#COVID19 Fraud Surge Threatens to Overwhelm Banks

Surging levels of fraud and financial crime during the pandemic threaten to overwhelm banking teams working from home with disjointed internal systems, according to new research from FICO.

The predictive analytics company commissioned Omdia to poll 110 senior executives supporting financial crime-fighting efforts in banks across the US, UK, Brazil, Germany, the Nordics and Canada.

In the UK, the vast majority (79%) of respondents cited remote working as having a “high” or “major” impact on the effectiveness of their financial crime prevention efforts.

A lack of cloud-based capabilities for home working, low levels of automation, inflexible systems and low levels of integration all compounded the challenges of maintaining productivity levels across the distributed workforce, the report found.

The integration piece appears to be key: half (49%) of UK respondents cited as a major challenge having multiple software systems for fraud management and financial crime compliance.

Toby Carlin, senior director for fraud consulting at FICO, explained that even though 80% of the functions shared between fraud prevention software and anti-money laundering (AML) software are the same, these systems and the teams that operate them are nearly always separate.

Nearly two-thirds (64%) of UK respondents said these teams don’t report to the same person at the bank.

“Just as the pandemic put huge stresses on the healthcare system, it put huge stresses on fraud and financial crime management teams,” explained Carlin.

“Teams that collaborate in person and work with large software systems that have restricted access found that working from home hurt their productivity. This was compounded as the volume of fraud attacks rose.”

As a result, 69% of global financial institutions surveyed for the report now have plans to integrate functions or share resources between AML compliance and fraud. Half (50%) said they will do so within three years.

The findings chime somewhat with a BAE Systems Applied Intelligence report out last year that revealed frustration among banks’ AML staff about outdated technology and a lack of resources.

It also claimed that most customers now expect their banks to do more to stop money laundering and related offenses.