Loading…

Guest blog: Fraud in financial services

RSM UK Associate Director Erin Sims outlines the various types of fraud risks that banks and building societies face.

Erin Sims, RSM UKBy Erin Sims, Associate Director, RSM UK

Fraud is now the most frequently reported crime in the UK, representing 41% of offences reported to police. Adding to the challenge, only around 1% of fraud cases result in prosecution. UK Finance reported in its annual fraud report that £1.2bn was stolen through fraud in 2022 and separate figures obtained by RSM UK under a freedom of information request show a 10% rise in reported cases of fraud committed by employees against their employers.

Banks and building societies are natural targets for fraud-related crimes, therefore it’s crucial for them to understand the fraud risks associated with their operations in order to best prevent future attacks.

Fraud risks in finance

The table below explores various types of risks, in addition to employee fraud, that banks and building societies face and how to mitigate against them. 

Increased fraud threat through hybrid working 

Since the pandemic, there has been a rapid shift to extensive hybrid working, bringing significant benefits for the workforces of banks and building societies. In fact, our People Perspectives survey identified hybrid working as the top benefit offered to attract or retain employees at 41%. Meanwhile, 57% of respondents had already begun, or were considering, upskilling managers to better manage a hybrid workforce. A recent survey has also found that UK employees are working from home more than workers in other European countries, doing so for an average of 1.5 days a week.

However, these agile working patterns present an increased exposure to fraud risks, including heightened cyber security vulnerabilities, weaker preventative controls, misuse of sensitive data, increased insider collusion opportunities, and new avenues for social engineering attacks.

It’s key for banks and building societies to balance the benefits of agile working with strong preventative measures, auditing, and oversight controls. Ongoing risk assessments and fraud prevention training for the workforce are also critical.

Conclusion

As the landscape of agile working evolves and technologies including generative artificial intelligence develop, banks and building societies are faced with an increased fraud risk. To counteract this, they find themselves needing to bolster their fraud defences. Just as importantly, there is an increasing need to foster an ethical and risk-aware culture. This can be achieved through frequent and bespoke workforce education on fraud red flags and effective security habits, applicable to both remote and in-branch work.

Leadership must clearly communicate expectations around information security, data privacy and fraud prevention in an agile environment.

As well as a continuous assessment of current obligations to prevent financial crime, banks and building societies will need to ensure that they consider the ‘failure to prevent’ offence, introduced by the Economic Crime and Corporate Transparency Bill in October 2023.

Find out more:

Erin Sims on LinkedIn: https://www.linkedin.com/in/erin-sims-rsm/
RSM UK: https://www.linkedin.com/company/rsm-uk/ 


The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.

 

You may also be interested in...

BSA Card
  • BSA.Event Event
  • Conduct Risk & Regulation

Consumer Duty: Navigating Board Reports

A free webinar hosted by BSA Associate, docStribute docStribute and Woodhurst are collaborating to bring you this webinar series. Following our pre...

BSA Card
  • BSA.Event Event

Building Societies Annual Conference 2024

Building Societies Annual Conference 2024 8th -9th May, Manchester   The Building Societies Annual Conference is the leading event in the secto...

BSA Card
  • BSA.Event Event
  • Audit & Taxation

Audit, Risk & Regulation Autumn Series

This year's annual update returned in a brand new format with a series of topical webinars covering key areas of audit, risk and regulation. This...

BSA Card
  • BSA.Event Event
  • Conduct Risk & Regulation

Consumer Duty: Linking Customer Outcomes to Customer Experience

A free webinar hosted by BSA Associate, Protiviti This webinar will explore ways firms can effectively test, monitor, and report customer outcomes ...

BSA Card
  • BSA.Event Event
  • Conduct Risk & Regulation

Annual Update & Networking for Boards

This autumn, the BSA is running its first event designed specifically for Board Members (Exec and Non-Exec) and Board attendees. This in-person eve...

BSA Card
  • BSA.Event Event
  • Conduct Risk & Regulation

BDO's Financial Services' NED event: Consumer Duty Board Champions

BDO’s Financial Services’ team is delighted to invite you to our first FS NED event for 2024, to discuss the Consumer Duty’s ("the CD") next phase of ...

BSA Card
  • BSA.Event Event
  • Prudential Regulation

Preparing for successful regulatory visits

Two half-day sessions on 24 & 25 January 2024

  • BSA.IndustryResponse Industry Response
  • Conduct Risk & Regulation

GC23-2 FCA Guidance consultation on financial promotions on social media

Our response to FCA GC23-2

BSA Card
  • BSA.PressRelease Press Release

The beauty of simplicity in a complex world

Speaking on the first day of the Building Societies 2023 Annual Conference at the ACC in Liverpool, BSA Chief Executive, Robin Fieth, talked about the...