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UK Finance Annual Fraud Report

Summary of Development

If you worked in fraud prevention last year, you’re probably still analysing the shifts and challenges the industry faced. The continued pressure to protect customers from scams, the refinement of new reimbursement regulations, publicly available scam reports, and the emergence of AI into fraud attacks were all significant drivers of change. This perfect storm of factors creates an inflexion point not seen for many years and is forcing the industry to rethink how they protect customers. Understanding user intent is critical, as is ensuring that technology deployed in previous years is still fit for purpose today.  

The good news is that efforts applied by UK banks have had a positive impact on fraud. The UK Finance Annual Fraud Report reveals that unauthorised losses were down three per cent in 2023, with Authorised Push Payment (APP) losses also down five per cent. These reductions should be recognised as welcome improvements, but we know there is more to do. A staggering amount of £1.17 billion was still stolen from consumers last year. Despite a reduction in APP losses, the data reveals that purchase scams were up, whilst impersonation and investment scams were down. The average value of loss in an impersonation scam is £7,448 compared to £549 for a purchase scam, which reflects a change in fraudsters’ focus to higher volume, lower value attacks. Separately, romance scams continue to represent the long game for the fraudsters, with an average of ten payments per case (compared to one for purchase scams). The total number of romance scam payments also increased 31 per cent in 2023 and are up 200 per cent from 2020.  

The global fraud picture presents an interesting comparison. Unlike in the UK, many countries are experiencing an increase in most types of fraud, especially scams. The US recorded staggering losses of USD 10 billion, and Australia, a country of just 26 million people, recorded AUD 3 billion in APP losses. These figures expose the borderless, relentless nature of financial crime.  

The impending Payment Systems Regulator’s (PSR) policies are a game-changer. They have the potential to help the most vulnerable amongst us but will also increase costs for banks. The focus on liability for both sender and receiver will fundamentally reshape how banks manage fraud. Today, many banks don’t monitor mule risk in real-time. Strategies such as the ability to monitor incoming payments will become more common. We already see a convergence of methodologies paving the way for a standardised approach. Focus on the mule also has the potential to disrupt entire criminal networks, exposing individual bad actors and enabling progress in the prevention of broader financial crime.