Hitting the streets. Why fighting fraud is not just about sitting in an office

Fraud has reached the highest levels on record, affecting more organizations than ever. The scale of the problem was revealed in last year’s PWC Global Economic Crime and Fraud Survey. Of the 7,228 businesses contacted by PwC, across 123 territories, 49 percent reported that they had experienced fraud or economic crime, over a two-year period.

Modern fraudsters have evolved their ability to detect vulnerabilities in business systems and are shifting their targets to those weak links. They are using new tactics too – using distributed networks, big data, and the dark web to locate these vulnerabilities and maximize the associated risk. Fraudsters are also devising multidimensional tactics that inflict damage by sequentially compromising more than one point of vulnerability.

The enterprise is fighting back. Using technology to analyze payment data, and automate workflow and decisions, fraud detection is becoming quicker and more efficient. At the same time, AI and machine learning offers greater flexibility and control, allowing banks, merchants and payment providers to launch new models quickly, that recognize new patterns of fraud and optimize alert levels to match their review capacity.

However, there is more to fighting fraud than technology. Fraud risk analysts also need to hit the streets and be willing to share best practice with potential targets. Teams need to visit merchant locations on a regular basis, and seek to work with unique organizations, like “We Fight Fraud (WFF)”, to try to understand the fraudsters better.

It was fascinating to spend some time with WFF. WFF’S Director of Strategy, Tony Sale’s story is incredible and highlighted the entrepreneurial skills of fraudsters. Once on the wrong side of the ‘thin blue line’ and dubbed “Britain’s Greatest Fraudster”, the skills Tony has developed are now the envy of many an entrepreneur.

Tony spent a lot of time looking for gaps in business processes that could be exploited and most importantly scaled up. What is impressive was that, without any formal business training, Tony understood business well enough to see the flaws that he could exploit. There is no doubt that if this very capable individual had been dealt a different set of opportunities, he would have been very successful in the business world.  

The contrast between Tony Sale’s background and that of Andy McDonald, who works with Tony at WFF, is fascinating. Andy was the Head of Fraud for the Metropolitan Police and Counter Terrorism Special Investigations. With over 30 years as a detective, Andy is now a leading financial crime expert, advising a wide array of global organizations.

As I digest both sides of WFF’s story, what is crystal clear is the significance of understanding process in combating fraud. Historically, many work streams were manual and decentralized, which limited the ability of fraudsters to scale up fraudulent activity. However, as many modern business processes have become centralized, with more and more powerful technology, the ability to scale up fraudulent activity has become more and more compelling prize.

This all too evident by the large-scale data breaches that we see around the world today.

For many years I have been saying that the rise in fraud is inextricably linked to highly scalable technical process failures. Fraud prevention processes are no different. Process deference is critical. For some reason this doesn’t get the press coverage that the technology seems to command. I am not sure why. Thankfully the fraud industry has experts, like Tony and Andy, to help us understand that solving financial crime is not just about products, but that highly trained people and well-defined processes are also critical.