary areas that fraudsters exploit. A combination of improving not only the security around this area, but also improving customer and employee education is indispensable. Companies need to be continually reinforcing fraud education in customers to help prevent phishing or social engineering attacks from working. A one and done approach is not enough! If this is not done, it’s all too easy for customers to slip and provide details over the phone that they shouldn’t. Sometimes a small nudge is all that is needed, telecom companies often provide a text message prior to the two-factor authentication code informing the customer that, as a business, they’d not request that number over the phone. This immediate reminder has been proven to work in ending calls with a fraudster prior to any harmful information being handed over.
Fraudsters Use New Technologies, So Fraud Prevention Needs To Own This Space
Companies should maintain the latest in machine learning models and profiling technologies to ensure that their defences are keeping pace with the fraudsters. The use of profiling, and graph databases in particular, allows for connections and patterns to become clearly identifiable and prevention measures put in place. Many companies rely on rules-based systems which, though initially effective, quickly become outdated, unable to keep up with fraudsters evolving tactics. Rules for combatting fraud can be effective in the short term but need to be reviewed regularly to ensure that they are still operating as expected and targeting the correct groups.
Profiling should also extend to real-time transaction monitoring, this is a proactive approach employed by organisations, including online retailers, financial institutions, and payment processors, to detect and prevent fraudulent activities as they occur. It involves continuously analysing incoming transactions of both individual customers and groups of customers in real-time to identify suspicious patterns, anomalies, or red flags indicative of fraudulent behaviour. When suspicious activity is detected, real-time monitoring systems generate alerts or notifications to notify fraud analysts, security teams, or customer service representatives. These alerts provide detailed information about the flagged transaction, enabling swift action to mitigate potential fraud.
Collaboration Across Industries And Government Bodies Is Key
Beyond individual organisational responses, a concerted effort is imperative, with telecommunications, online retail, financial services, regulators, and law enforcement agencies joining forces. Robust cybersecurity measures, coupled with comprehensive training and education programmes, should form the UK’s frontline defence against the growing threat.
In a rapidly evolving landscape, failure to stay abreast of emerging fraud trends and regulatory requirements leaves companies susceptible to new and evolving forms of fraud. Continuous monitoring and tracking of fraud trends and security controls within an organisation will help form a robust response and ensure that if existing measures are insufficient, changes can be made to target a response.
Regular checkups on the health of fraud defences
Only through proactive collaboration and constant vigilance can businesses effectively mitigate the risk of fraud and safeguard their businesses and customers from harm. A key aspect of the constant vigilance should be regular fraud health checks, these are often vital for organisations as they provide a comprehensive assessment of their current fraud risk exposure, helping to identify weaknesses in systems, processes, and controls. Additionally, conducting a fraud health check enhances operational efficiency by minimising the impact caused by fraud on both the organisation and the customers. It also instils confidence among stakeholders by demonstrating a commitment to integrity and transparency, while enabling organisations to stay vigilant and adapt their fraud prevention strategies to detect and mitigate emerging threats effectively.