Ana Lucia Salazar, senior sales manager at IDnow, discusses how a unified approach led by the UK government can mitigate the rise in impersonation fraud
Impersonation fraud is surging. Indeed, a recent case in the UK saw a house sold without the owner’s knowledge after his identity was stolen.
To put some numbers on it: in the first six months of 2021, identity fraud increased by 11% during the same period in 2020. According to figures from UK Finance, the number of impersonation scam cases more than doubled in the first half of 2021 to 33,115. These scams resulted in criminals stealing £129.4 million through this time of fraud alone during this period. This compares to the same period last year, when there were 14,947 impersonation scam cases leading to £57.9 million being stolen.
It is perhaps no surprise then that 62% of consumers say online security is their top priority, with a growing awareness of the need to protect their financial information online. Despite this, the same report highlighted that businesses were less confident that they have the right metrics and KPIs in place to effectively manage fraud.
Clearly then, implementing new approaches to tackling fraud, including deploying robust AI-driven identity verification methods, and improvements to how businesses detect and prevent fraud through more robust security measures, must be an absolute priority as we head into 2022. It is certainly something the Financial Action Task Force (FATF) are bringing to the top of the agenda.
But where do businesses begin? The main challenge for obliged entities is that, where there should be robust measures in place, they often do not offer enough protection against fraud. The result is a huge cost to the economy, to the businesses and to the individuals who fall victim to the crime of impersonation fraud.
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The role for AI-based technology
There are a number of steps that must be taken in order to take the fight to these fraudsters, many of which are highlighted by the FATF’s latest report, which focuses on the opportunities and challenges for anti-money laundering (AML) and countering the financing of terrorism (CFT) in a bid to help shape the future of AML and compliance.
What came out clearly from the report is the FATF’s belief in the ability of new technologies to enhance overall AML and CFT capabilities. Technology can and should play a major role in improving the monitoring capabilities of criminal activity, particularly the application of machine learning and other AI-based tools, which can offer accurate, real-time solutions as opposed to the traditional ‘defensive’ approach to compliance. When combined with machine learning, AI can be particularly useful when applied to big data in order to strengthen ongoing monitoring, differentiate between normal and suspicious activity in real-time and identify cases that require additional scrutiny.
As such, we’d expect to see more focus on the use of AI-enhanced transaction monitoring to enable regulated entities to comply quicker and with more accuracy, while reducing the need for human intervention. Machine learning is likely to grow in importance given its ability to automate the process of risk analysis and in turn, increase the degree of confidence when applying risk-based measures.
Overcoming the adoption barrier
Of course, as with any new technology, there are challenges around adoption, mainly relating to regulations and operations. It’s important, therefore, that FATF and other bodies and authorities in the fraud space work together in order to attract the level of interest and understanding required from the private sector to increase levels of adoption. Only then are we likely to see a decline in fraud such as impersonation.
Ensuring adequate enforcement
Critical to the fight is to ensure that regulators are enforcing and checking that companies are doing enough when it comes to compliance. And where fraud is taking place, regulators need to be asking questions to those companies and challenging them on why it is happening.
Duty of care – to customers and to communities
There is a real need to amplify the duty of care message. Customers are putting their trust and faith in obliged entities to protect them from fraud, however, with numbers continuing to rise, that trust will start to fade. And the reality is, that deploying technology that will help prevent fraud doesn’t require huge financial investment, it is highly effective and simple to use.
For businesses then, the main priority for technology investments are around improving compliance management and optimising those investments already made into software to meet their fraud detection and prevention obligations while improving the customer journey.
Moving towards digital identity
People are tired of duplicating their identity documents; a reusable ID that’s linked to an individual’s biometrics is likely to grow in demand, as the pressure mounts on Government to develop an effective digital identity framework and infrastructure that is both highly secure and easy to use.
We would urge private sector, public sector and Government to unite in the face of this growing and costly issue. We welcome any new changes that may protect society and communities across the UK from impersonation fraud and AML. In turn, this will make it much harder for criminals and much easier for the public to be safe from fraud.
Regulation is here to stay, and companies will need to demonstrate compliance. This is much more than a box ticking exercise – the reality is, if regulations are truly enforced, then companies could find themselves facing substantial fines or even closed down. The technology to aid the fight against fraud is readily available – it’s now down to companies and obliged entities to harness those capabilities in order to protect themselves, their customers, our economy and society as a whole.